Author Anthony Nefouse

The U.S. healthcare overhaul bill will provide insurance coverage for millions of Americans and possibly lower healthcare cost inflation, but it poses an increased credit risk for nonprofit providers, Standard & Poor’s said on Thursday.

 The outlook for 2010 remains one of stable credit quality after a period of deterioration from 2007 to 2009. But risk will increase in the next three to five years as many of the key provisions of the bill go into effect, S&P said. The bill can be viewed as having two halves, insurance reform and delivery system and payment reform, said the report. The former will mostly be covered by higher taxes and cuts in existing provider reimbursement formulas. But it remains unclear how the second part of the bill will be implemented, creating uncertainty for providers. “Given that the objectives of delivery system reform in the bill include lowering costs and minimizing inappropriate admissions and services, we believe the impact on the sector’s revenue could be significant,” according to the report. Still, the impact of delivery system and payment reform will likely be only gradual as many reforms will start with pilot or testing programs and could be changed after the testing period, the report said.

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As of September 23rd of 2010 dependent children can not be declined or pre-x from a health insurance policy.

This is creating some interesting situations. Right now we have seem some carriers stop selling stand alone children’s policies which is concerning. I can only speculate why they have stopped. One reason is the carriers are getting ready to increase the cost of these plans. If every child is guaranteed issue this mean the carriers are going to be absorbing much higher claims.

An example of this is we insurance children that suffer from a certain condition that  has a mandate of coverage. This mandate states the condition must be covered as any other illness and the child can not be declined from. So we have about 30 stand alone children’s policies at an avg annual premium for $2,400 x 30 policies= $72,000. For this particular condition to be treated ave about $34,000 year per patient x 30= $1,020,000 in claims.  So with this situation the insurance company is paying out much more than they are taking in.

So if we expand this on a state level of Guaranteed Issue for all children we should see an increase in premium to cover the claims.  This is the reason some carriers are not selling stand alone children’s policies as of right now.

What to do if you are in the market for a policy for your child.

If your child can get through underwriting take out a policy a.s.a.p. The reason for this is that policy will be a grandfathered policy which mean you could lock in a much lower rate than what the market has to offer after Sept. 23rd 2010. This could be the difference of paying $83 a month to paying $250 for the same policy after Sept. 23rd.

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Nefouse and Associates wants to remind small business owners about one of the first provisions of the recently passed health care reform legislation, the Patient Protection and Affordable Care Act, to go into effect – the small business health care tax credit. This tax credit encourages small business owners to offer health insurance coverage for the first time or maintain the coverage they already have. With the potential of assisting four million employers, it is specifically targeted to small businesses and tax-exempt organizations that primarily employ low and moderate income workers.

The tax credit is available to eligible small employers that pay at least half the premium cost of single coverage for their employees in 2010 and employ no more than 25 full-time equivalent employees that have average annual wages of less than $50,000. The amount of the credit varies based on the size of the employer and wages of its employees. The maximum credit will go to employers with 10 or fewer full-time equivalent employees and that have average annual wages of less than $25,000. Employers that have part-time workers may qualify even if they have more than 25 employees because the eligibility rules are based on the number of full-time hours worked in a year for 25 individuals, capped at 2,080 hours, not the number of employees. This tax credit can be considerable for a qualifying small business. In 2010, the maximum credit is 35 percent of employer-paid premiums (25 percent for tax-exempt organizations). In 2014, the maximum increases to 50 percent of employer-paid premiums (35 percent for tax-exempt organizations). The tax credits are not refundable (i.e., an employer must have income tax liability and a tax-exempt employer must have payroll tax liability).

A very simple example of how the tax credit would benefit a company with 10 full-time employees: •Employees: 10 •Total wages: $250,000 or $25,000 per worker •Employer’s Portion of Health Care Costs: $25,000 The maximum 2010 tax credit for an employer that is not tax-exempt would be $8,750 (35 percent credit). In 2014, the maximum tax credit would be $12,500 (50 percent credit). For information about the tax credit, visit You also can contact your Health Net broker or sales executives with any questions. In addition, this information is not intended to be tax advice, so you should consult with a tax professional before making any decisions.

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Under the new health care reform children/adults can stay on their parents health plan until 26.  Here is the issue that will arise with this. Can the parents afford to cover the adult child on the plan. With most group health plans today employees pay for their dependents. On the other side if the parent is already covering other children on plan the addition of the adult child might not have any impact on premium. So every parent should quote out the adult child on an individual plan to see if that is a better option from a price point. Now from an underwriting stand point being able to put the adult child on a group health plan who has ongoing health conditions could be a major relief.

Adult Child Coverage:

The Departments of Health and Human Services. Labor and Treasury issued new regulations to extend coverage to young adults by allowing them to stay on their parents’ health care plan until age 26. Before  the Affordable Care Act, many health plans  did  remove young adults from their parents’ policies because of their age, leaving many college graduates and others with no insurance.

Today, about 30 percent of young adults are uninsured, representing more than one in five of the uninsured Americans. This rate is higher than for any other age group. The Affordable Care Act and the regulations announced today will help close the coverage gap for young Americans. While the new provision takes effect for policies and plan years beginning on or after September 23, 2010, more than 65 insurance companies have voluntarily agreed to provide coverage to young adults before the deadline. On April 27, the Internal Revenue Service released new guidance specifically stating that children can be covered tax-free on their parents’ health insurance policies. According to analysis by the Department of Health and Human Services of this provision, adding young adult coverage would increase average family premiums by an average of 0.7 percent, while allowing 1.2 million young Americans coverage under their parents’ plans through employers or the individual market.

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Indiana Health Insurance for Children under the health reform act will no longer allow the insurance carrier to Pre X or decline children under 19 years of age.

This is the first step in Health Care reform that is going to have a huge impact on Individual policy holders and carriers. Once this goes into effect children cannot be declined or pre x for coverage.  Now all the claims on these children are going to be absorbed by the carriers. This is going to have a major impact on health carriers and major impact on individual premiums. There is some thought that we could see children’s premiums shoot up.  The insurance industry is about to feel the impact of the health care reform and policy holders will also feel the impact.

In 6 months, insurers will be prohibited from placing lifetime limits on what they will pay for your medical care,  and they can only apply restricted annual benefit limits.  Insurers will no longer be able to arbitrarily cancel your insurance policy when you get sick, except in cases of fraud.

Insurance companies will be prohibited from denying coverage to children with pre-existing conditions. This applies to all new plans in the individual market.

In 6 months, all new individual market health plans must provide coverage for preventive services.  Recommended prevention and vaccination services will be covered without any deductibles or copayments. They must also have a straightforward and independent appeals process so you can appeal decisions by your health insurance plan.

Beginning on January 1, 2011, insurance companies will be required to spend most of your premium dollars on your care, not on profits and overhead—75% in the individual market – and rebate any excessive overhead to enrollees.

Similarly, starting in plan year 2011, companies that sell insurance in the individual market that jack up rates will have to disclose requested premium increases publicly.  If that rate increase is found to be unreasonable, the insurer may be prohibited competing for your business in the new state-based exchange that will begin operating in 20

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Under the new health care reform tax credits will become available for small business  health plans. The first issue to address does my company quality? With premiums increases every year a tax credit could help a small business keep a health plan in place.

Effective January 1, 2010, tax credits are available to qualifying small businesses that offer health insurance to their employees. So if your business qualifies for a tax credit, you are eligible right now.

About 4 million small businesses will be eligible to receive tax credits if they provide insurance.

The tax credit is worth up to 35 percent of the premiums your business pays to cover its workers – 25 percent for nonprofit firms.  In 2014, the value of the credit will increase to 50 percent – 35 percent for nonprofits.

Your business qualifies for the credit if you cover at least 50 percent of the cost of health care coverage for your workers, pay average annual wages below $50,000, and have less than the equivalent of 25 full-time workers (for example, a firm with fewer than 50 half-time workers would be eligible).

The size of the credit depends on your average wages and the number of employees you have.  The full credit is available to firms with average wages below $25,000 and less than 10 full-time equivalent workers.  It phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers

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With the passage of the Patient Protection and Affordable Care Act (“PPACA”) and the Health Care and Education Reconciliation Act of 2010, Americans face a new era in health insurance. While there is still much guidance to come from the government,

Major changes to the limited medical industry are coming this Fall. Limited medical plans will be subject to new rules. Policy holders should contact the carrier ask them how the new laws will affect their plans.

Employers utilizing limited medical plans are facing many changes, beginning as soon as September 24, 2010 when grandfathered health insurance plans begin to renew. Group health plans, even those which have been grandfathered, will have to meet new requirements, including no lifetime and annual limits, on or after September 2010. All limited medical plans that were considered “group health insurance plans;” plans that issued Letters of Creditable Coverage under HIPAA; plans identified as Limited Major Medical Plans that function similarly to traditional group plans with co-pays, deductibles, co-insurance and an annual overall maximum or a separate inpatient/outpatient maximum; will be subject to these new regulations.

Within the limited medical industry, there are two styles of limited medical benefit plans: coinsurance and indemnity-based insurance. Fixed indemnity style limited medical plans that do not issue creditable coverage letters or represent themselves as a “true group health insurance plan” are exempt from the new regulations because they are filed as supplemental and not subject to these new regulations, as opposed to the coinsurance-based limited medical plans, which are.

Employer groups renewing after September 23, 2010 that are currently on a limited medical plan subject to the health care reform rules regarding the removal of annual and lifetime limits have several options:

1) Their carrier will not renew the plan because it cannot meet the new rules;

2) They are renewed with significant rate increases; or

3) They move to a fixed indemnity style limited medical plan

If you are a policy holder of one of these types of plans it’s important to contact the carrier for more information.

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This is going to be very interesting to see how the grandfathered plans are treated from a carrier standpoint. It’s very possible that these plans could cost less than the new generation of plans that will be launched under the health care reform.

The next few years these grandfathered plans either group or individual could become very valuable. If you have a plan where the premium is 35% lower than market condition you will not want to let that plan go.


What is a “grandfathered” health plan?

A “grandfathered” health plan is any group health plan or individual coverage that was in effect on the date of the Acts’ enactment on March 23, 2010. “Grandfathered” status is important under the Acts as certain provisions of the Acts do not apply to grandfathered plans (or at least to many participants under “grandfathered” plans), or apply to such plans at a later date. There remain many questions regarding “grandfathered” plans and the extent to which “grandfathered” status will apply

What provisions of the Acts apply to “grandfathered” health plans
The following lists some of the key provisions of the Acts that apply to “grandfathered” health plans with plan years beginning on or after September 23, 2010:

  • Dependent Coverage Until Age 26 – The Acts require group health plans (including “grandfathered” health plans) that cover dependents to provide coverage for dependent children until they reach age 26, regardless of student status or marital status. However, for plan years beginning before January 1, 2014, coverage need not be offered by a “grandfathered” plan if a dependent is eligible to enroll for coverage under another employer-sponsored group health plan.
  • Restrictions on Annual and Lifetime Limits – Group health plans (including “grandfathered” health plans) may not impose lifetime limits or “unreasonable” annual limits on the value of “essential benefits” for any plan participant or beneficiary. 
  • Prohibition on Retroactive Cancellation of Coverage – Group health plans (including “grandfathered” health plans) may not retroactively cancel a participant’s coverage once the participant is enrolled in the plan unless the individual has engaged in fraud or made an intentional misrepresentation of a material fact. 
  • Restrictions on Preexisting Conditions – The Acts mandate that group health plans (including “grandfathered” health plans) may not impose any preexisting condition exclusions for eligible children under age 19.



It is very possible if these are the only acts that are imposed on the grandfathered health plans they very well might end up costing much less.


What provisions of the Acts do not apply to “grandfathered” health plans?

“Grandfathered” health plans are excluded from the following provisions of the Acts so long as the plan maintains its “grandfathered” status:

  • Preventative Care Benefits – For plan years beginning on or after September 23, 2010, the Acts require that group health plans (other than “grandfathered”  health plans) offer certain preventative care benefits, such as immunizations and breast cancer screening, on a first-dollar basis, without cost to participants.
  • Nondiscrimination Testing – Currently, the existing Internal Revenue Code rules for nondiscrimination testing apply only to self-insured plans. For plan years beginning on or after September 23, 2010, the Acts require that fully-insured health plans (other than “grandfathered” health plans) apply the same nondiscrimination tests in an effort to discourage plans that cover only high-ranking employees.
  • External Review of Claim Denials and Appeals – For plan years beginning on or after September 23, 2010, group health plans (other than “grandfathered” health plans) must provide a mechanism in their claims procedures for an external review process, among other things.

Since these acts do not apply these plans should cost the carriers less in claims which means less in premium for the policy owner.

Time will tell.

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Group Gap Policy for Major Medical plan

 Group Gap Policies can help to offset health insurance premiums. Instead of complete cost shifting a high deductive the employer can pay for a gap policy that will pay a portion of the insured’s deductible.

 Typical Plan Overview and Benefits

Gap policies have been specifically designed to pay an indemnity benefit for out-of-pocket expenses of deductibles, co-insurance and co-payments from serious illnesses charges by the insured group’s comprehensive medical plan.

In-Hospital Indemnity Benefit

This benefit helps pay the deductibles, coinsurance or co-payment for:

Inpatient Hospital stays

Inpatient surgeries

Physician’s in-hospital charges

Routine nursery care for dependent children

Outpatient Hospital Indemnity Benefit

This benefit helps pay the deductibles, coinsurance or co-payment for:

Surgery in a hospital outpatient facility or a free-standing outpatient surgery center.

 Diagnostic testing in a hospital outpatient facility or MRI facility..

Treatment in a hospital emergency room  

Ambulance Indemnity Benefit

These benefit usually help pay for the deductibles, coinsurance or co-payment for ambulance transportation to a hospital or emergency center for injuries sustained in an accident.

Things to Consider

Some Gap Policies are not H.S.A compliant

Benefits are paid directly to the provider after an EOB has been submitted to the carrier

Gap policy may qualify for Cobra

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UniCare Life & Health Insurance Company (UniCare) has made decision to terminate its group and individual health insurance business locally. Following a transition period, UniCare will no longer provide health insurance in Indiana.

UniCare is pleased to collaborate with Anthem Insurance Companies, Inc., (Anthem), which will offer replacement coverage, on a guaranteed issue basis with no requirement for medical questions, to UniCare’s existing employer groups and to individual policyholders living in the state. The group proposals will of course be contingent upon there being no material change in the group census, use of the correct SIC factor, and compliance with eligibility, participation, and contribution requirements.

UniCare will send 180-day advance notice termination letters to Individual policyholders and 365-day advance notice termination letters to Small Group policyholders in late April. Soon thereafter, Anthem will contact you regarding offers for your small group clients and send offer letters to Individual policyholders. Your clients will have until June 30, 2010, to accept Anthem’s offer in writing.

For UniCare customers who elect to accept Anthem’s offer of replacement coverage, the coverage under the UniCare plan(s) will terminate on June 30, 2010, and the coverage under the Anthem plan(s) will begin on July 1, 2010. Although the Anthem benefits and premium will not be identical to those of the UniCare health insurance policy being terminated, Anthem will undertake to offer comparable products, which for Individual business, will be at a premium differential of no more than 12% for the first 12 months. This maximum premium differential does not include any premium increase due to changes in age and/or address. After the expiration of the initial 12 months, the premium for these Individual policies will be based on the policies’ applicable rates. There will be no break in coverage and no preexisting condition waiting periods for UniCare customers who elect to transition to Anthem. Additionally, if the offer is accepted, Anthem will provide credit for the 2010 UniCare accumulated deductibles.

For UniCare customers who choose not to move their health insurance coverage to Anthem, UniCare will terminate and discontinue coverage at 12:01 a.m. on November 1, 2010, for Individual coverage and at 12:01 a.m. on May 1, 2011, for small group coverage. If those customers have UniCare dental, life or disability coverage, it will not be terminated and will continue in accordance with the terms of those plans.

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