CMS Publishes 2013 Choosing a Medigap Policy Guide

The official 2013 Guide to Health Insurance for People with Medicare has been published by the Centers for Medicare and Medicaid Services (CMS).  This important guide covers topics such as:

• What is a Medicare Supplement Insurance (Medigap) policy
• What Medigap policies cover
• Your rights to buy a Medigap policy
• How to buy a Medigap policy

A Medigap policy is private health insurance that wraps around the Original Medicare Program (Parts A and B) by filling in gaps to the extent provided by the specific Medigap plan purchased.  This means it helps pay some of the health care costs that Original Medicare doesn't cover, such as copayments, coinsurance and deductibles.

Medigap plans sold in the U.S. are known by their "plan letter name" such as Plan F or Plan N.  Consumers who buy a Medigap policy typically also purchase a Stand-alone Medicare Part D Prescription Drug Plan (PDP) since today's Medigap plans don't offer prescription drug coverage.

A Medigap policy is different from a Medicare Advantage Plan (like an HMO or PPO) because those plans deliver all of your Medicare benefits, while Medigap just supplements your Original Medicare benefits.  Under a Medicare Advantage Plan (also known as the Medicare Part C Program), you have the convenience of having coverage for doctors, hospitals and prescription drugs all under one roof.  Medicare Advantage plans utilize provider networks, however, which can be more restrictive compared to the simpler requirement under Medigap policies to visit Medicare-approved providers.

Click Here To Download the 2013 Choosing a Medigap Policy Guide


Until next time,

Andrew Herman
AH Insurance Services, Inc.

Feds Say Health Exchanges to Open on Time, but SHOP Program Hits a Snag

Last week, U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius assured yet another congressional panel that the Patient Protection and Affordable Care Act (PPACA) exchanges will be opening on schedule.

"We are moving ahead," Sebelius stated April 18^th at a House Energy & Commerce health subcommittee hearing on the HHS fiscal year 2014 budget request.  "We are definitely going to be open for open enrollment starting Oct. 1 of 2013."

State Health Insurance Exchange (HIX) programs are mandated under PPACA to provide competitive marketplaces in which individuals and small businesses can choose among private insurance plans; it is meant to be a “one-stop shopping” experience.  The HIX programs also are designed to assess individual financial need and determine federal compensation.  Health insurance plans offered in the insurance exchanges must reach certain levels of coverage and include PPACA-mandated options that other private, grandfathered health plans may be exempt from.

HIX programs can be set up in a few different ways.  First, states can run their own HIX programs; if so, they are eligible to receive federal grants.  States had until December 14, 2012 to submit plans for state-run HIX programs to HHS for approval.  Second, states can run HIX programs in conjunction with the federal government; plans for such programs had to be submitted to HHS by February 15, 2013.  Third, all states who either chose not to submit plans for health insurance exchanges or whose plans were not approved will have programs set up and run by HHS.  All HIX programs are meant to be fully operational by January 1, 2014; states that have declined responsibility or partnership can still choose to implement state HIX programs past that date.

Follow this link for a current map of state decisions regarding HIX programs

While implementation of the HIX programs may still be on schedule, exchanges will not be giving small businesses a full choice of plans in 2014.  At the April 18^th subcommittee hearing, Sebelius explained that HHS has decided to let the Small Business Health Options Program (SHOP) small-group exchanges put off giving employers a chance to offer employees a multi-carrier coverage option.

Each SHOP exchange will still offer the employers themselves a chance to choose from a menu that includes plans from all of the carriers that have agreed to sell plans through that exchange, Sebelius said.

Will the new health exchanges open on time, as Ms. Sebelius assured us last week?  We’ll all know for sure later this year; and by this time next year we’ll have a better idea whether these exchanges ultimately will be a success or a failure.

 

Until next time,

 

Andrew Herman, President

AH Insurance Services, Inc.

What Are the Obamacare "Essential Health Benefits"?

Essential Health Benefits

Section 1032 of the Affordable Care Act (ACA), also known as the "Obamacare" legislation, defines the following categories of benefits that individual and small business insurance plans must cover by January 1, 2014:

 

1.      Ambulatory patient services (these include outpatient services such as doctor office visits).

2.      Emergency services (these include care received in an Emergency Room).

3.      Hospitalization (these include medically-necessary surgeries and other inpatient procedures).

4.      Maternity and newborn care.

5.      Mental health services.

6.      Substance use disorder substances (these include behavioral health treatment).

7.      Prescription drugs.

8.      Rehabilitative and habilitative services and devices (rehabilitation covers services such as relearning how to walk after a stroke, while habilitative services involve learning a new skill such as speaking without a speech impediment).

9.      Laboratory tests and services.

10.  Preventive and wellness services and chronic disease management.

11.  Pediatric services, including oral and vision care.

 

Health plans are allowed to impose cost sharing obligations on plan members for most essential benefits, but those that qualify under a category of preventative health services will be provided without any cost sharing.

States are given the authority under ACA to specify details around these essential benefits.  Cost sharing for plan members will be limited by each plan’s need to cover sufficient benefit costs to qualify under the following four plan types:  Bronze plan, Silver plan, Gold plan and Platinum plan.  Surely, the writers of ACA like precious metals!

It is important to note that while these are categories of benefits that must be provided, health plans are not required to have unlimited coverage of all categories.  Rather, health plans must offer benefits that are “substantially equal” to the ten essential health benefits.  Plans will be able to adjust specific benefits, provided that all ten categories of essential benefits are still sufficiently covered.

More specific definition of the ten essential health benefits will be determined on a state-by-state basis. Each state may choose a benchmark from the following options:

 

·         One of the three largest small group plans in the state

·         One of the three largest state employee plans by enrolment

·         One of the three largest federal employee health plan options by enrolment

·         The largest HMO plan offered in the state’s commercial market by enrolment

If a state chooses not to make a selection, it will be held to the benchmark of the small group plan with the highest enrolment in the state.

The essential health benefits only apply to individual plans and small businesses.  Large group plans will be expected to provide hospitalization and emergency services, physician and midlevel practitioner care, pharmacy benefits, and laboratory and imaging services.

What do these essential health benefits mean for us?  First: a high probability of having more comprehensive coverage.  One study made by HealthPocket.com shows that less than 2% of existing plans meet the new ACA Essential Health Benefit Standards.  On average, existing health plans in the study provided 76% of the Essential Health Benefits, with the missing 24% generally concentrated around several categories:  pediatric dental and vision coverage, maternity, prenatal, delivery, postnatal, substance abuse and mental health coverage.

Of course, insurance premiums will likely increase due to the expansion of plan benefits.  A major factor even more likely to increase premiums starting next January 1st is the ACA's guaranteed issue requirement mandating that people with pre-existing health conditions can sign up for a health plan at any time.  Add to that the ACA's actuarial value requirements on the maximum out-of-pocket costs that can be charged, and we may be looking at some hefty premium increases for those who buy their insurance without a government subsidy!  That will be the subject of another post.

Until next time,

 

Andrew Herman, President

AH Insurance Services, Inc.

 

 

 

4/1 News Flash - CMS Reverses Course and Increases Medicare Advantage Payment Rate

4/1/13 - CMS Releases Final 2014 Medicare Advantage Payment Rates (Source - Reuters)

In a reversal that followed intense lobbying by the insurance industry and members of Congress, the U.S. government said it will increase the payment rate for health insurers that offer coverage through the Medicare Advantage (Part C) program that covers approximately 14 million Medicare beneficiaries.

The Centers for Medicare and Medicaid Services (CMS) announced yesterday that it will increase the payment rate by 3.3 percent in 2014, reversing a 2.3 percent cut announced in February.  CMS declared that the changes came "after careful consideration of public comments."

"The policies announced today further the agency's goal of improving payment accuracy in all our programs, while at the same time ensuring program stability and preserving beneficiary choice," Jonathan Blum, acting principal deputy administrator for the CMS, said in a statement.

Some insurers had hinted they would drop their Medicare Advantage plan offerings if CMS followed through with its initial proposal; which would, combined with other aspects of the new health care reform legislation, increase MA plan premiums between $50 and $90 per month according to actuaries at Oliver Wyman.

Lawmakers on both sides of the aisle took those concerns on board.  More than 160 of them joined an effort to reverse the previously announced rate cut, according to America's Health Insurance Plans (AHIP).

"We have concerns that if CMS does not make this adjustment, many Medicare Advantage enrollees in Massachusetts, and across the country, will face higher premiums and fewer benefits," said the Massachusetts delegation's letter, which was addressed to Marilyn Tavenner, acting CMS administrator, and dated March 27.

Earlier in March, a large bipartisan group of senators highlighted the threat of plans potentially exiting the Medicare Advantage market altogether.  And in recent months, "The Coalition for Medicare Choice," which is funded by AHIP and other private insurers, lobbied hard against the proposed Medicare Advantage cuts through television advertising and social media.  The Coalition posted on its website the Oliver Wyman study warning of a "significant amount of upheaval" if the original 2014 rate plan went through.

For further information, click on these links:

4/1/2013 Reuters Article

The Coalition for Medicare Choices Website


Until next time,

Andrew Herman
AH Insurance Services, Inc.

Will CMS Reconsider 2014 Payment Cuts to Medicare Advantage?

In a bipartisan effort, lawmakers are pushing the Centers for Medicare and Medicaid Services (CMS) to reverse proposed 2014 payment cuts for Medicare Advantage (MA) and Medicare Part D Prescription Drug Plans.  The proposed cuts would have a crippling effect on 2014 MA plan offerings and the more than 14 million Medicare beneficiaries on MA plans.

MA plans constitute the part of Medicare through which private health plans provide comprehensive medical and drug coverage to seniors and other Medicare beneficiaries.  CMS recently proposed a 2.3 percent reduction in MA payments for 2014 at a time when medical costs are projected to increase by three percent.  This is the lowest growth rate in the history of the MA program, and it is far below the 2.8 percent increase in payment rates for 2013.

Karen Ignagni, America's Health Insurance Plans (AHIP) President and CEO, recently stated, "The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare."

The new proposed payment cuts are in addition to the MA cuts and new health insurance tax included in the Patient Protection and Affordable Care Act (PPACA).  AHIP hired actuaries at Oliver Wyman to assess the cumulative impact of all these changes; and Oliver Wyman estimated in its February 2013 report that the combined effect will be a 6.9 to 7.8 percent cut to MA plans in 2014, causing benefit reductions and premium increases of $50 to $90 per member per month.

Nearly 100 Members of the U.S. House of Representatives have urged CMS to reconsider the payment cuts.  In a letter to CMS earlier this month, lawmakers wrote that the payment cuts "will leave many vulnerable seniors with fewer benefits, higher out-of-pocket costs, and in some cases the loss of their current MA coverage."

Just the other day, I received the following communication from Congressman C.W. Bill Young, U.S. Representative for Florida's 13th district:


March 22, 2013

Because of your earlier support for private Medicare Advantage (MA) plans, I thought you might be interested to learn of recent events in this regard.

As a Representative of one of the largest number of Medicare beneficiaries in the Congress, you can be sure that I am greatly opposed to any reduction in service for our nation's seniors, particularly those with multiple chronic conditions as MA plans have a proven track record when it comes to coordinating care for chronically ill individuals. 

That is why I agreed to sign a letter along with more than 90 of my House colleagues that was sent March 15th to Centers for Medicare and Medicaid Services (CMS) Acting Administrator Marilyn Tavenner expressing serious concerns with the calculations that brought forth a February proposal by CMS to reduce MA payments by 2.3 percent for next year.  Combined with the huge reductions in MA payments that are planned over the next several years to help pay for the controversial 2010 Patient Protection and Affordable Care Act, this additional cut could very well lead to significant disruption for the 14 million beneficiaries enrolled in MA plans.  Specifically, it is estimated the cumulative impact of these changes will reduce MA payments by more than 8 percent in 2014.

This is a clear example of our efforts to prevent any further reduction in MA plans from taking place.  Of course, the solvency of the Medicare program is an issue that will remain under careful scrutiny by the Congress and you can be sure that I will continue to closely monitor the situation and will follow up with you on any new developments that occur.

As always, I greatly appreciate knowing of your support for my efforts on this important matter of mutual concern.  With best wishes and warmest personal regards, I am

Bill Young
Member of Congress


Andrew again.  This time, I'm 100% in agreement with Congressman Young!  Of course, that's not always been the case during the 15 years I've resided in Pinellas County.

Until next time,

Andrew Herman
AH Insurance Services, Inc.

 

Suspension of PCIP (Pre-Existing Condition Insurance Plan)

The Department of Health and Human Services (HHS) has suspended the Pre-Existing Condition Insurance Plan (PCIP) authorized by the Patient Protection and Affordable Care Act (PPACA).  This comes as a surprise, as the PCIP stop-gap program for uninsurable individuals was designed to accept new enrollments through the end of this year, prior to full implementation of PPACA guaranteed issue rules on 1/1/2014.

Why did HHS suspend PCIP enrollment?
The federal government states, on its official health care website, "PCIP is a temporary program for those locked out of the current insurance marketplace.  The program has a limited amount of funding from Congress.  Based on program experience and trends since the start of the program, PCIP enrollees have serious and expensive illnesses with significant and immediate health care needs.  This suspension will help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

The federal website notes that individuals who recently lost PCIP coverage due to moving may be eligible to re-enroll in PCIP in their new residence state.  To learn more, click here to visit healthcare.gov.

From the viewpoint of many, including Rep. Morgan Griffith (R-Va.) the early shutdown of the PCIP program does not bode well for the fate of PPACA as a whole.  At a U.S. House of Representatives Energy and Commerce health subcommittee meeting today, Griffith remarked, "are we making promises we can't fulfill when we say we're going to cover everybody?"

Douglas Holtz-Eakin, a former Congressional Budget Office director, observed that PPACA defines "affordable" when a consumer spends less than 10% of income on health care.  Unfortunately, the U.S. as a whole now spends nearly 20 percent of national income on health care.  Based on that disconnect, the former CBO stated, "By definition, not all of us can have affordable health care... the law will never add up for everybody in the United States.  It cannot."

Regardless of how the numbers add up, it seems disappointing that PCIP enrollments were suspended more than nine months earlier than expected.  Clearly, this is detrimental to the 50-64 age group most likely to enroll into PCIP due to a pre-existing medical condition.  This demographic group often is described as vulnerable by proponents of PPACA, who advocate for the 3:1 rating rule that keeps premiums lower for older people but shifts those costs to younger people.

In my last blog post, I noted that actuarial studies suggest the average 64-year old exceeds a 5:1 cost ratio, as compared to the average 21-year old.  So while PPACA proponents are busy advocating for the 3:1 rating rule to protect the 50-64 demographic group, HHS strikes an even bigger blow to that same group by suspending PCIP enrollments - leaving newly uninsurable individuals with less options for the next nine months.  So much for early retirement!

Until next time,

Andrew Herman
AH Insurance Services, Inc.
 

Letting Insurance Benefit Everyone Regardless of Their Youth (LIBERTY Act)

Rep. Dr. Phil Gingrey (R-Ga) Introduced H.R. 544 on February 6, 2013

 

Last month, Rep. Dr. Phil Gingrey (R-Ga) introduced H.R.544 in order to challenge the age rating rules written into the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare.  Dr. Gingrey’s bill would allow the states, not the federal government, to determine their age-rating bands to prevent spiking insurance costs for young, healthy people that could propel them to leave the health insurance market in droves.

 

As called for by PPACA, insurance companies must limit the difference in health premiums due to age to a 3-to-1 ratio.  From an actual cost perspective, it can demonstrated through actuarial studies that the average 64-year old exceeds a 5-to-1 cost ratio, as compared to the average 21-year old.  To make up the difference, the costs will be subsidized by young people in the form of higher premiums, with some increases expected to be in the 30-40% range.

 

The LIBERTY Act allows states to determine the age discount in their insurance market.  Should a state fail to act, the legislation establishes a rating which better reflects the correlation between age and health care costs.  Click here to read Dr. Gingrey's 1/29/2013 Letter to Congress.

The bill’s chances in the Democratic-controlled Senate are uncertain. In today’s times, with younger people burdened at an unprecedented level by student loans, unemployment and under-employment, I can only wish that wisdom will prevail and H.R. 544 will be passed.

Until next time,

Andrew Herman

AH Insurance Services, Inc.

2013 Medicare Costs and Taxes

If you're eligible for Medicare, or will be soon, you likely know that Medicare costs for services and coverage are subject to change every calendar year.  The coming year also brings an increase to Medicare payroll taxes for high-income earners.

 

 

 

 

Below are some of the cost changes for Medicare Beneficiaries in 2013:

 

Part A Premium for those who are not eligible for Premium Free - $441 per month

Part B Premium - $104.90 (Subject to change based on income)

 

Part A Hospital Deductible - $1,184

Part B Deductible - $147

 

 

Part D Drug Program - Initial Coverage, Coverage Gap and Catastrophic Coverage:

 

Initial Coverage Stage - Beneficiary will pay copayments based on the Part D Plan's tier level for each drug (many plans have an initial deductible up to $325)

 

 

Coverage Gap - Once combined costs incurred by the beneficiary and the Plan reach $2,970

 

While in the Coverage Gap the Beneficiary will pay no more than:

• 47.5% of the plan's cost for brand name drugs
• 79% of the plan's cost for generic drugs

 

Catastrophic Coverage - After the Beneficiary's out of pocket costs for generic drugs and the full cost for brand name drugs (including the 52.5% brand name drug discount) = $4,750

 

While in Catastrophic Coverage the Beneficiary will pay:

• 5% coinsurance, or
• $2.65 copy for generics and $6.60 for all other drugs

 

Part D Drug Plan benefits change every January 1st, and the above tallies start fresh.  The Coverage Gap (also known as the infamous "Donut Hole") is being phased out entirely by the year 2020.

 

 

Increased Medicare Payroll Taxes:

Readers who earn (or are aspiring to do so) more than $200,000 will want to know (or maybe not) that the following increased Medicare taxes are to be implemented on January 1, 2013:

Medicare payroll taxes, now set at 1.45% of payrolls, will be increased .9% (to 2.35% total) for high-income individuals and couples.   This increase will be taken into effect for self-employed individuals earning over $200,000 annually, married individuals filing separately earning over $125,000 annually, and couples filing jointly with a combined income of at least $250,000 annually.

Note that these same income limits will be used to trigger a 3.8% annual tax on net investment income (the proceeds of which are to be used to help fund health care reform changes).


For complete details, download the 2013 Medicare & You Guide


Until next time,

Andrew Herman
AH Insurance Services, Inc.

 

Medicare Annual Election Period (AEP) for 2013

Medicare Annual Election Period (AEP) for 2013

 

It's that time of year again for the Annual Election Period (AEP) for Medicare Health and Drug plans.  The AEP runs from 10/15 - 12/7 and is the period when you can change your Medicare Health/Drug plan or return to the original Medicare program.  Any changes made become effective on January 1st, 2013.

 

There's no doubt your mail box is filling up with advertisements from every insurance company with a Medicare Health and Drug Plan.  But please remember that along with those advertisements will also come the Annual Notice of Change and Evidence of Coverage documents from your current Medicare Insurance Plan.  As you know change is inevitable; and this year is no exception.

 

It is important that you review your 2013 plan documentation to see what has changed and how  the changes affect you.  As in past years, we will be contacting all of our Medicare clients between October 1st and October 15th to discuss changes in your plan and help you determine if the same plan, or a different plan will best meet your needs. According to CMS rules, agents can discuss plan benefits beginning on October 1st; and enrollment applications/changes can be processed beginning on October 15th.  So if you have received your Annual Notice of Change and Evidence of Coverage documents, and you have a question or concern about your coverage, feel free to give us a call first!  We don't want you to worry one minute about your Medicare Plan.  The earlier we know your needs have changed or any changes your plan has made that adversely affect you, the more time we have to research alternatives for your Health and Drug Plan needs.

 

Medicare Health and Drug Plans are governed by enrollment guidelines established by the Centers for Medicare and Medicaid Services (CMS).  Please refer to the following chart, courtesy of Universal Health Care Insurance Company:

 

HSAs: Costs Are on the Rise

What is an HSA? What is it used for? Who is qualified to have one?

An HSA is a Health Savings Account; it is a supplement to a high-deductible healthcare plan (HDHP). As a lot of companies, especially with the current economic conditions, are cutting back on health insurance, more and more people are finding themselves having healthcare plans with high deductibles. The HSA does not get rid of the high deductible; but it does serve as a non-taxable security fund in case of medical emergency. As the 401k is established to help squirrel away money for retirement, untouched for other purposes, the HSA is used to set money aside only for medical use. These non-taxable caches are meant to lighten the burden in case the deductible has to be filled in one fell swoop; or simply to pay for routine medical care on a tax-favored basis. The best part, though: whatever money is left over in the HSA at the end of a year will be rolled over into the next year.

So What Is New with HSAs?

The tax-deductible contribution limits have increased slightly: the contribution limit for individual plans has increased from $3,050 in 2011 to $3,100 in 2012; and for family plans from $6,150 in 2011 to $6,250 in 2012. Furthermore, the 10% penalty for using HSA funds for non-approved expenses is being raised to 20%. Finally, under the Patient Protection and Affordable Care Act (PPACA), HSA approved expenses on drugs include only doctor-prescribed medications, with the sole exception of insulin. Before PPACA, there was no requirement for OTC medications to be prescribed by a doctor in order to count as an approved expense.

How About Partial Year Eligibility for People Newly Insured by an HDHP?

A 2006 change in the HSA law allows individuals whose HDHP coverage begins part of the way into the year to make the full annual contribution amount for their first year of HSA eligibility. This change in the law was intended to help people fully fund their HSA accounts, especially since many insurance plans apply the full year deductible amount even though coverage might be in effect less than 12 full months. To take advantage of this rule, the individual’s HDHP coverage must take effect any time after January 1 but no later than December 1. Normally, less than full-year HDHP coverage would require the individual to pro-rate their HSA contribution for the year based on the number of months they had HDHP coverage. However, to avoid having to pay back any of the “extra” contribution amount, the individual must remain covered by an HDHP through December 31 of the following calendar year. If the individual does not remain covered by HDHP during this “testing period,” the extra amount must be included in the individual’s income and will be subject to additional taxation. If you are unsure or know that you’re not going to keep your HDHP coverage through December 31of the following year, you may be better off prorating your contributions for your first year of HSA eligibility.

Are HSA Contributions Tied to the HDHP Deductible?

HSA contributions are not limited by the amount of the HDHP deductible. This means that even if you are covered by an HDHP with the minimum deductible (i.e., $1,200 for individual coverage or $2,400 for family coverage), you may still contribute up to the full amount to your HSA. On the other hand, if you purchase an HDHP with a deductible higher than the annual HSA contribution limit, your 2012 HSA contribution will still be limited to $3,100 for individuals with self-only coverage or $6,250 for individuals with family coverage.

Contribution Deadlines

HSA contributions for a given year must be made on or before the due date (without extensions) for filing tax returns for that year. That means for most years contributions must be made on or before April 15 of the following calendar year.

What Else Should I Know About HSAs?

In addition to the tax favored treatment of qualified medical expenses, HSA account funds can be drawn down without penalty or taxes to pay for the following types of premium:

1)      Qualified Long Term Care Insurance;

2)      Health Insurance while receiving federal or state unemployment compensation;

3)      Continuation of Coverage plans, such as COBRA, required by federal law; and

4)      Medicare premiums.

Qualified medical expenses are defined to include unreimbursed medical expenses of the accountholder, his or her spouse, or dependents. Therefore, the HSA account can be used to pay for medical expenses incurred by family members even if they aren’t covered by the HDHP.

Until next time,

Andrew Herman