Democrats Face Tough Messaging War on Prescription Drug Bill

Democrats vent their fury as Joe Manchin shelves action on climate changeSource: Bloomberg, by Alex Ruoff and Zach C. Cohen

Democrats want to go into their August recess telling their constituents they’re lowering what they pay for medicines — but many of their promised changes won’t be felt for years, and only by a fraction of the nation.

Drug-pricing legislation is expected to get a vote in the Senate as soon as this week as part of a larger domestic policy package. The pharmaceutical industry, conservative groups, and Republican lawmakers are already bashing the measure in television ads and in town halls, painting it as ineffective and harmful to drug innovation.

This messaging war could be challenging for Democrats because some of the major benefits of their drug-pricing bill won’t go into effect until 2025, too late for voters in elections this November. Opponents of the drug bill say they’ll try to capitalize on that.

“The administration knows none of this is going to help benefit people anywhere around the country, nobody this year,” said John Barrasso(R-Wyo.), a physician who’s chairman of Senate Republicans’ messaging operation.

The party of the president tends to lose seats during midterm elections, and this November is shaping up to repeat that precedent. President Joe Biden has a low approval rating and Americans report increasing dissatisfaction with the direction of the country and the economy.

The legislation is the culmination of more than a decade of work by Democrats to make good on their promise to reduce prescription drug prices in the US by allowing the government to negotiate with drugmakers.

Democratic leaders say they’ve got the backing of influential groups such as the AARP, who can help spread their message about coming benefits — namely a $2,000 out-of-pocket cap on what seniors pay each year for medicines.

“Of course it will take time to phase out, and of course the opposition will try to cause problems in the meantime, that’s just the nature of it,” said Sen. Debbie Stabenow (D-Mich.), head of the Democratic Policy and Communications Committee. “We just have to tell the story, and work with AARP and everyone else to tell the story of what we’ve done, and explain that relief is coming and it will come as fast as possible.”

Democrats also face concerns within their own party that the drug-pricing bill doesn’t go far enough because it would limit drug negotiations to only a set number of medicines that’ve been on the market for years. Sen. Bernie Sanders (I-Vt.), who caucuses with Democrats, said limiting negotiations is a mistake, and Americans want a more forceful effort to lower drug prices.

“This is a weak bill, which goes nowhere near as far as I think the American people want us to go,” Sanders said.

Attack Ads

Democrats seen as swing votes or who have difficult reelection bids already face attack ads around their drug-pricing bill. Outside groups have spent more than $8.2 million on broadcast ads lambasting the drug-pricing provision since it was unveiled in July, data from media tracker AdImpact show.

The dark-money group American Prosperity Alliance has spent $5.7 million and counting on ads in West Virginia, Georgia, Nevada, and Washington, D.C. The spots falsely claim that this legislation would strip Medicare of $300 billion, misinterpreting projections that the legislation would lower Medicare spending by $288 billion over 10 years.

Sen. Catherine Cortez Masto (D-Nev.), who is up for reelection this November, said last week “hundreds” of Nevadans called her office worried about the policy. “In Reno this past weekend, Nevadans came up to me because they were concerned about these false accusations,” Cortez Masto said on the Senate floor.

The Partnership to Fight Chronic Disease, a political tax-exempt group, has spent more than $1.1 million on ads in West VirginiaGeorgiaNevada, and Washington, D.C., urging key senators not to “mess with” Medicare. And PhRMA, the trade association for pharmaceutical companies, is spending more than $1 million across the country warning “government price-setting could mean fewer medicines in the coming years.”

Supporters of the proposal are outgunned, spending millions of dollars less in the same timeframe on broadcast advertising to celebrate the provisions. Some of this funding comes out of the pockets of Democrats who are on the ballot in November.

AARP is spending $436,000 on ads in Washington, D.C., and West Virginia applauding the plan for “putting money back” in voters’ pockets. Majority Forward, a political nonprofit with ties to Democratic Senate leadership, spent $310,000 thanking Sen. Maggie Hassan (D-N.H.) for her support for the domestic policy measure.

Sens. Chris Van Hollen (D-Md.) and Richard Blumenthal(D-Conn.), who are up for reelection, have both spent thousands of dollars running ads touting their work to cut drug costs.

Pre-Recess Messaging

Democrats will likely keep up that drumbeat over the August recess. House Speaker Nancy Pelosi(D-Calif.) wrote to colleagues last week, encouraging members of her caucus to highlight work to “lower costs,” and the Democratic Congressional Campaign Committee in a pre-recess memo warned a Republican majority would “protect Big Pharma profits over people’s lives.”

House Republican leaders last week distributed communications kits—pamphlets meant to give lawmakers talking points while at home in their districts—that decry a a “Democrat Socialist drug takeover could lead to 135 fewer drugs and cures.”

Rep. Brad Wenstrup (R-Ohio), a physician, said Democrats’ bill would “limit production” and would be a “crushing blow to research and development in the pharmaceutical industry.”

“To me, one lost cure is too many,” Wenstrup said. “And one of the worst parts about this bill: if you’re someone, like most Americans, that pays into Medicare your whole life, this bill is robbing Medicare to go ahead and pay for insurance premiums.”

Both sides of this messaging fight are a bit divorced from the reality of the drug-pricing bill, said Spencer Perlman, director of health-care research for the consultancy Veda Partners.

The Senate drug-pricing bill is the “second-best possible outcome” for the pharmaceutical industry behind no congressional action, Perlman said. It’s weaker than what Democrats have proposed in the past and likely means Congress won’t return to drug pricing for years to come, he said. Meanwhile, drug spending will continue to grow over the next decade, and Democrats’ bill is expected to slow that growth rate by about 15% for Medicare and 12% for the commercial market, Perlman wrote in a recent analysis.

Significant Changes

Democrats are trying to advance one of the most significant changes to Medicare’s drug benefit since it was started in 2006. Some of them will be more apparent than others, researchers who study the program say.

In addition to the out-of-pocket cap, the bill would allow seniors in Medicare to spread out their drug costs over the year, and in 2023 Medicare beneficiaries would have no cost-sharing for adult vaccines, said Tricia Neuman, who heads the Kaiser Family Foundation’s research on Medicare.

In 2024, the bill would also eliminate the 5% coinsurance beneficiaries pay when they hit what’s known as a catastrophic threshold, which was more than $7,000 in out-of-pocket drug spending in 2022, she said. This will help people who take brand-name drugs costing thousands of dollars afford their pricey medicines, she said.

More than 1.3 million Medicare beneficiaries hit the catastrophic threshold for drug spending, and more than 1.4 million beneficiaries spent more than $2,000 on medicines in 2020, Neuman said. But that’s just a fraction of about 48 million enrollees in Medicare’s drug benefit.

“It’s a terrible program for people who need expensive, life-saving drugs,” said Stacie Dusetzina, an associate professor in the Department of Health Policy at Vanderbilt, with some seniors not filling their prescription for crucial medicines because of the cost. Dusetzina was part of an April study that found almost a third of people on Medicare weren’t filling anti-cancer drugs.

Dusetzina, who studies Medicare and drug policy, said the drug bill is a big step forward for Medicare.

“Even if they don’t fully get the public to understand the nature of these changes and why they’re so important, it’s still important to do them because the program is broken and needs to be fixed,” she said.

Many Workers, Particularly at Small Firms, Face High Premiums to Enroll in Family Coverage, Leaving Many in the ‘Family Glitch’

Many Workers, Particularly at Small Firms, Face High Premiums to Enroll in Family  Coverage, Leaving Many in the 'Family Glitch' | KFFSource: Kaiser Family Foundation, by Gary Claxton, Larry Levitt, and Matthew Rae

The Biden Administration recently issued a proposed rule to make it easier for family members of workers offered health insurance at their jobs to qualify for premium tax credits for Marketplace coverage. The proposal aims to address what has been called the “family glitch”. Under the ACA, an individual enrolling in a Marketplace plan is not eligible for a premium tax credit if they are eligible for job-based coverage that is considered affordable and provides minimum value (i.e., covers at least 60% of health expenses on average). Current regulations provide that job-based coverage is considered affordable to a worker and their dependents if the cost of self-only coverage for the worker is less than 9.6 percent of family income, without regard to the cost of adding family members. The proposal would revise that interpretation by assessing the affordability of job-based coverage available for the family members of a worker by comparing the total cost for the whole family (including the worker) to the 9.6 percent threshold. This assessment would measure affordability for members of the family other than the worker. Affordability for the worker himself or herself would continue to be based on the cost of self-only coverage.

The proposed rule explains that the current interpretation leads to cases where family members are considered to have an affordable offer even when they face very high contribution amounts if they want to enroll in that coverage, which the agencies assert is not consistent with the ACA’s purpose of providing access to affordable coverage for everyone. We previously estimated that 5.1 million people are currently caught in this ‘family glitch’.

In this analysis, we use the KFF Employer Health Benefits Survey (EHBS) to look at the shares of workers that might pay significant amounts to enroll families and how these shares vary across firms. These are the workers most likely to benefit from a fix to the family glitch.

Health insurance is expensive. The average premiums in 2021 were $7,739 for single coverage and $22,221 for a family of four. The average contribution amounts for covered workers were $1,299 for single coverage and $5,969 for a family of four. Importantly, there was considerable variation around these averages: for example, ten percent of covered workers were enrolled in a plan with a premium of more than $29,000 for family coverage; and 12% of covered workers were enrolled in a plan with a contribution of at least $10,000 for family coverage. It is the family members of workers in firms with high contributions that are most likely to benefit from the proposed rule change.

Before looking at some of the characteristics of these firms and workers, we should be clear about what these percentages mean. When we say that 12% of covered workers are in a plan that has a worker contribution of at least $10,000, we are not saying that 12% of covered workers actually enroll in family coverage and pay those amounts. Instead, we are saying that 12% of covered workers work at firms where the contribution for a family of four for their largest health plan (or sometimes an average of several plans) is at least $10,000. Surveys do not collect information about all of the health plans each employer may offer, nor are they able to account for potential adjustments that might affect individual workers or families (smoking surcharges, discounts for filling out a health risk assessment, surcharge if spouse is offered coverage at another job). So, while these surveys cannot give precise results on actual costs, they give a pretty good picture of the magnitude of the costs workers face to enroll in the plans that most workers choose.

Workers in small firms face higher contributions for family coverage. Workers in small firms (3-199 workers) on average face higher contributions to enroll in family coverage and are more likely to face very high contribution amounts. The average contribution for a family of four in 2021 was $7,710 for workers in small firms, compared to $5,269 for workers in larger firms. Twenty-nine percent of covered workers in small firms faced a contribution of at least $10,000 for family coverage, compared to only 5% of covered workers in larger firms.

One reason family contributions may be higher in smaller firms is that some small employers only make a contribution toward the cost of self-only coverage, leaving the worker to pay the entire difference between the premium for self-only coverage and the premium for family coverage. Even in firms selecting less comprehensive coverage, this difference can be many thousands of dollars. We estimate that 19% of small firms offering health benefits make little or no additional contribution towards the cost of family coverage. These firms employ about 17% percent of the covered workers enrolled at small firms (3-199 workers).

Workers in the service industry are more likely to face high contributions for family coverage. Contributions for family coverage vary significantly by industry. Covered workers in certain industries are more likely to face high contributions for family coverage while covered workers in other industries (wholesale, transportation, communications, utilities, state and local government) are less likely.

The proposed rule addresses the eligibility for premium tax credits in situations where workers face unaffordable contribution amounts to enroll their family members in job-based coverage. Data from the KFF Employer Health Benefits Survey demonstrates that some workers face very high contribution amounts for family coverage, with 12% facing a contribution of at least $10,000 for a family of four. Workers with coverage through small firms are particularly at risk of high contributions for family coverage, and would therefore benefit from the family glitch fix.

Small Businesses Face $2 Billion Cut From Covid-19 Relief Fund

Small businesses face $2 billion cut from Covid-19 relief fund - KTVZSource: CNN Politics, by Katie Lobosco

Congress is considering taking back some of the money it authorized last year for a small business aid program in order to pay for new Covid-19 vaccines, testing and therapeutics.

The Biden administration asked Congress to provide more money weeks ago, warning that funds are needed to continue fighting Covid-19. But lawmakers have disagreed on how to pay for the request. Senate Republicans have insisted any new funding be fully offset by repurposing money from Covid-19 relief legislation that Congress previously passed.

A bipartisan deal reached in the Senate earlier this month would fully offset the $10 billion legislation by reallocating a variety of Covid-19 relief funds that were previously authorized by Congress but have not yet been spent.

A majority of those unspent funds were left over from programs that have already expired. But the deal also proposes taking about $2 billion from a $10 billion small business program that hasn’t disbursed any funds yet.

“There’s a big difference between funds that have not been used and funds that have yet to be deployed,” said Katie Kramer, vice president of the Council of Development Finance Agencies, a national association dedicated to supporting economic development.

The program in question, known as the State Small Business Credit Initiative, provides money to states to help create small business financing programs. It’s a long-term aid program that is meant to help small businesses have access to capital as the economy rebounds, instead of providing emergency grants and loans like other Covid-19 aid programs.

Funding cut threat puts state plans on hold

After months of planning how best to use the money, the threat of the cut is putting states’ plans on ice.

Like many states, Oregon was ready to launch several small business financing programs as soon as it receives the money from the Treasury Department. If the funds are cut, it could mean big delays.

“The frustrating thing for us is that we’ve been engaging with communities for months, letting them know these resources are coming,” said John Saris, finance manager at Business Oregon, the state’s economic development agency.

He was expecting Oregon to receive more than $83 million, enough to potentially reach 1,000 businesses. But if Congress rescinds some of the money, the state could see a reduction by as much as $20 million, leaving it with resources to help just 700 small businesses.

“With these cuts, we will have to totally revamp our plans. Some programs might go away completely – that’s how dire this is,” Saris said.

The State Small Business Credit Initiative allows states to create a variety of financing programs for small businesses and startups emerging from the pandemic, including venture capital programs and loan guarantees to lenders, for example.

Governments are required to match some of the federal funds with private capital, and Treasury expects that the programs should generate small business lending and investment of at least 10 times the federal contribution amount.

That means that a $2 billion cut in federal funding from the State Small Business Credit Initiative could result in more than a $20 billion reduction in private investment for small businesses, according to the Council of Development Finance Agencies.

States are still waiting for the money

The State Small Business Credit Initiative was originally created in 2010 to help small businesses recover from the Great Recession. The American Rescue Plan Act, which was signed into law by President Joe Biden in March 2021, reauthorized the program and provided $10 billion in new funding.

States were required to submit applications to Treasury in February and tribal governments have until May 11. But no applications have been approved yet and none of the money has been disbursed by Treasury.

A Treasury official told CNN that the agency’s rollout of the State Small Business Credit Initiative “has been consistent with the statute and included outreach, input, and engagement with states, tribes, lenders, small businesses and experts, as well as technical assistance to ensure programs are set up to deploy these funds effectively.”

The official noted that Congress created some new elements for the program that weren’t included in 2010, including the addition of allocations for tribal governments and socially and economically disadvantaged business owners, along with a new technical assistance program.

Bill remains in limbo

After weeks of negotiation on the Covid-19 relief bill, lawmakers left for a two-week recess without voting on the bill. The latest hurdle came as Republicans demanded a vote on an immigration amendment to restore Title 42, a pandemic-era rule that allowed immigrants to be returned immediately to their home countries citing a public health emergency.

The bill calls for repurposing several buckets of previously approved Covid-19 relief funds to pay for the new health spending, in addition to the money it would take back from the State Small Business Credit Initiative.

The bill would use nearly $2 billion left over from the Shuttered Venues Operators Grant program, which gave money to live music venues, theaters and museums that were forced to shut their doors for some period of time due to the pandemic. The program stopped taking applications in August. It awarded more than $14 billion in grants.

The bill would also repurpose about $900 million that is remaining for the Covid-19 Economic Injury Disaster Loan advance program, which allowed some small businesses to receive up to $15,000 that did not need to be paid back. The program would be left with enough money to accommodate pending loan modifications and the recently announced six-month deferment on loan payments, according to a summary of the bill provided by Senate Democrats.

More than $2.3 billion would come from the Aviation Manufacturing Jobs Protection Program, which provided funding to businesses to cover up to half of their payroll costs for certain categories of employees for up to six months. In return, those businesses were required to make several commitments, including to not involuntarily furlough or lay off employees within that group during the same six-month period.

The bill would also use remaining unspent money in the Higher Education Emergency Relief Fund, totaling $500 million. That program provided funds to colleges so that they could give emergency financial aid grants to students whose lives were disrupted by the pandemic. Another $1.6 billion of unspent funds that were previously given to the US Department of Agriculture would also be repurposed.

Congress could take up the new Covid-19 relief legislation next week after lawmakers return from recess. Spokespeople for Senate Majority Leader Chuck Schumer and Republican Sen. Mitt Romney of Utah, who was negotiating the funding deal for Republicans, did not return emails from CNN requesting comment for this story.

Obamacare Enrollees Face Growing Out-of-Pocket Costs

 

StethoscopeObamacare enrollees were already warned to prepare for double-digit rate hikes. Now, the structure of Obamacare’s tax credits is ratcheting up the out-of-pocket costs of premiums – especially for the lowest earning enrollees, according to a report by National Center for Policy Analysis senior fellow John Graham. “This ratchet effect on the out-of-pocket cost of premiums is greatest for the lowest earning enrollees [who are] only slightly above the federal poverty level. Some of them will see hikes of 50% or more. What’s behind this ratchet effect? Obamacare’s tax credits are determined by an enrollee’s income and the second-least expensive Silver plan in the locating region. This introduces harmful leverage into most enrollees’ renewal, which can increase the net premium by a significantly higher percentage than the increase in gross premiums. If every single enrollee who chose the second-lowest cost Silver plan in 2015 took the time to shop around and found the second-lowest cost Silver plan, which is usually different, the average gross premium hike would be 7.5%. This is an unlikely, best-case scenario, given enrollees’ behavior renewing from 2014 to 2015,” says Graham.

Numerous reports of double-digit rate hikes in Obamacare’s health insurance exchanges understate the increases most consumers are facing. The gross premium for the average Silver plan increased 10%. However, the subscriber earning 150% of the Federal Poverty Level has seen a 28% increase in net premium. “This is because of the perverse way tax credits are allocated to insurers in the exchanges. This ratchet effect explains why subscribers are more outraged by premium hikes than Obamacare’s advocates appreciate,” says Graham.

Hundreds of Thousands of Californians Face Increased Tax Penalty

Covered California is reminding consumers that time is running out to avoid the tax penalty for those who do not have health insurance in 2016. A recent report from the Henry J. Kaiser Family Foundation (http://kff.org/health-reform/issue-brief/the-cost-of-the-individual-mandate-penalty-for-the-remaining-uninsured) estimates that the average household penalty in 2016 will be $969, which is a 47% increase from 2015. The report also estimates that those subject to the penalty include 75% of people who are eligible for premium subsidies. The fine is calculated two different ways; uninsured consumers will pay whichever amount is higher. The first calculation is 2.5% of household income, with a maximum of the total yearly premium for the national average Bronze health insurance plan premium. The second calculation is $695 per adult plus $347.50 per child under the age of 18, with a maximum of $2,085.

The following table shows the potential range of penalties for not having insurance in 2016.

Estimated Annual Penalties for Not Having Health Insurance in 2016
Household Size Minimum Maximum*
1 (single filer) $695 ($58 per month) $2,484 ($207 per month)
2 (single filer with one dependent under 18) $1,043 ($87 per month) $4,968 ($414 per month)
3 (married filing jointly with
one dependent under 18)
$1,738 ($145 per month) $7,452 ($621 per month)
4 (married filing jointly with two dependents under 18) $2,085 ($174 per month) $9,936 ($764 per month)

Nearly nine out of 10 Covered California enrollees get some financial assistance. Covered California says that 670,000 enrollees paid $100 a month or less for their coverage in 2015 and 350,000 enrollees paid $50 or less per month. Open enrollment runs through Jan. 31. Anyone signing up between Jan. 16 and Jan. 31 will have their health care coverage start on March 1.

Many Insured Patients Still Face Crushing Medical Debt

A recent Kaiser Family Foundation/New York Times study reveals that one-in-five working-age Americans have run into serious financial difficulties trying to pay medical bills despite being insured. In the survey, 62% of those with medical bill problems say the bills were incurred by someone who was insured, with 75% saying that the amount they had to pay for their insurance copays, deductibles, or coinsurance was more than they could afford. They reported skipping or putting off other health care in the past year because of the cost, such as postponing dental care, skipping doctor-recommended tests or treatments, or not filling a prescription. For out-of-network charges, 69% said they were unaware that the provider was not in their plan’s network when they received the care.

Consumer Watchdog says that PPO health insurance policies with very narrow provider networks and extremely limited out-of-network coverage are a new form of “junk insurance.” The group says that many patients cannot find competent in-network doctors, and then face huge medical bills due to extraordinarily limited coverage for out-of-network services.

Jamie Court, president of Consumer Watchdog said, “New PPO policies with very limited providers in-network and extraordinarily low benefits out-of-network are creating new express lanes to bankruptcy for families. Until insurance companies are forced to justify that their premiums, co-pays, and policy benefits are reasonable, too many families will be forced to choose between medical bills and other necessities of life, like paying their mortgage. These findings should shake up the statehouse and revive the regulation debate.”

In 2014, Consumer Watchdog sponsored Proposition 45, which would have allowed the insurance commissioner to make health insurance companies justify their rate hikes under penalty of perjury, and to reject excessive rate increases.

Other findings in the Kaiser/New York Times survey include the following:

  • 26% of insureds with problems paying medical bills say they received unexpected claim denials; and 32% say they received care from an out-of-network provider that their insurance wouldn’t cover.
  • Those in higher deductible private plans are more likely to report medical bill problems than those in private plans with lower deductibles (26% versus 15%).
  • Sixty-one percent of those with medical bill problems say they’ve had difficulty paying other bills as a result of their medical debt, and 35% say they were unable to pay for basic necessities like food, heat, or housing.

Read the Kaiser Family Foundation/New York Times survey here: http://kff.org/health-costs/press-release/new-kaisernew-york-times-survey-finds-one-in-five-working-age-americans-with-health-insurance-report-problems-paying-medical-bills/

Caregivers Face A Career Crisis

Providing care for loved ones has taken a toll on the careers of half of caregivers with 11% losing their jobs and another 10% having to change careers.  That’s in addition to the other financial, physical, and emotional effects of caregiving according to a Genworth study.

Fifty-one percent of caregivers say that that caregiving responsibilities impeded their ability to perform their jobs. The survey also reveals the following:

  • 77% missed some work during the past year, up 19% in 2010.
  • Caregivers missed an average of seven hours of work per week.
  • 19% missed 10 or more hours of work per week.

As a result of their caregiving responsibilities:

  • 11% lost their jobs.
  • 10% had to change careers.
  • 12% had to change positions.

Approximately one-third of caregivers provided 30 hours or more of care a week.  On average, caregivers lost one-third of their income. The study also highlights several factors that contribute to respondents’ reluctance to plan early. Thirty percent didn’t want to admit that long-term care may be needed and 25% didn’t want to talk about the issue.

Caregivers who had long term care insurance were reimbursed for 23% of their qualified out-of-pocket expenses. Forty-eight% of care recipients had considered the possibility needing long-term care, but only 26% made a plan to cover their potential needs. Even planners felt they could have been better prepared; 63% said they should have taken steps sooner, which would have led to reduced stress.

Consumers in Grandfathered Plans Can Face Higher Costs for Preventive Benefits

Reprinted from the Kaiser Health News (www.khn.org).

by Michelle Andrews June 9, 2015

Judy Naillon called her insurer several months ago to find out why she was being charged $35 every month for birth control pills. Her friends said they were getting their pills for free under the federal health law. Why wasn’t she getting the same deal?

The insurance rep explained that was because the plan Naillon and her husband had through his job was grandfathered under the health law. That meant the plan didn’t have to cover preventive services, including contraceptives, with no charge to consumers as Obamacare requires of other plans.

Naillon, 33, would have to continue to pay a share of the cost of her pills, and the plan wouldn’t pay if she wanted to switch to an intrauterine device. There also was no coverage for an annual physical.

“I’m just really frustrated,” says the Wichita, Kan., piano and violin teacher. When her husband took a new marketing job last fall, I thought that surely all these insurers must now be covering these benefits.

About a quarter of insured workers remain covered by grandfathered plans, according to the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.) These plans were in existence when the health law was enacted in March 2010 and haven’t changed their benefits or consumer costs significantly since then.

In addition to not being required to cover preventive benefits without charge, grandfathered plans are exempt from some other health law requirements. They don’t have to guarantee members’ rights to appeal a decision by their health plan, for example, and may charge consumers higher copays or coinsurance for out-of-network emergency services. They also don’t have to comply with the law’s limits on annual out-of-pocket spending ($6,600 for someone in an individual plan and $13,200 for families), so consumers in these plans may be on the hook financially for more of their medical care.

When the health law passed, President Barack Obama sought to reassure anxious consumers by promising that if you like your health care plan, you can keep it. Since then, the number of grandfathered plans has steadily declined. In 2011, 72% of companies that offered health insurance had at least one grandfathered plan; by 2014 that number had declined to 37%, according to KFF’S annual employer health benefits survey. The decline isn’t surprising, say benefits experts.

Large employers make changes every year to improve care and reduce costs, says Steve Wojcik, vice president of public policy at the National Business Group on Health, an advocacy group representing large employers’ interests.

“Some big self-funded companies may keep generous grandfathered plans as a recruiting and retention tool, says Joe Kra, a partner and actuary at human resources consultant Mercer. Smaller employers are more likely than large ones to be grandfathered at this point,” Wojcik says. Small firms typically buy a plan from an insurer that pays their claims, unlike larger companies that often design their own plans and pay their employees’ claims directly.

Some health policy experts have two words for the demise of grandfathered plans: Good riddance. Lacking many consumer protections and generally subject to weaker regulation, they aren’t necessarily good options for people who have health problems.

“But they can be a good deal for younger and healthier people. Grandfathered plans are more likely to hang onto people who are low risk,” says Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities. However, on the individual market, if healthy people stay in grandfathered plans, it tends to leave sicker people in the comprehensive plans that comply with the health law.

From an employee’s perspective, what grandfathered plans may lack in consumer protections they may make up for in reduced cost sharing, Kra says.
In order to retain their grandfathered status, for example, plans are limited in how much they can increase copayments and deductibles, among other things. That means if someone had a $20 copayment in 2010, the copayment could be no more than $26 next year, Kra says. Likewise, a $500 deductible could be no more than $652.

“If an employee is in a grandfathered plan, they’re one of the fortunate minorities,” Kra says. Naillon probably wouldn’t agree with that statement. “Even though my doctor would like to do a physical and run labs, I can’t afford to have those services,” she says.

Californians With Mental Health Issues Face Discrimination

Californians With Mental Health Issues Face Discrimination
Many California residents with mental health issues report discrimination in personal relationships and in the workplace, according to a RAND Corp. study. Just 41% of those surveyed say that people are caring and sympathetic to those with mental illnesses while 81% say that people with mental illness face prejudice and discrimination. More than two-thirds of said they definitely or probably would hide a mental health problem from co-workers or classmates, and more than one-third said they would hide their condition from family or friends.

Nearly 90% who had a mental health problem faced discrimination. Most often, they faced discrimination in intimate personal relationships, but they also reported high levels of discrimination at school, in the workplace, and from health care providers and law enforcement officials. However, Californians who are facing psychological distress are showing signs of resiliency. More than 80% of those surveyed have a plan for staying or becoming well and say they can meet their personal goals. In addition, about 70% of those surveyed said that they are satisfied with life. The large majority of respondents say that recovery from mental illness is possible and say they would seek treatment for a mental health problem if needed.

Proposition 63, which imposed a special state tax on people with incomes over $1 million, funds the California Mental Health Services Authority (CalMHSA). Wayne Clark, executive director of CalMHSA said, “This new report…highlights the need to confront stigma, and the opportunity to promote mental health in our state with the statewide stigma reduction efforts offered by CalMHSA.” The survey found that the mental health education campaign mounted by CalMHSA is reaching people facing psychological distress. About one-third of the people surveyed had been reached during the previous 12 months by the early intervention efforts, such as viewing the campaign’s documentary on ending stigma about mental illness. In addition, other activities that could be related to the CalMHSA efforts reached nearly 90% of the group during the previous 12 months.

Large Employers Could Face Higher Taxes

A recent Q&A document from the IRS reveals how large employers could suffer tax consequences for pushing employees toward a health exchange:

Q. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance ( through a qualified health plan in the Marketplace or outside the Marketplace)?
Under IRS Notice 2013 to 54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health cover or take that amount in cash compensation. As explained in Notice 2013 to 54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q. Where can I get more information?
On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy. DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable

Last Updated 08/10/2022

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