Not!

Take the provision in the Patient Protection and Affordable Care Act that extends care to dependents up to age 26.

HR 676 – the single payer legislation that is still before the House of Representatives – has this to say about eligibility:

All individuals residing in the United States (including any territory of the United States) are covered under the USNHI Program entitling them to a universal, best quality standard of care.

Compare that with language in the Patient Protection and Affordable Care Act (PPACA) regarding eligibility just for those young adults up to age 26 who are children of parents with employer sponsored health insurance.

SEC. 2714. EXTENSION OF DEPENDENT COVERAGE.

‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age.   Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.

‘‘(b) REGULATIONS.—The Secretary shall promulgate regulations to define the dependents to which coverage shall be made available under subsection (a).

‘‘(c) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to modify the definition of ‘dependent’ as used in the Internal Revenue Code of 1986 with respect to the tax treatment of the cost of coverage.

And the regulations mentioned in 2714(b)?  They are 67 pages.

What can you possible discuss in 67 pages?  Well let me remind you that hair splitting is difficult business.

To be fair, the actual regulation part of these 67 pages is really only seven pages times three.  The 67 pages include the interim final (don’t you love “interim final”?) regs for the Internal Revenue Service, the Health and Human Services and the Employee Benefit Security Administration.

What do the regs address?

Was the child previously covered?   -  Doesn’t matter

Was the child previously eligible for coverage? ?   -  Doesn’t matter

What is a dependent?  – Consult IRS rules

Does a dependent need to be dependent?  -  No

What was that last one?  A dependent does not need to be financially dependent, they only need to meet the family relationship test.  They could be married, employed and have access to employer sponsored health insurance.

Married?  Yes, the language quoted above in the PPACA was eliminated in the Health Care and Education Reconciliation Act of 2010.

What if the plan is “grandfathered”? ?   -  Almost doesn’t matter.

Does the dependent or parent pay more for this coverage?  -  In short, no.  But that answer is less than precise.

When are these changes effective?

This is perhaps the most confusing part.  The regs are fairly clear.  The changes are effective the first day of the plan or policy year after September 23, 2010.  For most people that means January 1, 2011.

Confusing?

It is the public perception that is confused.  And justifiably so.  Several insurers have announced different approaches to early implementation of these rules.   What is an individual to think when the health insurer that provides their employer sponsored health insurance announces that will begin early implementation of the rules concerning coverage of dependents up to age 26.

That employer sponsored plan may be covered by state insurance regulations that also have jurisdiction.  If it is regulated by ERISA, state regulations do not apply.  If it is a government sponsored employee benefit plan, neither ERISA or state insurance regulations may apply.

Eight pages of these regulations describe “take up rates”.  Of the 29.5 million young adults in the 19-25 age cohort, the rules are expected to extend coverage to 2.83 million people.

Meanwhile the rules have no effect on 9.5 million people in that age group because those 9.5 million young adults either have no parents or have no parents with employer sponsored health insurance.

Get the picture?  67 pages of rules to extend coverage to 8% of an age group that represents 10% of the US population.  Sixty seven pages on how to cover less than one percent of the population.

Should I remind you that eight of those 67 pages are devoted to the Paperwork Reduction Act?

Photo Credit : FLICKR: Don Solo

This one had some startling advice.

It advised employers to deny all applicants for the COBRA subsidy.

Why, you ask.

Well, it seems that our federal government speaks with forked tongue on whether to make it easier for recently unemployed workers to continue their health insurance.

The American Recovery and Reinvestment Act (ARRA) says that employees who are involuntarily terminated can apply for COBRA continuation coverage.  If they have been involuntarily terminated, they become an Assistance Eligible Individual (AEI to the cognoscente).

An AEI (you are now part of the cognoscente) pays 35% of the normal COBRA premium – a fairly substantial premium subsidy, although for the unemployed, still a hefty burden.

Guidance from the Department of Labor (DOL) appears to give weight to the individual’s determination on whether the termination was “involuntary”.  They  offer this guidance:

If you believe you meet the criteria for the premium reduction, complete the attached “Request for Treatment as an Assistance Eligible Individual” and return it with your completed Election Form.  Under federal law, you have 60 days after the date of this notice to return your completed Election Form and Request for Treatment as an Assistance Eligible Individual.

If you are denied treatment as an “Assistance Eligible Individual” you may have the right to have the denial reviewed by {the Department of Labor (for private sector employees) or the Department of Health and Human Services (for federal, state, and local governmental employees) as appropriate}.  Additionally, certain high-income individuals may have to repay the amount of the premium reduction through an increase in their income taxes.  (Your income for the year would have to be more than $125,000 ($250,000 for married couples) before you would have to repay all or part of the premium reduction.)

Here is what the Employee Benefit News writes:

And, employers should keep in mind that guidance from the Internal Revenue Service has made clear that “involuntary termination” is to be interpreted very broadly, including employees who quit in advance of a threatened layoff, seasonal employees, and even those employees who quit instead of being relocated by their employer.

The rub comes later.

The way that an employer gets the other 65% of the COBRA premium is by claiming the COBRA subsidy as a credit on the quarterly tax withholding reports that an employer files with the IRS – Form 941.

The IRS apparently takes a dim view of employer mistakes.  If for any reason, the plan takes a credit for the COBRA subsidy and it is subsequently determined that the presumed AEI is, in fact not an AEI at all, the employer will be considered delinquent in their quarterly remittance to the IRS.  The employer will be assessed interest and penalties for the shortfall.  Anyone who has had experience with IRS interest and penalties, knows that they can mount very quickly.  Depending how long it takes the IRS to come to the conclusion that the COBRA subsidy credit was taken inaccurately, the interest and penalties could exceed the subsidy credit.

Thus the advice – deny the claim first.

The ARRA has an expedited process to appeal COBRA subsidy denials.  If the feds say its OK, then you, the employer, are protected against excessive fines from the IRS.

One can only hope that this consultant advice is playing to employers who want to hear that kind of advice.

So once again, the federal government comes up with a temporary and half baked solution to a permanent problem – health care coverage for the recently unemployed.  It makes it complicated and confusing from the outset with approximately 15 pages of forms and instructions.  Then it throws a few more roadblocks in the way with contradictory motives from another federal agency.

The amazing maze of health care in the United States of America!  What does this portend for health care reform?

“Portability”, the P in HIPAA, offered the promise that an individual undergoing treatment for a medical condition, would not have their treatment disrupted because of a “pre-existing condition” if they changed jobs and employer sponsored health plans.

HIPAA has the same elements described in my recent post about Michelle’s Law: a good story line and a very narrow focus.  The Rube Goldberg fix over the simple, direct fix.

Anyone looking around at health care today might be surprised to learn that Congress even considered the subject.

HIPAA predominately impacts the group insurance market.  Yet most of that market does not use medical underwriting.  The law applies ends up applying almost exclusively to the small group market. But rather than go for some kind of risk pooling concept – in today’s debate, the term is an insurance exchange, Congress opted for some feeble, complicated and ultimately ineffective regulations.

So what does the P in HIPAA do?  According to the Department of Labor web site, it:

Prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information.

That is a bit of an over statement.

First, it is limited to the small group market – not by law but by reality.  For large groups, medical underwriting is impractical and unnecessary.

It does not eliminate medical underwriting, it limits it.

An insurer can not look back more than six months to find evidence of treatment for an illness or injury.  Why six months?  Seems like a good number.  It means they can’t deny you treatment for something that you were treated for, say, eight months ago.

And the pre-existing exclusion period can not be longer than 12 months.  “Goodness gracious” you sputter.  What is a “pre-existing exclusion period”?  That means that if you had, for example, treatment for hypertension during the six months prior to taking your new job with health insurance, the new insurance company would not pay for any hypertension related treatments for 12 months.

This is what the law allows.

And that assumes that you elect coverage in the health insurance plan when you first became eligible.  If, for some reason, you don’t elect coverage when you first become eligible, the “pre-existing exclusion period” is extended to 18 months.  Why 12 months and 18 months?  Seem like nice numbers.

But wait, you say.  What about this P in HIPAA, this portability thing.

The law says that if you have up to 12 months of “creditable coverage” in you old plan,  You can use that “creditable coverage” to reduce your “pre-existing exclusion period” in your new plan.  Too many quotation marks?  Consider it a by-product of thinking small.

So how does this work in our hypertension example?  If our sample employee had six months of “creditable coverage” in his old plan, and less than 63 days break in coverage between plans, then his “pre-existing exclusion period” would be limited to six months in his new plan.

Wait a minute, you astutely observe, where did this 63 days come from?  And, please, don’t tell me it seems like a good number.

Sixty three days is the allowable “break in service” – more quotation marks – the period from the time you lose coverage under your old plan and the time when you first become eligible for benefits under your new plan.  Frankly, I would love to know why exactly 63 days.

If your “break in coverage” is longer than 63 days, say 65 days, then you could be subject to a a 12 or 18 month “pre-existing exclusion period.”  Why “could”?  Because some states have laws that provide for longer “breaks in service.”

You can use individual coverage as part of your creditable coverage, but your creditable coverage has absolutely no relevance to the medical underwriting of individual policies.

In fact, some insurance companies don’t even guarantee portability from year to year.  This is called “guaranteed renewability”.   You might think that this could be an easy add-on that would fit under the fix for Portability – the P in HIPAA.

The number that Congress is really reluctant to tackle is  40 million – the number of uninsured in America.  They just can’t think that big.

Past efforts by the federal government to reform the health care system offer instructive guidance about future prospects for meaningful reform.

Forgeddaboutit.

Lesson learned – why go for the simple fix when the Rube Goldberg fix will do. Limit the fix to only a small hole in the system. Make sure it has a good story line. Congress gets some political mileage with little down side. In addition, it keeps bureaucrats and lawyers busy figuring out what Congress intended.

Let me illustrate with two examples.

Thirty state legislatures have attempted to address a real problem – health care coverage for young adults. Young adults generally lose coverage as dependents on their parents’ plan when they turn 19. The technical term we in the benefits profession use is “age off.” Young adults who continue as full time students can generally continue on their parents’ plan if they and their college or university jump through some administrative hoops.

These ideas evolved in a quainter world when young people could find jobs at 18 or 19 that offered health insurance. Rarely true today.

How have these 30 state legislatures addressed the problem? Most are requiring plans they regulate to cover dependents until age 25. New Jersey uses age 30. The focus is on dependents.

No more student certification forms to hassle students, parents, and university administrators. Just cover everyone under a certain age. Simple in concept, simple in execution. Unfortunately, it only covers those insured plans regulated by state insurance departments.

That’s why a federal approach to reform is so essential. The concept may be simple at the state level, but a multi-state business trying to conform to different state requirements will not find it simple at all.

So how does Congress approach the problem?

They don’t see a problem with coverage for all young adults. But thanks to an impassionate plea and effective lobbying from the mother of one young adult, congress was able to focus on a problem for a very small percentage of young adults. A very very small percentage.

The result was Michelle’s Law.

The story is a heartbreaker. We see similar stories in our plan often enough. A college student get ill. In the case of Michelle Morse, she was unable to continue as a full time student as a result of the illness. But if a student is not a full time, she loses her health care coverage under her parents’ plan. A tragic enough story.

Let’s look at the fix.

According to the Michelle’s Law web page, it affects only .0058% of students. Even if you assume the decimal point is in the wrong place, it is still a very small number. And it is only the percentage of students affected, not the percentage of young adults.

And the law only gives the student one year to get better and return to full time status. What if the student had an illness that took longer than a year to recover from? Forgeddaboutit!

The law only affects young adults who are students and covered under their parents’ plan. What if the young person was working and the illness caused them to lose their job? Forgeddaboutit!

What if the young person had purchased a plan offered by the college – as is often the case?  Can the student continue if she is not a student?

The law does not extend student eligibility, which frequently ends at age 22. What if the illness extends past the plan’s age limit for student coverage?  Forgeddaboutit?

And the law certainly does not simplify anything. Instead of a process that involves just the student, parents, university, plan sponsor and carriers, you now need to add the physician into the mix.

Is this a model for health care reform?  Forgeddaboutit!

Next up – the portability provisions of HIPAA.