Thursday, March 11, 2010

Health Care Updates March 2010

Healthcare Reform

The White House is expected to announce mid-week the president's preferred path forward for getting health care legislation passed. The widespread assumption on Capitol Hill is that Obama will address the specific changes that he wants made to the Senate's version of the legislation beyond the proposals he already outlined and that he will encourage Congress to pass those changes using reconciliation

The updates to the Senate bill based on the President's plan:

  • The “Cadillac plan” excise tax delayed until 2018 and the dollar limits increased to $10,200 per individual and $27,500 for families. It excludes stand-alone dental and vision plans from the tax. The tax also would be adjusted for employers with higher health costs due to employees’ age or gender.
  • Increases the employer penalty for not providing coverage from $750 to $2,000 per employee in 2014.
  • Requires all plans to cover dependents up to age 26 immediately.
  • Starting in 2014, health plans could not impose annual and lifetime maximums, exclude pre-existing conditions, or discriminate in favor of highly compensated individuals.
  • First-dollar coverage of preventive services would be required starting in 2018.

COBRA Subsidy

A new bill is being put together by Senate Majority Leader Harry Reid to extend the COBRA premium subsidy for laid-off workers. The draft bill would extend the COBRA premium subsidy for another 10 months, so employees laid off through year-end would be eligible for the 65% subsidy for up to 15 months. The bill is expected to pass sometime in March or April which will require employers to retroactively send out COBRA subsidy notifications.

IRS Fringe Benefit Audits: National Research Program (NRP)

The IRS has advised that they will be aggressively auditing fringe benefits to determine compliance and noncompliance characteristics in several core areas traditionally associated with employment taxes. They will be looking at: employer provided automobiles, gift cards and other de minimis fringe awards, discounted services, education assistance, meal reimbursements, dependent care assistance programs, adoption assistance, leave banks, moving expenses, fitness memberships, group term life, transit benefits, retirement planning, severance, and vacation awards.

IRS 401(k) Audits

In March, a random sample of 401(k) plan sponsors will receive IRS questionnaires from the Employee Plans Compliance Unit (EPCU) to better understand compliance behaviors and determine if employers are correcting errors and using IRS-developed compliance tools. The responses could lead to follow up questions with an EPCU agent, but the IRS has not said whether it could also trigger an audit.

Health Insurance News

Congressional Summons

Five health insurers posted a combined profit of $12.2 billion last year. These insurers are being invited to testify in front of Congress regarding their business models. Wellpoint recently testified after passing a 39% rate increase to members.

California Investigation

The California Attorney has an ongoing investigation into possibly illegal practices by some California health insurers and has subpoenaed financial records and other documents from California's seven largest health insurance companies. Records from Aetna Health, Anthem Blue Cross, CIGNA, Health Net, Blue Shield of California, Kaiser Permanente and PacifiCare were subpoenaed. The subpoenas cover pay-for-service health plans, which are health plans that reimburse doctors and hospitals for services performed instead of a health maintenance organization (HMO) approach. The investigation was prompted by reports that California's five largest health insurance providers were denying insurance claims at rates of up to 39.6 percent.

Current CA Claims denials rates are:

  • PacifiCare -- 41.17%
  • Cigna – 35.43 percent
  • HealthNet – 25.82 percent
  • Kaiser Permanente – 26.96 percent
  • Anthem Blue Cross – 24.5 percent
  • Blue Shield – 22 percent
  • Aetna -- 6.4 percent


CIGNA is expanding their onsite capabilities through the acquisition of Kronos Optimal Health Company, a Phoenix-based health and wellness company that specializes in lifestyle management programs, face-to-face coaching, biometric screenings and health education programs. Additionally, continuing with changes to their management team, CIGNA appointed Alan Muney, M.D., MHA, as senior VP of the company's total health and network teams.

Blue Shield of California

The CTO Forum announced that Blue Shield of California's senior vice president and chief information officer, Elinor MacKinnon, has been appointed to its CIO Council Advisory Board. The CIO Council brings together IT executives from to foster discussion and collaboration regarding the advancement of technology and innovation within organizations.


Five of New Jersey’s insurers are participating in a pilot program to allow doctors and hospitals to use a single Web portal to check patients’ medical coverage and claims, in an effort to reduce administrative costs. The pilot program allows office staff to quickly determine eligibility and benefit information, such as the amount of copays and differences in coverage for in-network or out-of-network treatment. It also provides for online submission of health care claims and gives physicians access to current information on the status of claims.

California Legislation

A recent court ruling in California (McCarther v. Pacific Telesis Group), ruled that Kin Care does not apply to paid sick leave policies that are based on uncapped sickness absence programs. In these cases, there was found to be no Kin Care obligations.


  • Patients of color are less likely than whites to be treated by experienced surgeons or to receive care in high-volume hospitals, according to a new study. (
  • Workers With Depression, Although Treated, Have More Disability Absences: Study (Assessing the Relationship Between Compliance With Antidepressant Therapy and Employer Costs Among Employees in the United States)
  • Employers report that lack of employee engagement is the biggest obstacle to changing health behaviors. Still, they are trying new ways to encourage employees to become healthier and buy health care services more efficiently. (Purchasing Value in Health Care, Towers Watson Report, 2010)
  • If focusing wellness programs on weight loss there may not be value. All the evidence on physical activity illustrates that people gain benefits from physical activity regardless of whether they lose weight in the long term. The vast majority of cases, of course, don't lose weight in the long term, but they still get the benefits of improved physical activity. The weight loss goal is completely unnecessary. (Paul Campos, a professor of law at the University of Colorado, and the author of The Obesity Myth: Why America's Obsessions with Weight is Hazardous to Your Health)

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