Health care providers should review the Proposed Rule on hospital payment policies posted by the Centers for Medicare and Medicaid Services (CMS) and consider submitting comments on the effects of the suggested provisions.
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The recently enacted Patient Protection and Affordable Care Act built on federal efforts to support and direct research comparing patient treatments. Drug manufacturers, diagnostics companies, medical device manufacturers and health services providers should carefully monitor and selectively engage in the formal and informal processes that will shape the development of the Patient Centered Outcomes Research Institute, conduct of research and communication of research findings.
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Health Reform Provisions
The Internal Revenue Service (IRS) issued Notice 2010-38, which provides guidance under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, (collectively, the Act) on the tax treatment of health coverage and medical reimbursements for children under age 27. Taxpayers may rely on Notice 2010-38, pending the issuance of amended U.S. Treasury regulations.
Section 105(b) of the Internal Revenue Code generally excludes from an employee’s gross income employer-provided reimbursements made to an employee for the medical care of the employee, the employee’s spouse or the employee’s dependents. Coverage under an employer-provided accident or health plan is excluded from an employee’s gross income under Code Section 106. Effective March 30, 2010, the Act extended these exclusions to coverage under an employer-provided plan and to expenses incurred for the medical care of an employee’s child who has not attained age 27 as of the end of the taxable year.
Notice 2010-38 also clarifies the tax treatment of these dependent benefits under cafeteria plans, VEBAs and Section 401(h) accounts.
Your Next Moves
Cafeteria plans must be amended by December 31, 2010, in order to cover children under age 27 for the 2010 plan year. Amendments for the 2011 and subsequent plan years should be made prospectively. Employer sponsors of group health plans should analyze their current benefit plan design to determine whether they will extend health coverage to children under age 27 in the 2010 plan year or wait until 2011 to implement this change.
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Health Reform Provisions
Employers providing health coverage to early retirees should be aware of the new retiree reinsurance program under health care reform that goes into effect June 1, 2010. Recent guidance issued by the U.S. Department of Health and Human Services specifies the qualifications for eligibility, the steps plan sponsors must take in the application process and the requirements for reimbursement. The program is scheduled to begin on June 1, 2010, and will end on January 1, 2014, or until the $5 billion in funding allocated to the program is exhausted.
Eligibility to participate in the program is not automatic. A plan sponsor is eligible to participate in the program if the plan sponsor submits a timely application for certification to the secretary, or the secretary’s designee, containing the necessary information. Applications will be processed in the order received. Incomplete applications will be returned, and any revised applications will be processed based on the date the revised submission is received, not based on the date of the original, returned submission. Due to the limited duration and budget for this program, it is important for plan sponsors interested in the program to become certified as quickly as possible.
Your Next Moves
Employers providing health coverage to early retirees should analyze their current benefit plan design and cost structure to determine whether they will apply to the program.
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Health Reform Provisions
The reimbursement models in the health reform legislation—including accountable care organizations, bundled payments and payments for quality—create powerful incentives for hospital/physician consolidation. Strategic options include hospital acquisitions of physician practices or other, usually contractual, forms of hospital/physician clinical and financial alignment. In addition, many non-governmental payors have implemented or are planning similar reimbursement initiatives, which will further reinforce the hospital/physician consolidation trend.
Your Next Moves
Hospital boards and senior managers should have as their first priority the development, and effective and rapid implementation, of a hospital/physician consolidation strategy appropriate to the realities of their markets. Leaders considering forming or joining a consolidated provider system should carefully analyze several factors at the next board meeting or strategic planning session. For instance, these consolidated provider systems will need the infrastructure, such as information technology, necessary to meet the reimbursement goals. Another key agenda item is whether the organizations have the financial strength to bear greater financial risk for the cost of care provided to patients.
A hospital’s fate, and, perhaps, existence, in the post-2015 world of fully implemented payment reform will depend upon actions taken, or not taken, in the next year.
Among the more popular reforms included in the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, are the “immediate health insurance reforms.” These provisions, which affect group health plans and insurers offering group or individual health insurance, become effective for plan years beginning on or after September 23, 2010. This summary addresses the principal immediate health insurance reforms, namely expansion of dependent coverage, prohibition on excluding children based on pre-existing conditions, coverage of preventive health services, limitations on rescission practices, and regulation of annual and lifetime limits on essential health benefits.
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As part of the health care reform legislation, and in an effort to help restrain growth in Medicare expenditures, Congress has created the Independent Payment Advisory Board, which has the authority to develop proposals that will become law if Congress fails to enact alternative proposals.
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