May 2010

Health Care Reform – What Does it Really Mean?

The recently enacted health care reform legislation will bring the biggest changes to the U.S. health care system since the creation of Medicare and Medicaid in 1965. When fully implemented, 32 million individuals will gain insurance coverage, and 95 percent of all legal U.S. residents will have coverage. This legislation significantly advances CHI's highest advocacy priority: access and coverage for all.

Medicaid will be expanded to all residents who earn up to 133 percent of the federal poverty level. Individuals and small businesses will be able to purchase coverage through state-based insurance exchanges. Federal subsidies will make coverage more affordable for those who earn lower incomes. Individuals will be required to have health insurance or pay tax penalties. Larger employers (50 or more employees) that do not provide adequate coverage for employees will pay fees if their employees use subsidies to purchase insurance through an exchange.

Significant reforms to insurance practices will make coverage more accessible. The law will prevent denial of coverage based on pre-existing conditions; eliminate annual and lifetime coverage limits; prohibit insurance cancellation when an individual gets sick; guarantee issuance and renewal of coverage; and limit premium variations to those justified by age, geographic location, family size or tobacco use.

Health care reform will create incentives for improved coordination and quality of care across the continuum of services, particularly for individuals with chronic conditions. Provider payments will be based on value rather than volume of services. Wellness and prevention will be encouraged and funded, including insurance coverage for recommended preventive services. There will also be a renewed focus on expanding the health care workforce.

While many major coverage expansions will not be effective until 2014, several provisions in the bill will be put in place within the next year. These include:

·        Tax credits to help small businesses provide insurance for employees.

·        Interim high-risk pools for individuals denied coverage due to pre-existing conditions.

·        No denial of coverage to children with pre-existing conditions.

·        Extension of dependent coverage up to age 26.

·        Prohibitions on insurers dropping coverage for individuals who get sick.

·        No lifetime dollar limits and restricted annual limits.

·        No copayments or deductibles for preventive care under Medicare and new plans.

·        Requirements for insurers to spend 80 to 85 percent of premiums on medical services.

·        Temporary reinsurance program for employers providing early retiree coverage. 

The legislation creates opportunities for CHI in the months and years ahead through increased coverage, delivery system reforms and incentives that reward quality and value. It will also create challenges for CHI, including Medicare and Medicaid provider payment reductions that will help fund the cost of reform.

CHI's leadership will be involved in shaping regulations for implementation of key provisions of the new law. To advance this effort, CHI's Advocacy Group has created a Health Care Reform Implementation Task Force with representation from all national groups and operations. The task force will help identify CHI's reform priorities and develop recommendations for federal agencies on new regulations. For more information, contact Marcia Desmond,