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Gov. Blagojevich’s Illinois Covered Healthcare
Plan
Key Provisions for Employers
Governor
Blagojevich’s proposed Gross Receipts Tax plan has been
receiving nearly all the attention because it is the biggest
component of the “tax” part of his budget plan. What has been
overlooked by many is the companion 3% tax on income that has
been proposed to help finance his ambition for taxpayer
subsidized healthcare for the uninsured population.
The Governor’s “Illinois Covered” healthcare plan has
failed to receive the attention it deserves. In this
President’s Message we provide an analysis of the “spend”
portion, his Illinois Covered healthcare plan. Jay Shattuck,
the chamber’s leading staff expert on employment law and
healthcare issues, has provided this bill summary. The summary
reads a great deal like an insurance policy, but in essence,
that’s what the Governor is presenting. This bill reflects the
Governor’s approach to expanded taxpayer-finance healthcare
coverage.
Today’s message is intended to provide
readers with a detailed breakdown of the proposal with minimal
commentary. The objective is to simply inform readers about
what is being proposed. You may provide comment, opinion and
feedback to Jay via
email.
The Illinois Chamber is committed to
addressing ways to provide healthcare to the uninsured, but we
are opposed to this plan. Instead of additional taxes on
employers for healthcare expansion and subsidies, we prefer to
see Medicaid reform savings and federal grant monies pay for
healthcare expansion to the uninsured. There are far too many
critical issues in this plan that are left to rule-making and
new bureaucracy that will duplicate responsibilities currently
handled by the Illinois Division of Insurance. Policy
statements regarding healthcare issues that have been adopted
by the Illinois Chamber’s Board of Directors are available on
the Chamber web site: ilchamber.org.
Employee Retirement Income Security Act (ERISA)
Implications
Employers who believe they are
protected by ERISA preemption should be aware of the following
provisions in the Governor’s proposal.
- Healthcare tax on employers with more than 10 full-time
equivalent employees whether ERISA exempt or otherwise;
- Extension of the new Office of Patient Protection to any
“healthcare plan” regarding complaints about claim denial;
- Every employer of 10 or more must provide a Section 125,
cafeteria plan:
- severability clause (Part 7 Section 50-701) requiring
each court decision regarding the legality of the proposal
are stand-alone decisions and every plaintiff must
separately make their case for legal standing of the
law.
Healthcare Tax on Income
Employers affected: Employers of 10 or more
full-time equivalent employees are subject to 3% payroll tax
up to $7,500 on a single employee. Full-time equivalent is
defined as the lesser of the number of employees at any time
during the taxable year and the total number of hours worked
by all employees divided by 1500 (7.2 full-time equivalents).
Public sector employers are exempt. The tax applies to wages
paid on or after July 1, 2008.
How tax will be
collected: Payment will be required at the same time the
employer remits its employee income tax withholding to the
Illinois Department of Revenue. No payment is required if the
employer paid more than 4% of its total payroll costs on
healthcare benefits during the 12 months preceding the taxable
year; a partial credit will apply up to an additional 1.5%
(limiting the payroll tax to 1.5%) if an employer provides
between 2.5% and 4% of payroll costs for healthcare benefits.
Group Health Insurance Requirements
Expanding Dependent Coverage to Age 30: The
Governor’s proposal will require all group health insurance
policies and group HMO plans that provide dependent coverage
to offer dependent coverage up to age 30.
In order to
qualify, a person under age 30 must be unmarried, a resident
of the state or enrolled in college, and not otherwise covered
by insurance. The premium for dependents added to a group
policy pursuant to this change can be no more than 105% of the
last regular dependent premium required of the dependent. An
employer sponsoring the group coverage is not required to
contribute any portion of the premium associated with the
dependent.
Employer Requirement to Provide
Cafeteria Plan: All employers of 10 or more employees in
the state as of January 1, 2009 will be required to provide a
Section 125 Cafeteria Plan to its employees. In general, a
cafeteria plan provides tax advantages to participants who
have expenditures for healthcare and other items such as
childcare.
Health plan discrimination: The
Governor’s proposal prohibits discrimination between employees
with respect to the amount an employer contributes for health
insurance for an employee unless a collective bargaining
agreement exists. An employer must offer its group policy to
all full-time employees.
Expanding Mental and
Emotional Disorder Coverage: Current law establishing an
appeal process for denial of claims based on an insurer’s
determination that a given treatment is not medically
necessary is removed. Two new sections, the “serious mental
and emotional disorder provisions of the Illinois Insurance
Code and Section 45 of the Managed Care & Patients Rights
Act, will provide a new framework for denied mental health
claims. A new definition of “medically necessary” with respect
to treatment of mental and emotional disorders is created. It
extends the same definition requirements for individual
policies providing any form of mental and emotional disorder
coverage. When an internal and external review process is
denied, an additional appeal to the new Office of Patient
Protection (OPP) is created. The OPP decision is not
appealable. The new process likely will make it more difficult
for plans to deny excessive or inappropriate mental health
services.
Illinois Covered Rebate Program
This establishes a premium assistance program. Persons
age 19-64 with income below 400% of the poverty level (over
$80,000 for a family of 4) who are U.S. citizens, documented
legal permanent immigrants, or documented non-immigrants who
have been granted legal entry to the United States will be
eligible under the program.
Assistance will be
available whether an individual has access to
employer-sponsored coverage or not. The Department will define
by rule what types of plans and at what levels an employer
must contribute premiums for the employer plan to be eligible
for premium assistance.
Note that premium assistance
for individual coverage is only available for the Illinois
Covered Plan. If an individual purchases an individual policy
in the private marketplace, they will not be eligible for
premium assistance.
Illinois Covered Choices
Program
The Governor’s proposal creates a new
program that offers individuals and small businesses a health
insurance option. The Illinois Covered Choices plan is to be
available on January 1, 2009.
All insurers with
established managed care networks must participate in the
program and offer plans that have benefits approved and
defined by the Department of Healthcare and Family Services
(HFS) with lower co-pays and deductibles for participants at
lower-income levels. Insurers will be required to offer
Covered Choices through existing network arrangements.
Plans shall allow for only in-plan benefits, with the
exception of emergency care or where a plan provider cannot
provide needed services. Participants may choose to purchase
separate dental or vision coverage at the expense of the
individual
HFS in collaboration with the Division of
Insurance will determine the benefits in the suitable small
group and individual Covered Choice products, including
co-pays and deductibles, but long-term care and infertility
treatment will not be included.
Employers who are
eligible: Illinois based employers of not more than 25
employees, if the employer pays a minimum amount of the
premium; to participate in the first year, at least two-thirds
of employees must earn less than 400% federal poverty level
($80,000 for a family of 4). Although an employer may opt for
a lower threshold, an eligible employee is one who works at
least 25 hours per week.
“Suitable Managed Care
Plan” Requirements
Employer requirements:
An employer must offer participation in the plan to all
eligible employees. Employers are required to make the same
percentage contribution to premium regardless of employee
class. If an employer wishes to extend the plan as an option
for employees, at least 50% of eligible employees must be
insured. A pro-rata contribution will be required for
part-time employees. Employers will have the option of whether
to extend dependent coverage to employees. Suitable coverage
must include coverage for mental and emotional disorders as
defined and amended by the Governor’s proposal (215 ILCS
5/370c).
Deductibles are limited to the maximum
allowed under the Insurance Code. Under current law HMO
deductibles are limited: “Deductibles shall be either for a
specific dollar amount or for a specific percentage of the
cost of the healthcare service. No single deductible or
co-payment for health services may exceed 25% of the usual and
customary fee of the service to the HMO and must be waived
when, in a calendar year, deductibles and co-payments paid for
the receipt of health care services exceed $500 per enrollee.”
(Sec. 5421.131 of the Administrative Code)
On the HMO
side, there also are limits on the combination of deductibles
and co-payments for basic healthcare services to 50% of the
usual and customary fee of the service and $1,500 per enrollee
or $3,000 per family.
Individual eligibility:
An individual will be eligible if they are unemployed, work
less than 25 hours per week, are self-employed, or the
individual’s employer has not offered group health insurance
during the eighteen months prior to the individual’s
application for enrollment. For the first year of Illinois
Covered Choices (January 1, 2009 – December 31, 2009) there
will be no income restrictions; thereafter, the individual
must have personal or family income of less than 400% of the
poverty level, not be eligible for Medicare; and be an
Illinois resident.
The income restrictions do not
apply to veterans not on active duty or honorably discharged.
Individual eligibility requirements other than income
do not apply:
When coverage is terminated due to the death of a family
member;
Change of residence and insurance is not available through
an employer; or
When there is a change in marital status that ends health
insurance.
Pre-existing conditions: Although
pre-existing conditions cannot be used for premium-setting
purposes or to deny access to Illinois Covered Choices, the
HFS will determine to what extent the cost for care of a
pre-existing condition limitation can be applied. Pre-natal
care must be covered without consideration of pregnancy as a
pre-existing condition. Waiver of deductibles or co-pays may
be used for participation in chronic care management or
wellness and prevention programs.
Guaranteed
issue: Any applicant for an Illinois Covered Choice
product is guaranteed issue of coverage. (Section 10-15 (s))
Rate regulation: Insurers may develop a base
rate factoring only: Place of residence; the highest rate for
any geographic area may not exceed the lowest rate by more
than 30%.
Age; age variations cannot be fewer than
five years, beginning at 20 and ending with 65, except for
dependents. Individuals, sole-proprietors, and employees under
20 are to be treated as age 20.
Smoking or non-smoking
status;
Participation in wellness or chronic disease
management activities; premium discounts up to 10% for
participation when actuarially justified. Claims experience
for groups and individuals must be combined for rating
purposes.
Rate Bands:
- The highest age group rate shall not exceed the lowest
age group rate by 25% for the first year of Covered Choices,
and 20% thereafter with the Division of Insurance able to
modify the allowed variance.
- The highest rate for any small employer group cannot
exceed the lowest rate by more than 25%.
All base
rates for Illinois Covered Choice products will be subject to
prior approval, and the Division of Insurance will approve,
reject or modify a proposed rate.
(1) rates must reflect the
stop-loss program;
(2) rates cannot
be excessive, inadequate or unfairly discriminatory;
(3) rate evaluation will consider
loss experience (past, prospective, in-state and out of
state);
(4) rate evaluation will
consider actuarial support, enrollment, premium volume,
risk-based capital, and ratio of incurred claims to earned
premium.
Reinsurance: HFS will determine at
what level qualified, catastrophic claims are reimbursed,
including the reimbursement point or points and the percentage
that will be paid by the state. Beginning January 1, 2009,
reimbursement is 80% of claims paid and will be subject to
appropriation.
ICHIP assessments: The Illinois
Comprehensive Health Insurance Plan (ICHIP) is a state health
benefits program funded by assessments on health insurers and
by premiums paid by its participants who, in general, due to
pre-existing conditions are unable to obtain coverage in the
private market.
Health insurers will be assessed at a
rate that equals the average assessment, as a percentage of
gross premium volume, from 2004-2008 in ICHIP. This
calculation will establish a minimum baseline assessment for
the future.
Provider reimbursement:
Reimbursement rates will be no lower than “base Medicare”:
105% of base Medicare for critical access hospitals; 112% of
base Medicare for all other hospitals. Reimbursement may be
higher for medical research, medical education, highly complex
medical care and disproportionate share hospitals. Where
Medicare base can not be calculated, reimbursement will be 90%
of the lowest rate paid by an insurer.
Reimbursement
rates under this program can not be used for other plans or
used as usual and customary levels for hospitals.
Provider requirement: All providers who
participate in a managed care network must also participate in
the Illinois Covered Choice product(s) offered by the insurer.
Consumer guide: Insurers must share cost of
publishing and distributing consumer shopping guides for the
Illinois Covered plan.
Creation of More
Bureaucracy
A new state agency, the Office of
Patient Protection (OPP), is created within the Division of
Insurance to adjudicate consumer grievances on healthcare
policy disputes.
The OPP will help consumers
understand their rights and will, when appropriate, act on
their behalf. The OPP will have authority to investigate
claims practices, order the payment of a claim, and/or call a
hearing to determine whether an insurer or HMO is complying
with applicable law. The OPP will also implement the
Division’s new power to review medically necessary
determinations. The Director of the Division can overturn any
determination that is arbitrary and capricious or that
demonstrates disregard for patient well-being or contractual
terms.
Health plan appeals rights expansion:
Expands a right to an internal appeal process and an
independent external review process provided to HMO
participants under the Managed Care Reform and Patient Rights
Act to other health insurance plans such as PPOs and indemnity
plans. Requires all health insurers, like HMOs, to
systematically report to the Division of Insurance complaints
made to the insurance company and the resolution of those
complaints.
A consumer will be allowed to bypass the
internal appeal process and move directly to an independent
external review if the enrollee, plan, and provider agree; or
if the Office explicitly allows.
Health Information
Exchange and Technology
The proposal creates a new
public/private partnership to implement the recommendations of
the Electronic Health Records Task force which promote the
development of electronic health records in Illinois.
Reducing Administrative Costs in the Overall
Healthcare System
A common claims and procedures
work group will be formed with representatives from healthcare
providers, insurers and state agencies to review current
systems and to make recommendations for improvements. This
initiative is modeled after Vermont’s initiative in this area.
Medicaid and Public Program Expansion
The Governor’s proposal seeks to expand access for
FamilyCare, the Health Benefits for Workers with Disability
Program and creates the Illinois Covered Assist to provide
state sponsored healthcare coverage for adults whose family
income is below the poverty level and who do not currently
qualify for other state sponsored programs.
Disabled employed up to 350% of federal poverty level;
Caretaker relatives up to 400% federal poverty level
Building Healthcare Capacity & Workforce
Planning Group
The Governor’s proposal increases
appropriations for recently initiated proposals to assure
access to affordable health insurance for all Illinoisans. The
proposal creates a Council to review state healthcare
workforce efforts, develop 25-year workforce need projections
and develop a five-year comprehensive workforce development
plan.
This establishes a loan repayment program to
encourage physicians (primary care and specialists) and
dentists to serve underserved areas and underserved
populations.
A new community health center program is
created, with grants targeted to expansions of services in
areas (by geography and/or specialty) identified by state
health agencies as most needed to serve targeted populations
(uninsured, underserved, Illinois Covered).
The intent
is to create a consensus process to develop a “roadmap to
health.” The roadmap will include the creation of a chronic
care infrastructure designed to, where possible, prevent
chronic illnesses and where chronic illnesses exist to manage
such diseases in a manner that utilizes clinical best
practices and integrates information technology initiatives to
more cost effectively address chronic illnesses. Based on
input from healthcare professionals, insurers and other
experts, a strategic plan shall be developed to effectuate the
integration of such a system across state programs including
the Illinois Covered Choice program with the goal of diffusing
across the healthcare system generally.
Individual
Coverage Mandate
By 1/1/08, a taskforce of
consumers will be created to analyze the effects of
establishing an individual mandate to purchase health
insurance and its effects on current insurance premiums, its
effects on lifetime healthcare costs, the issues of
affordability of health insurance, the barriers to insurance
that exist today and the remedies for such barriers, what
entities currently incur costs due to individuals being
uninsured and what an appropriate enforcement mechanism for
such a mandate might be.
Health Insurer Rate
Regulation
A nine-member task force is created to
issue a report to the Governor regarding the feasibility of
rate regulation of health insurance products provided in the
state.
Click
here to read the full text of this bill,
SB0005. |
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