NYS Pushes Back Association Plans and Short Term Medical
NYS is pushing back on Association Health Plans (AHP) In reaction to President Trump’s Executive Order of Association Health Plans expansion. The President expanded the role of association plans earlier this week rule to makes it easier for small businesses and trade groups to band together to purchase health coverage outside of Obamacare’s insurance markets.
These regulations provide an additional basis for a group or association of employers to be treated as an “employer. New York’s top insurance official said the Trump administration’s final rule making it easier to form association health plans will not hamper the state’s ability to continue regulating the health insurance industry. Other states like Massachusettes have have also pushed back over Association Plans. “Yesterday’s announcement by the Trump Administration to dramatically expand the footprint of Association Health Plans will invite fraud, mismanagement, and deception – and, as we’ve made clear, will do nothing to help ease the real health care challenges facing Americans,” Healey and Underwood said in a joint statement. “We believe the rule, as proposed, is unlawful and would lead to fewer critical consumer health protections.”
One program getting attention are inpexpesivive but limited short-term health insurance plans. According to yesterdays NYS DFS annoncment, however, New York regardless of federal actions will prohibit these plans as consumer protection. Current federal rules only permit short-term plans — which are exempted from certain health benefits coverage requirements, such as chronic pre-existing conditions — to last up to three months, but the Trump administration wants to expand that up to 364 days. “Such ‘limited health’ plans, whether limited to less than three months or one year, are not short-term at all, but rather an end-run around requirements applicable to individual or group hospital, surgical or medical expense coverage and are prohibited under New York State law,” DFS wrote in a circular letter to insurers.
Summary of Trump’s Association Health Plans Expansion
• Purpose of Association. Employers may band together in an association for thepurpose of obtaining health coverage.However, the association also “musthave at least one substantial business purpose unrelated to offering andproviding health coverage or other employee benefits to its employer membersand their employees.”The DOL clarifies in its safe harbor that a “substantialbusiness purpose is considered to exist if the group or association would be aviable entity in the absence of sponsoring an employee benefit plan.”
• Commonality of Interest. Employers in the association can either (1) be fromthe same trade, industry, line of business, or profession; or (2) all have aprincipal place of business in a State (or portion of a State, such as a city orcounty) or in the same metropolitan area (even if the metropolitan area spansmore than one State, like New York, Washington, D.C., or Kansas City
• Structure and Control.There must be a formal organizational structure with agoverning body and by-laws or similar formalities, to control the association,including the establishment and maintenance of the group health plan. Thecontrol can be direct or indirect through the regular election of directors,officers, or other similar representatives; however control must be present bothin form and in substance. Ultimately, the functions and activities of the group orassociation are controlled by its employer members, and the group’s orassociation’s employer members that participate in the group health plancontrol the plan, by determining contributions, plan designs, and benefits.
• Eligibility. Only employees and former employees of association members (andtheir eligible family members) may participate in the association health plan.Inother words, it cannot be an insurance exchange for any interested party.
A new law entitled the “New Jersey Health Insurance Market Preservation Act” was signed by Governor Phil Murphy on May 30, 2018 to reestablish the recently repealed “shared responsibility tax”. The law, which will take effect on January 1, 2019, will require every New Jersey resident to obtain health insurance with minimum essential coverage or pay a fee, essentially adopting the rules of the ACA.
This legislation will directly impact residents of NJ and indirectly affect employers with employees residing in the state.
The New Jersey Health Insurance Market Preservation Act will require all New Jersey residents to have Minimum EssentialCoverage (MEC) beginning January 1, 2019, or pay a penalty.
In light of Federal repeal on Dec 29, 2017, Tax Reform Bill Includes Repeal of Individual Mandate Beginning in 2019, NJ’s mandate is scheduled to take effect on January 1, 2019, making NJ the second state, after Massachusetts, to enactan individual mandate. The mandate includes an annual penalty of 2.5% of a household’s income or $695 per adultand $347 per child – whichever is higher. The maximum penalty is based on household income and will not exceed theaverage yearly premium of a bronze plan.If it’s based on a per-person charge, the maximum household penalty will be $2,085.
A “hardship exemption” will be available for individuals who cannot afford coverage, determined by the State Treasurer. NJ expects to collect between $90 million and $100 million in penalties. This money, along with additional federal funding, willbe used on a reinsurance program, which Murphy also signed into law.
While these bills do not directly affect employer sponsoredplans, the individual mandate requirement for NJ residentswill likely require education for employees. As residentsin NJ will now be required to obtain health overage toavoid a state income tax penalty, employers may see anincrease in plan enrollment. Unlike Massachusetts whichrequires specific coverage components, the NJ law onlyrequires that coverage be MEC. Thus, most traditionalemployer-sponsored group health plans should meet thisdefinition. However, coverage for only dental benefits,certain medical indemnity policies and vision benefitsare likely not sufficient for purposes of avoiding the statetax. For now, employers with employees who reside inNew Jersey may wish to educate employees at OpenEnrollment that by January 1, 2019 health coverage willbe required for NJ residents to avoid a penalty.
New Jersey lawmakers feared the repeal would drive healthier people out of the marketplace causing premiums to spike. They believe this law is pertinent to stabilize the marketplace, keep people insured, and prevent a death spiral of the individual market.
Last Friday, June 1, 2018, the NYS 2019 Rate Requests filings were released. Great news for SMB! The total weighted average increases were a modest 7.5% small groups but 24% for the individual market. This early filing request deadline request requirement is not an Obamacare requirement. As per NY State Law carriers are required to send out notices of rate increase filings to groups and subscribers.
These are simply requests and the state’s Department of Financial Services has authority to modify the final rates. But they are the first indication of what New Yorkers can expect when shopping for health insurance on the individual marketplace at the end of this year. The news comes as insurance companies across the country brace consumers for another year of large rate hikes, owing in part to the composition of the individual market, and in part to the uncertainty over the future of the law under the Trump administration.
By contrast last year’s NYS 2018 Rate Request early filing request were higher at 11.5% small group but much lower 16.6% for individuals. The NYS final August 2018 rate approval are expected to be lower. For example, the final filing rates were aproved NYS 2018 Final Rates at 9.3% small group and 13.9% for individuals. Incidentally, the NYS 2017 Rates final rates were 8.3% small group and 12.3% for individuals. Using these past figures one projects a 2019 Final Rates of 6.5% small groups and 19% individuals.
With only 3 months of mature claims in 2018 to work of off Insurance Actuaries have little experience to predict accurate projections. Simply put the less credible information presented to actuarial the higher the uncertainty and higher than the expected rate increase. The national rate trend, however, has been much higher than in past years due to higher health care costs and the loss of Federal reinsurance fund known as risk reinsurance corridor.
Summary of 2019 Requested Rate Actions
Individual rates are expected to be higher than the small group market. The national rate trend, however, has been much higher than in past years due to higher health care costs Like other states throughout the nation, the 2019 rate of increase for individuals in New York is higher than in past years partly due to the termination of the federal reinsurance program. The loss of the program’s aka federal risk reinsurance corridor funds accounts for 5.5 percent of the rate increase.
The single biggest justification offered by insurers for the requested increases is the recent repeal of the individual mandate penalty –Tax Reform Bill Includes Repeal of Individual Mandate Beginning in 2019. The individual mandate, a key component of the Affordable Care Act, helped mitigate against dramatic price increases by ensuring healthier insurance pools. Insurers have attributed approximately half of their requested rate increases to the risks they see resulting from its repeal. Without the federal action, the average requested rate increase would be 12.1%. As DFS reviews all of the submissions, we will continue to ensure that any rate increases are fully and actuarially justified by appropriate medical cost increases and are not inadequate, excessive or unfairly discriminatory, in accordance with New York law.
Most encouraging to see the average rate requests for the small group market reflect the increased stability of that market in New York State. The combination of 2-50 and 51-100 market underscores the stability for msall bsuinesses under 50 employees. Prior to the NYS regulatory combination, the 2-50 market was running an average 12-13% trend.
The Obamacare health insurance tax, aka The HIT, is responsible for approximately 2.5%. Whiel the HIT moratorium was approved it had indeed come back last year. The total projection is $14 Billion. Notably, Empire Blue Cross has filed a modest 6% increase as their portfoliio is running stable. Additionaly, Oscar’s inbdustry low 3% filing is practially at break-even considering the HIT.
THE THREE R – RISK CORRIDOR, RISK ADJUSTMENT & REINSURANCE designed to mitigate the adverse selection and risk selection. The problem, according to many insurance companies, is that the formula is flawed, and CareConnect executives have consistently complained that they are at an unfair disadvantage. The Cuomo administration has taken steps to ameliorate some of those problems, giving the DFS the authority to essentially overrule the federal numbers. In its first-quarter financial report, executives made clear that the risk adjustment penalty was a threat to its business.
Defined Contribution Choice: Instead, the correct approach for a small business in keeping with simplicity is a defined contribution model using a PrivateExchange. This is a true defined contribution empowering employees with the choice of leading insurers offering paperless technologies integrating HRIS/Benefits/Payroll. Both employee and employers still gain tax advantage benefits under the business. Also, the benefits, rates and network size are superior under a group plan as THE RISK OUTLINED ABOVE ARE HIGHER FOR INDIVIDUAL MARKETS THAN SMALL GROUP PLANS.
To be clear: These trends affect a small subset of the insurance market—non-group plans that cover less than 2 percent of the population. Many qualify for tax credits that lower their net costs and reduce or eliminate the impact of year-to-year rate increases.However, non-group customers with incomes above 400% of the poverty level ($48,560 for a single adult) get no subsidy—and feel the full brunt of any hikes.
You may view the NYS 2019 Rate Requests DFS press release, which includes a recap of the increases requested and approved by clicking here.
For a custom analysis detailing YOUR upcoming 2018-2019 renewal please contact our team at Millennium Medical Solutions Corp (855)667-4621. We work in coordination with Navigators to assist with Medicaid, CHIP Child Health Plus, Family Health Plus and Medicare Dual Eligibles. We have Spanish, Russian, and Hebrew speakers available. Quotes can also be viewed onour site.
President Trump announced earlier today a new pharmacy cost reduction program, “American Patients First”. The program aims to provide new tools to Medicare to negotiate lower prices, stop limiting pharmacists from helping patients save money and speed up approval of over-the-counter medicines so that fewer will require prescriptions.
The plan has 4 components:
Creating incentives to lower prices.
Lowering out-of-pocket spending on drugs.
“American Patients First” calls for reforms in Medicare Part D to allow plan sponsors to negotiate lower prices for high-cost drugs, including negotiation tools that may be available to private payers. The administration also plans to address incentives in Part D to push drug companies to lower prices.The plan includes a five-part plan to restructure the Part D program to reduce drug costs. The budget includes proposals to cap spending in Medicare Part B and move Part B coverage into Part D to facilitate better negotiation.
The Food and Drug Administration will begin acting quickly to bring more generics and biosimilars to the market to address competition issues, for example.
Another area of particular focus is using a US large buying group much as other countries have been doing traditionally. The U.S. pays for 70% of the profits of branded drugs among 35 leading countries because many have government-run health systems that pay one price for drugs, senior administration officials said. According to Trump the U.S. is essentially subsidizing the R&D costs for other countries.
Last Sundays 60 Minutes segement on how the Town of Rockford, Illinois can NOT meet its budgetery obligations due to crushing PBM influenced pricing. Example: In 2001 an infant drug cost $40/vile and now
The Dept of Health and Human Services reiterated the agency’s focus on price transparency and said that was another crucial element of the drug pricing plan. The FDA, for example, is going to immediately begin
to examine ways to push drug companies to disclose prices in their advertising.Long awaited and a welcomed consumer policy.
We received the following communique from the Council of Insurance Agents & Brokers (CIAB) a delay in the Cadillac Tax for two years as a result of the passage earlier today in the US Senate of the continuing resolution (CR) to fund government until February 8th.
Implementation of the Cadillac Tax on health insurance plans will be delayed by two years, from 2020 to 2022, as part of a deal reached in Congress today to fund the government through February 8.
Repealing the Cadillac Tax is a top legislative priority for The Council and we’re pleased to see the two year delay included in this agreement. The agreement will also delay the medical device tax for two years and the health insurance tax for one year.
The Cadillac Tax imposes an annual 40 percent excise tax on plans with annual premiums exceeding $10,800 for individuals or $29,500 for a family. The Council strongly advocates for legislation that exclusively repeals the Cadillac Tax as championed by Senators Dean Heller (R-NV) and Martin Heinrich (D-NM), and Representatives Mike Kelly (R-PA) and Joe Courtney (D-CT).
The major hurdle to the effort continues to be the $87 billion cost associated with the bill, a figure with which The Council and our allies take issue. We will continue to work with our Congressional allies to see a full repeal of the tax.
Contact Us Now Learn how our Agency is helping buinsesses thrive in today’s economy. Please contact us at email@example.com or (855)667-4621.
Tax Reform Bill Includes Repeal of Individual Mandate Beginning in 2019
On Dec. 20, Congress passed the Tax Cuts and Jobs Act, which makes significant changes to individual and corporate provisions of the U.S. tax code, including a reduction in the corporate tax rate to 21%, down from 35%, beginning in 2018. The bill includes permanent effective repeal of the Affordable Care Act (ACA) individual mandate, requiring individuals to purchase and maintain health coverage, by zeroing out the penalty beginning in 2019. For 2018, most individuals are still required to maintain coverage or pay a penalty when they file their 2018 federal income tax return.
The bill was negotiated by a conference committee comprised of representatives from both the Senate and House after each chamber passed their own versions of tax reform. The final bill was passed 51-48 by the Senate and 224-201 by the House before being sent to the President. President Trump is expected to sign the bill into law soon.
The bill also changes how certain tax thresholds will be indexed for inflation. Affected provisions, including the ACA “Cadillac” Tax (scheduled to take effect in 2020), will now be indexed to the Chained Consumer Price Index (CPI) instead of the regular CPI (the previous metric). That change makes it likely that more employer-sponsored plans would trigger the Cadillac tax sooner.
We will keep our clients advised of timely developments of the Tax Cuts and Jobs Act as it relates to employee beneifts. For now, though, it appears that the biggest impactsthe next couple years are likely to be with respect to the individual mandate repeal and the Cadillac Tax changes.