Health reform is moving from the legislative to the regulatory arena. As it does, the 2,000-plus page law will be dwarfed by a regulatory flood of epic proportions. Changing the rules for nearly one fifth of the U.S. economy will keep small armies of bureaucrats busy for years. That's especially true within the U.S. Department of Health & Human Services (HHS), which has primary implementation oversight for health reform.
Several key health reform measures will take effect this year, although the largest changes won't occur until 2014. Here's a look at 2010 provisions of particular interest to older consumers.
[Use our Mutual Fund Score to find the best investments for you.] Modest relief will be provided this year to Medicare beneficiaries to help with drug expenses. For 2010. Medicare prescription drug programs stop reimbursements when expenses have reached $2,830, and insurance doesn't resume until year-to-date spending has reached $4,550. This coverage gap is called the donut hole, and has been a lightning rod for reform efforts since the Medicare Part D prescription drug program began in 2006.
Under the reform law, the donut hole will shrink each year and totally disappear by 2020, at which time consumers will face 25 percent co-pays for brand and generic drugs. Beginning next year, brand drug companies will cut their prices to Medicare by 50 percent and continue discounting at that level. The government will then begin to subsidize both brand and generic drug prices, and will increase the percentage amounts of the subsidies each year until 2020, when government will be paying 25 percent of branded drug prices and 75 percent of generic prices. In both cases, this will leave consumers footing 25 percent of the price.
This year, however, there are no discounts. Instead, anyone reaching the donut hole will get a one-time check for $250. The payments will be generated quarterly with a lag factor for the reporting work that must flow from insurers to Medicare. According to a Medicare spokesperson, people who hit the donut hole by March 30 will receive a $250 payment on or before June 15; people who hit the hole by June 30 will get their payments on or before September 15; people who qualify by September 30 will receive their payments on or before December 15, and people who qualify on or before December 30 would receive their payments by March 15, 2011. If the processing is delayed, the spokesman said, people should look for a check in the next quarterly cycle.
Consumers do not need to do anything to get these payments. They are automatically triggered when an insurance company reports to Medicare that a person has entered the donut hole. Offers of assistance in obtaining the payments are likely to be fraudulent. All payments will be by paper check, the Medicare spokesperson said. Be wary of anyone who offers to help you receive an electronic payment; do not provide anyone with your Social Security or credit card number.
The Kaiser Family Foundation has a timeline of health reform changes. Of those taking effect this year, the most significant for Baby Boomers is the creation of high-risk insurance pools in each state to insure people who have been denied coverage because they have pre-existing health problems. Denying coverage for pre-existing conditions will be totally banned beginning in 2014. During a transition period, people can still get coverage in high-risk pools in their state.
The HHS rules for these pools are still being finalized. With the program set to begin July 1, there are many unresolved questions about how rates will be set and how the state pools will operate. Some states already operate high-risk insurance pools and will adapt them to include health coverage. Other states may set up new pools. As of Friday afternoon, HHS had heard from 43 states -- 28 will use their own pools and 15 decided not to set up or manage pools but to let HHS do it for them.
Opposition to health reform is cited as one reason some states have balked at the pools. Other states have opted out because they believe the $5 billion in funding approved for the program will be exhausted long before 2014, and they're worried they might get stuck making up some or all of the shortfall. An HHS fact sheet for the high-risk pools includes a breakdown of how much money will be provided to each state's high-risk pool.
The reason that $5 billion may be used up quickly is that insurers will be required to charge standard insurance rates to participants that are affordable. No one really knows the price tag for the covered health expenses of high-risk pool members. But they easily could burn through a state's allocation of the $5 billion.
Even though rates in the high-risk pool are supposed to be affordable, insurers will be able to charge higher rates to older pool members. Such "age rating" is limited under health reform rules but insurers in the high-risk program will still be able to charge rates up to four times higher for some members than others. The specifics of how age-rated premiums will be set are still being developed, an HHS spokesperson said. States will have substantial authority to govern how premiums are set, and how much flexibility they cede to participating insurance companies.
Another provision affecting parents of young adults will take effect in September. It allows children up to the age of 26 to remain on their parents' health insurance policies. There had been concern that some students receiving degrees this spring would lose access to coverage under existing law and might have to drop off their parents' policies and then seek to be added again in September. According to information provided on Friday by the White House, 65 health insurers so far have agreed to let insurance continue in such situations as if the new policy was already in effect.