HCA Holdings 2012 Annual Report Download - page 32

addition, health insurers are not permitted to deny coverage to children based upon a pre-existing condition and
must allow dependent care coverage for children up to 26 years old. Commencing January 1, 2014, health
insurers will be prohibited from imposing annual coverage limits, dropping coverage, excluding persons based
upon pre-existing conditions or denying coverage for any individual who is willing to pay the premiums for such
coverage.
Larger employers will be subject to new requirements and incentives to provide health insurance benefits to
their full time employees. Effective January 1, 2014, employers with 50 or more employees that do not offer
health insurance will be held subject to a penalty if an employee obtains government-subsidized coverage
through an Exchange. The employer penalties will range from $2,000 to $3,000 per employee, subject to certain
thresholds and conditions.
The Health Reform Law uses various means to induce individuals who do not have health insurance to
obtain coverage. By January 1, 2014, individuals will be required to maintain health insurance for a minimum
defined set of benefits or pay a tax penalty. The penalty in most cases is $95 in 2014, $325 in 2015, $695 in
2016, and indexed to a cost of living adjustment in subsequent years. The Internal Revenue Service (“IRS”), in
consultation with HHS, is responsible for enforcing the tax penalty, although the Health Reform Law limits the
availability of certain IRS enforcement mechanisms. In addition, for individuals and families below 400% of the
FPL, the cost of obtaining health insurance through the Exchanges will be subsidized by the federal government.
Those with lower incomes will be eligible to receive greater subsidies. It is anticipated that those at the lowest
income levels will have the majority of their premiums subsidized by the federal government, in some cases in
excess of 95% of the premium amount.
To facilitate the purchase of health insurance by individuals and small employers, each state must establish
or participate in an Exchange or default to a federally-operated Exchange by January 1, 2014. Based on CBO
estimates issued in February 2013, approximately 26 million individuals will obtain their health insurance
coverage through an Exchange by 2022. This amount will include individuals who were previously uninsured
and individuals who have switched from their prior insurance coverage to a plan obtained through an Exchange.
The Health Reform Law requires that the Exchanges be designed to make the process of evaluating, comparing
and acquiring coverage simple for consumers. For example, each state’s Exchange must maintain an internet
website through which consumers may access health plan ratings that are assigned by the state based on quality
and price, view governmental health program eligibility requirements and calculate the actual cost of health
coverage. Health insurers participating in an Exchange must offer a set of minimum benefits, to be defined by
HHS, and may offer more benefits. Health insurers must offer at least two, and up to five, levels of plans that
vary by the percentage of medical expenses that must be paid by the enrollee. These levels are referred to as
platinum, gold, silver, bronze and catastrophic plans, with gold and silver being the two mandatory levels of
plans. Each level of plan must require the enrollee to share the following percentages of medical expenses up to
the deductible/copayment limit: platinum, 10%; gold, 20%; silver, 30%; bronze, 40%; and catastrophic, 100%.
Health insurers may establish varying deductible/copayment levels, up to the statutory maximum (estimated to be
between $6,000 and $7,000 for an individual). The health insurers must cover 100% of the amount of medical
expenses in excess of the deductible/copayment limit. For example, an individual making 100% to 200% of the
FPL will have copayments and deductibles reduced to about one-third of the amount payable by those with the
same plan with incomes at or above 400% of the FPL.
Public Program Spending
The Health Reform Law provides for Medicare, Medicaid and other federal health care program spending
reductions between 2010 and 2019. In March 2010, CMS estimated Medicare fee-for-service reductions from
2010 to 2019 would be $233 billion and the Medicare and Medicaid DSH reductions would be an additional $64
billion. In February 2011, the CBO estimated that from 2012 to 2021, the Health Reform Law reductions would
include $379 billion in Medicare fee-for-service market basket and productivity reimbursement reductions, the
majority of which will come from hospitals. The CBO estimate included an additional $57 billion in reductions
in Medicare and Medicaid DSH funding.
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