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It seems that no matter which way community banks turn, they are subject to more and more regulations and compliance requirements. Health Reform continues to add compliance responsibilities that all banks must juggle. New IRS guidelines, mandatory reporting, and steep fines are indicators that Health Reform will cost you money, and it will require more time away from your customers in order to handle the tall task of dealing with compliance issues.

The Ups and Downs of Cost

Although the Health Reform Bill has been touted as a cost-reducing measure, many of the provisions are going to increase costs to businesses and participants. Requiring a plan to cover more people, more conditions, and have less available funding for large claims will inevitably drive up premiums. Some items involved in Health Reform will have a larger impact than others, but no one can be sure of the exact amounts just yet. Other provisions will be less costly, such as covering dependents to age 26 and eliminating pre-existing conditions for children.

Removal of Limits: There’s No Stopping It

The most immediate impact will be felt by the removal of lifetime and annual limitations. This regulation is imminent (September of this year for some employers), and will have a huge impact to many insurance programs. Many plans have a very high limit on the amount that can be spent in a year or over a lifetime. In the rare instance that a participant reaches these limits, they would normally qualify for Medicaid or government assistance. The biggest issue with removing these caps is that there is no way to underwrite for ongoing catastrophic events in excess of millions of dollars in care. Additionally, it gives providers the ability to charge drastically higher rates for services, since they will be paid no matter what. Other types of plans often utilized by charitable organizations and companies that are heavy-utilizes of part-time help (often called ‘Mini-Med’ plans) will also be affected.

Also, beginning in 2010, plans will not be allowed to limit access to primary care providers that are in-network. While this sounds good on the surface, providers who have joined a network have agreed to do so at a reduced cost for services. Out-of-network providers are free to charge any amount they choose, and any remaining costs after insurance pays can be ‘balance-billed’ to the patient. Since there will be no incentive for providers to stay in-network, they will allow their contracts to lapse and begin charging full price for services. This is another factor that will cause costs to increase.

Even If It Doesn’t Affect You, It Affects You

One portion of the bill that doesn’t affect employer plans directly, but will have a larger impact globally on costs to plans is cuts to Medicare and Medicaid reimbursements. Providers are already feeling the pinch of low reimbursements and are passing those costs on to other plans and individuals.

Minimum Coverage, Maximum Cost

“Minimum Essential Coverage.” That is the new buzz phrase for “you will buy a plan the government tells you to buy, with the coverage they say you should have.” Starting in 2014, employers will be required to provide coverage to their employees that falls under ‘minimum essential coverage.’ Historically, when an employer wanted to lower the cost of their premiums, they would choose different coverage options. Those days will soon be gone. The only way to lower costs will be to lower claims.

More Reporting, More Time

Reporting and compliance with many of the employer-based requirements will end up costing you money, employee time, and energy. Advantage Health Plans will take on as much compliance and reporting duties as we can for our clients, but there will be some items that will be up to individual employers to handle, meaning more time and more dollars spent.

So - What’s Our Point?

You may be thinking, “Why does AHP think it’s a good idea to tell me my costs are going to go up?” The reasons are simple. We want to be honest with our bankers, and Advantage Health Plan is not your typical benefits program. The impact on self-funded plans like ours should be much lower than it will be to plans offered by the carriers. For example, starting in 2011, plans will be required to spend 80-85% of premiums collected on claims, which is not necessarily always the case today. For AHP, since it is a not-for-profit Plan that is self-funded, we already aim to spend 100% of contributions on claims. That is what our not-for-profit plan is all about. In the fully insured carrier market, premiums may potentially go down for ultra-healthy groups, but groups with health issues may see marked increases - well into the double digits.

But there are some bright spots…

Not all of the news is doom and gloom. There are portions of this bill that are beneficial to everyone. Disallowing pre-existing exclusions for children is a step towards better health care access for all children, especially those born with serious illnesses.

The small business tax credit will allow some small businesses to take a tax credit for the cost of benefits they provide. Though this is limited to the truly small employer, and it will only last until 2013, this amount can go towards helping small businesses become compliant with the new regulations.

In Closing

As health care reform continues to be interpreted and modified, more regulations will be written, and we vow to keep you informed with the latest news and developments as they apply to your plan. This issue is complex, and much of the law still needs to be interpreted by HHS in order for regulations to be written. Details are sure to change as government entities interpret congressional intent. Please continue reading our emails and checking our frequent website postings for information. We will make information available as soon as we can.

Professional Resources:

  • Society of Professional Benefit Administrators
  • Robert Wood Johnson Foundation at
  • Self Insurance Institute of America