Immediate Impacts of Health Care Reform Legislation for the Insurance Industry

Author:Mr Kevin Fitzgerald, Ethan Lenz and Benjamin P. Sykes
Profession:Foley & Lardner

On Tuesday, March 30, 2010, President Barack Obama signed the last piece of legislation instituting sweeping changes to the nation's health care system. The reconciliation bill of the Patient Protection and Affordable Care Act (PPACA), which the U.S. House of Representatives passed by a vote of 220 to 207, was slightly changed by the Senate from a version that passed the House late last month, necessitating a second vote by the House.

With PPACA now in place, the insurance industry faces a slew of new regulations, restrictions, and fundamental changes. Although it is too early in the process to know exactly how health care reform will reshape the industry, especially since a majority of the changes will not take place until 2014, it seems clear that the regulatory framework and rules for the insurance industry that will eventually emerge will look significantly different than the one that exists today.

Pre-existing Conditions Coverage

National High-Risk Insurance Pool PPACA essentially guarantees that those with pre-existing conditions will have the ability to purchase insurance coverage. Within 90 days of enactment, Americans who have pre-existing conditions and have not been covered by insurance for at least six-months may sign up for a new high-risk insurance pool. This high-risk pool will continue until 2014, at which time all insurance carriers will be prohibited from excluding an individual based on a pre-existing condition. In a recent letter to state governors and insurance commissioners, U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius clarified that coverage offered under the high-risk pool must have an actuarial value of at least 65 percent of total allowed costs, an out-of-pocket limit no greater than $5,950 for an individual and $11,900 for a family, and no pre-existing condition exclusions. Further, premiums under the high-risk pool must not exceed 100 percent of the standard non-group rate and not have an age rating greater than four to one. Finally, Ms. Sebelius' letter outlined the different ways that states could participate in the high-risk pool. Namely, states can: Operate a new high-risk pool alongside a current state high-risk pool

Establish a new high-risk pool (in a state that does not currently have a high-risk pool)

Build upon other existing coverage programs designed to cover high-risk individuals

Contract with a current HIPAA carrier of last resort or other carrier to provide subsidized coverage...

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