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Employer Health Care Reform Guide

Taxes and Fees

The Affordable Care Act imposes new taxes and fees designed to fund many of the health care system changes. Many directly impact employer groups and health insurance companies like Health Net.

Analysis
This annual fee will fund premium subsidies for the health insurance marketplaces and Medicare expansion. It applies to health insurers, health maintenance organizations and entities providing insurance under government programs (e.g., Medi-Cal).

Provision Effective date Applicable to Impact Products affected

Health insurance tax is an annual fee to help fund premium subsidies for the health insurance exchanges and Medicaid expansion.

January 1, 2014, and beyond

Insured plans, including health insurers, HMOs and plans providing insurance under government programs such as Medicaid, Medicare Advantage and Medicare Part D.


  • We expect the impact of the 2014 Health Insurance Tax to be approximately 2.47% of premium. For 2015, we expect health insurer tax to be approximately 3.49% of premium.
  • The total amount to be collected across all health insurers is set at:
    • $8 billion in 2014
    • $11.3 billion in 2015
    • $11.3 billion in 2016
    • $13.9 billion in 2017
    • $14.38 billion in 2018
    • 2019 and forward – The threshold for total fees to be collected will increase annually thereafter based on premium growth.

The fee is based on the net premiums written during the preceding calendar year (for example, the tax due in 2014 will be based on the net premiums written in 2013).

All “covered entities,” which include any entity providing health insurance for any U.S. health risk, including medical, dental, vision, behavioral health, and pharmacy plans, the Federal Employees Health Benefit plan, and Medicare Advantage and Part D prescription plans.

Examples of entities and plans exempted from the fee: self-insured groups, governmental entities, Medicare Supplement plans, specific disease insurance, hospital-only indemnity insurance, and long-term care insurance.

Transitional Reinsurance Risk Pool Assessment Fee is an annual fee that will support the transitional reinsurance program established by each state. The intent of the program is to help stabilize premiums and minimize the effects of adverse selection in the individual exchange market.

 

January 1, 2014, through 2016

Insured plans and self-insured plans2


  • We expect the Transitional Reinsurance Risk Pool Assessment fee to be about $5.25 per member per month based on 2014 membership.1 For 2015, the transitional reinsurance tax is estimated at $3.67 per member per month.
  • The total amount to be collected across all health insurers and self-insured plans is set at:
    • $12 billion in 2014
    • $8 billion in 2015
    • $5 billion in 2016
    • Funds collected for benefit years 2014–2016 will be used for reinsurance payments through 2018.

These fees apply to commercial insured and self-insured plans, including grandfathered and non-grandfathered plans.

Excludes standalone dental and vision plans, Medicare Advantage and Medicare Part D plans, Medicare Supplement plans, Medicaid, and CHIP plans.

Patient-Centered Outcomes Research Institute (PCORI) fees will fund the Patient-Centered Outcomes Research Institute which was established as part of ACA to provide key information that will directly benefit patients by helping them make better health care decisions. Tasked with researching the effectiveness of medical treatments – and the associated risks and benefits – the intent of PCORI’s research is to help improve health care delivery outcomes by helping patients gain a better understanding of the care options available to them, as well as the science supporting those options.

October 1, 2012, through September 30, 2019

Insured plans and self-insured plans

The total amount to be collected across all health insurers and self-insured plans is based on each plan’s average number of covered lives:

  • $1 multiplied by the average number of covered lives for plan or policy years ending on or after October 1, 2012, and before October 1, 2013.
  • $2 multiplied by the average number of covered lives for plan or policy years ending on or after October 1, 2013.
  • The fee increases after October 1, 2014, are based on a formula that takes into account the increase in the per capita amount of national health expenditures.
  • Health Net will pay the PCORI fees in accordance to ACA provisions for its insured clients as required by law.
  • For self-insured groups, payment of all applicable PCORI fees are the employer group’s responsibility.

These fees apply to commercial insured and self-insured plans, including grandfathered and non-grandfathered plans.

1In the state of Oregon, an additional Oregon Reinsurance Fee has also been considered (estimated $4.00 per member per month).

2In December 2013, HHS proposed regulations that would exempt self-insured group health plans from the reinsurance contributions in 2015 and 2016. This exemption does not apply to self-insured plans that use third-party administrators (TPAs) for adjudication, claims adjustment, processing, communication, and other core administrative functions.

Impact to Health Net employer groups

Health Net is making the necessary adjustments to new business and renewal rates. Health Net's allocation of ACA-related fees to a client group's final premium will vary by group based upon the anniversary date of the policy and any differences between initial proposed and final sold rates/plan design.

Since the policy periods for new and renewal business may include revenue and enrollment from two different calendar years, Health Net has elected to prorate, or smooth, the Health Insurance and Reinsurance Contribution fees over the full 12-month policy period by applying a constant load factor for these fees over the 12-month period. This proration, or smoothing, eliminates the need for off-cycle rate changes and stabilizes contributions and plan selections for the group and enrollees.

In the event additional federal or state legislative guidance or regulatory requirements emerge that result in a modification of the estimated impact of the benefit mandates, taxes or fees, Health Net reserves the right to further adjust its premium schedule.

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Important Notice

General Purpose
Health Net's National Medical Policies (the "Policies") are developed to assist Health Net in administering plan benefits and determining whether a particular procedure, drug, service, or supply is medically necessary. The Policies are based upon a review of the available clinical information including clinical outcome studies in the peer-reviewed published medical literature, regulatory status of the drug or device, evidence-based guidelines of governmental bodies, and evidence-based guidelines and positions of select national health professional organizations. Coverage determinations are made on a case-by-case basis and are subject to all of the terms, conditions, limitations, and exclusions of the Member's contract, including medical necessity requirements. Health Net may use the Policies to determine whether, under the facts and circumstances of a particular case, the proposed procedure, drug, service, or supply is medically necessary. The conclusion that a procedure, drug, service, or supply is medically necessary does not constitute coverage. The Member's contract defines which procedure, drug, service, or supply is covered, excluded, limited, or subject to dollar caps. The policy provides for clearly written, reasonable and current criteria that have been approved by Health Net's National Medical Advisory Council (MAC). The clinical criteria and medical policies provide guidelines for determining the medical necessity criteria for specific procedures, equipment and services. In order to be eligible, all services must be medically necessary and otherwise defined in the Member's benefits contract as described in this "Important Notice" disclaimer. In all cases, final benefit determinations are based on the applicable contract language. To the extent there are any conflicts between medical policy guidelines and applicable contract language, the contract language prevails. Medical policy is not intended to override the policy that defines the Member's benefits, nor is it intended to dictate to providers how to practice medicine.


Policy Effective Date and Defined Terms.
The date of posting is not the effective date of the Policy. The Policy is effective as of the date determined by Health Net. All policies are subject to applicable legal and regulatory mandates and requirements for prior notification. If there is a discrepancy between the policy effective date and legal mandates and regulatory requirements, the requirements of law and regulation shall govern. In some states, prior notice or posting on the website is required before a policy is deemed effective. For information regarding the effective dates of Policies, contact your provider representative. The Policies do not include definitions. All terms are defined by Health Net. For information regarding the definitions of terms used in the Policies, contact your provider representative.


Policy Amendment without Notice.
Health Net reserves the right to amend the Policies without notice to providers or Members. In some states, prior notice or website posting is required before an amendment is deemed effective.


No Medical Advice.
The Policies do not constitute medical advice. Health Net does not provide or recommend treatment to Members. Members should consult with their treating physician in connection with diagnosis and treatment decisions.


No Authorization or Guarantee of Coverage.
The Policies do not constitute authorization or guarantee of coverage of any particular procedure, drug, service, or supply. Members and providers should refer to the Member contract to determine if exclusions, limitations and dollar caps apply to a particular procedure, drug, service, or supply.


Policy Limitation: Member's Contract Controls Coverage Determinations.
Statutory Notice to Members: The materials provided to you are guidelines used by this plan to authorize, modify or deny care for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your contract. The determination of coverage for a particular procedure, drug, service, or supply is not based upon the Policies, but rather is subject to the facts of the individual clinical case, terms and conditions of the Member's contract, and requirements of applicable laws and regulations. The contract language contains specific terms and conditions, including pre-existing conditions, limitations, exclusions, benefit maximums, eligibility, and other relevant terms and conditions of coverage. In the event the Member's contract (also known as the benefit contract, coverage document, or evidence of coverage) conflicts with the Policies, the Member's contract shall govern. The Policies do not replace or amend the Member contract.


Policy Limitation: Legal and Regulatory Mandates and Requirements
The determinations of coverage for a particular procedure, drug, service, or supply is subject to applicable legal and regulatory mandates and requirements. If there is a discrepancy between the Policies and legal mandates and regulatory requirements, the requirements of law and regulation shall govern.


Reconstructive Surgery
California Health and Safety Code 1367.63 requires health care service plans to cover reconstructive surgery. "Reconstructive surgery" means surgery performed to correct or repair abnormal structures of the body caused by congenital defects, developmental abnormalities, trauma, infection, tumors, or disease to do either of the following:


1. To improve function; or
2. To create a normal appearance, to the extent possible.


Reconstructive surgery does not mean "cosmetic surgery," which is surgery performed to alter or reshape normal structures of the body in order to improve appearance.


Requests for reconstructive surgery may be denied, if the proposed procedure offers only a minimal improvement in the appearance of the enrollee, in accordance with the standard of care as practiced by physicians specializing in reconstructive surgery.


Reconstructive Surgery after Mastectomy
California Health and Safety Code 1367.6 requires treatment for breast cancer to cover prosthetic devices or reconstructive surgery to restore and achieve symmetry for the patient incident to a mastectomy. Coverage for prosthetic devices and reconstructive surgery shall be subject to the copayment, or deductible and coinsurance conditions, that are applicable to the mastectomy and all other terms and conditions applicable to other benefits. "Mastectomy" means the removal of all or part of the breast for medically necessary reasons, as determined by a licensed physician and surgeon.


Policy Limitations: Medicare and Medicaid
Policies specifically developed to assist Health Net in administering Medicare or Medicaid plan benefits and determining coverage for a particular procedure, drug, service, or supply for Medicare or Medicaid Members shall not be construed to apply to any other Health Net plans and Members. The Policies shall not be interpreted to limit the benefits afforded Medicare and Medicaid Members by law and regulation.

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