Financial Executives International

Patricia Huffman Rod TurnerVice President, Actuarial Vice President, Product Policy           Wellmark Blue Cross Blue Shield of Iowa America’s Health Insurance Plans

Current Regulatory Developments andProduct Trends in Healthcare(HSA’s and Other Timely Topics)

February 17, 2005

2

Agenda

Health Savings Accounts

Projected Federal Issues and Trends in 2005

HIPIowa

3

Health Savings Accounts (HSA)

4

Eligibility for Health Savings Accounts

Must be covered by a qualified high deductible health plan

Must not be covered by a low or no-deductible health plan

Cannot be claimed as a dependent on somebody else’s tax return

5

High Deductible Health Plan (HDHP)

Comprehensive health plan with an annual deductible of at least: $1,000 for single coverage $2,000 for family coverage

Annual out-of-pocket maximums (OPM) of no more than: $5,100 single $10,200 family

Only preventive health services may be exempted from the deductible (these benefits may have “first-dollar” coverage)

6

High Deductible Health Plan (HDHP) (cont.)

In the case of a network plan (PPO, HMO, Exclusive Provider Organizations), the OPM limit applies only to in-network services

Deductible and OPM limits are indexed and subject to change annually

After 2005, prescription drugs must be subject to the minimum annual deductible (thus precluding most drug-card plans)

7

Contribution Rules

Maximum annual contribution by an individual to their HSA is the lesser of 100% of the deductible (e.g., $1,000) or an indexed amount established by law.For 2005, the limit is $2,650 for single coverage

and $5,250 for family coverage Contributions are permitted only for the

months that the individual has qualifying high-deductible health plan coverage

8

Distribution of Money from the HSA

Distributions from an HSA are tax-free if used to pay for “qualified medical expenses” of the account beneficiary, the spouse or dependents:Expenses as defined by Code Section 213(d) –

similar to flexible spending accountCOBRA coverageHealth insurance while unemployedQualified long term care insuranceRetirement health benefits except Medigap

9

Non-Medical Distributions

Income Taxes Amounts distributed from an HSA that are not for qualified

medical expenses are subject to income tax

Excise Taxes Non-medical distributions are also subject to an additional

10% excise tax Does not apply to distributions made after beneficiary’s

Death Disability Attainment of age 65

10

Projected Federal Issues& Trends in 2005

11

Potential Legislation for 2005

Medical liability reform Class action reform Patient safety Medicaid Uninsured Health Care CHOICE

Association health plans Genetic nondiscrimination Long-term care Mental health parity Recreational parity SMART

12

Medical Liability Reform

Places caps on non-economic and punitive damages

Applies to health plans and providers Approved by House in March 2003

(229-196 vote) Outlook less favorable in Senate

Supporters of medical liability reform lost procedural votes in July 2003 (49-48 vote) and February 2004 (48-45) – needed 60 votes to win

13

Class Action Reform

Allows large, multi-state class action suits to be adjudicated in federal court

Approved by House in June 2003 (253-170 vote)

Approved by Senate Judiciary Committee in April 2003 (12-7 vote)

Cloture motion defeated in Senate in October 2003 (59-39 vote, needed 60 votes to win)

14

Patient Safety

Establishes legal protections for medical error information voluntarily reported by providers

Approved by House in March 2003 (418-6 vote)

Approved by Senate HELP Committee in July 2003 (20-0 vote)

15

Medicaid

House Republican Medicaid Task Force Led by Rep. Heather Wilson (R-NM) Concerned about Medicaid’s impact on state

budgets Flexibility for states is high priority Energy and Commerce Committee Chairman,

Rep. Barton has placed a priority on Medicaid reform in 109th Congress

16

Uninsured

Senate Republican Task Force Recommendations released in Spring 2004 Senator Gregg (R-NH) says solutions should:

Target assistance to those with the greatest needEmpower health care consumersFocus on care, not just coverageEncourage choice, competition, and qualityAddress health care costs to improve access

17

Association Health Plans

Allows small employers to form regional and national AHPs that would be exempt from state benefit mandates and other state regulatory requirements

Approved by House in June 2003 (262-162 vote)

Faces opposition in Senate

18

Genetic Nondiscrimination

Prohibits discrimination based on genetic information

Approved by Senate in October 2003 (95-0 vote)

Does not include sweeping private right of action originally proposed by Senator Kennedy

Does not prohibit health plans from using/disclosing genetic information for health care operations

19

Long-Term Care

Makes long-term care insurance more affordable by: Establishing a tax deduction for individuals who purchase

long-term care insurance Providing a $3,000 tax credit to caregivers Allowing long-term care insurance to be offered under

employer-sponsored cafeteria plans and flexible spending arrangements

Introduced in House by Johnson (R-CT)/Pomeroy (D-ND)

Introduced in Senate by Grassley (R-IA)/Graham (D-FL)

20

Mental Health Parity

Expands 1996 law by requiring parity for all treatment limitations and all financial requirements for all conditions listed in the DSM-IV, except for substance abuse disorders

67 cosponsors Senate (Domenici-Kennedy)242 sponsors in House (Kennedy-Ramstad)

Domenici compromise – not based on DSM-IV Opposition from House leadership

21

Recreational Parity

Prohibits health plans and insurers from denying otherwise available benefits for injuries resulting from legal transportation and recreational activities

Approved by Senate HELP Committee in October 2003

Introduced in House by Rep. Scott McInnis (R-CO) – 167 cosponsors

22

CHOICE Act

Allows consumers to purchase health insurance across state lines

Similar proposal included in President’s budget

Likely to be issue for 109th Congress

23

SMART Act

Market Conduct Uniformity & Coordination One Stop & Uniform Licensing of Agents Streamlined Merger Oversight Life and Health Insurance Interstate Compact for

Filing of Policies Single Point of Filing of P&C and Reinsurance

Policies and Rates Uniform Internal and External Review Partnership Advisory Body to Congress Removal of Rate Authority of All Lines

24

HIPIowa

25

Background of State Individual Programs State of Iowa has two separate health insurance programs

available to individuals not eligible for affordable insurance coverage.

Iowa Comprehensive Health Association (ICHA) (also known as the “high risk pool”)

Basic and Standard (B&S Plans)

The number of individuals with ICHA coverage has been reduced to under 200 due in large part to B&S Plans, which are generally less expensive than ICHA Plans.

For calendar year 2003, there were 9,365 individuals covered by B&S Plans.

26

Background of State Individual Programs(cont.)

Under Iowa Code Chapter 513C, carriers offering B&S Plans are reimbursed for their losses on these plans. The mechanism for funding such losses is the Iowa Individual

Health Benefit Reinsurance Association (IIHBRA). Members of IIHBRA are all carriers, organized delivery systems,

and public self-funded health plans. Members are assessed on an annual basis for losses.

The past 5 years, the assessable losses have ranged between $15.2 million to $18.7 million.

For the past 5 years, public self funded entities have been responsible for $2 to $3 million of each assessment.

27

House File 647

The Iowa Insurance Division was directed to establish an Individual Health Insurance Task Force To conduct a study to review individual health

insurance market reform under Iowa Code Chapter 513C and the ICHA under Iowa Code Chapter 514E

The Insurance Commissioner was to select the members of the Task Force that included representatives from the ICHA, a public employee governing body subject to Iowa Code Chapter 509A, and other health insurance-related parties or experts as deemed appropriate by the Commissioner.

28

Overview of Proceedings and Deliberations

The review was divided among the following categories:

1. Programs’ Eligibility

2. Programs’ Benefit Designs

3. Programs’ Rate Structures

4. Administration of the Programs

5. Funding of Assessments

29

Overview of Proceedings and Deliberations (cont.)

The Task Force concluded that the ICHA and B&S programs should offer similar products. Assuming similar products are offered, the two programs would be redundant and only one program should be necessary in the future.

The Task Force recommended that legislation be passed that would result in abolishing the requirement imposed on carriers to offer B&S Plans.

Carriers would continue to maintain the existing B&S Plans until the individuals with these plans no longer desired to keep their coverage under such plans.

30

HIPIowa Executive Director Administrator

Benefit Management, Inc. (BMI) Commission

$200 finders fee Premiums

150% of post 1996 rate of top five carriersRates vary by gender and tobacco useSingle only

31

HIPIowa

General Eligibility RequirementsYou are a resident of the State of IowaYou must also meet one of the Eligibility

Categories Medical Eligibility Medical Condition Federal Eligibility Basic and Standard Eligibility

32

HIPIowa Plans

Plan A Plan B Plan C Plan DMedicare Carveout$1,000 Deductible $1,000 Deductible $1,500 Deductible $2,500 Deductible

Feature/BenefitCoinsurance 80% / 60% 80% / 60% 80% / 60% 80% / 60% (In-Network/Out-of-Network)

Deductible $1,000 / $2,000 $1,000 / $2,000 $1,500 / $3,000 $2,500 / $5,000 (In-Network/Out-of-Network)

Out-of-Pocket Maximum (OOP) $2,500 / $5,000 $2,500 / $5,000 $3,000 / $6,000 $5,000 / $10,000 (OOP includes deductible & coinsurance)

Lifetime Maximum Benefit $3 million $3 million $3 million $3 million

Doctor's office visits & related expenses, No Copay (1) $20 Copay/visit $30 copay/visit $40 copay/visit consultations, medical treatments, in-network in-network in-network office surgery

(1) $20 copay applies when the service is not covered by Medicare

All Plans Contain Preferred Provider Features

Office visit only. Other services subject to deductible and coinsurance.-Out-of-network subject to deductible and coinsurance