The state health insurance exchanges are a central tenet of the health reform law’s goals to expand coverage and lower costs for health insurance. Individuals and small businesses will be able to purchase health insurance through the exchanges beginning in 2014. Exchanges will certify standardized health plans that provide different levels of coverage for “essential health benefits” based on the following actuarial values of coverage of benefits provided under the particular plan:
Why the Exchanges Are Important
Beginning in 2014, people who do not have access to qualifying and affordable coverage through their employer may qualify for federal subsidies for coverage purchased through an exchange. The subsidies, which are only available for coverage purchased through the state-operated exchange, include premium tax credits and cost-sharing reductions. However, to qualify, the person’s household income must be under four times the federal poverty level (generally, $92,200 for a family of four in 2012 dollars).
January 1, 2013, Deadline
Each state exchange must be ready to accept enrollees on October 1, 2013. Under the law, each state must demonstrate progress toward operational readiness by no later than January 1, 2013, although the Department of Health and Human Services (HHS) will grant conditional approvals for states that are moving forward. If a state fails to meet HHS’s deadline, then the federal government is tasked with operating the exchange within the state (federally facilitated exchange).
The feds are getting concerned that all 50 states’ exchanges might not be operational by the October 2013 deadline, potentially limiting the ability of consumers to access health insurance coverage. Although HHS has grant money available to the states to help plan and establish the exchanges, many states have yet to apply for funding. According to the Obama Administration, 28 states are “on their way” toward establishing an exchange.
Why the inaction at the state level? Some state legislatures are ideologically opposed to the health reform law, while others are waiting for the Supreme Court’s decision on whether the law is constitutional. Consequently, many states will fail to meet next year’s January 1 readiness deadline. Although HHS has issued final regulations on the establishment and operation of the exchanges, it has issued no guidance to date on how a federally facilitated exchange would operate.
The Feds Are Scrambling
In early January, the White House reiterated that HHS “has the capacity to ensure all Americans will be able to purchase insurance in an exchange on January 1, 2014.” HHS continues to encourage states to move forward with their exchanges. Late last year, HHS began touting a federal-state partnership to operate an exchange. Under this model, the state performs some exchange functions, but leaves other functions to the federal government.
If the health reform law withstands judicial scrutiny, many states will be scrambling to have their exchanges up and running by October 1, 2013.
State Exchange Status at This Time
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As healthcare costs rise, employing pharmacy analytics is a very effective strategy to realize savings within your self-insured employee benefit plan. Many pharmacy contracts go unchecked by plan sponsors and their consultants. These contracts may not be written to benefit you, the client. They may be geared instead to provide a false perceived value, accomplished through ambiguous terms and definitions. It can, therefore, be very beneficial to have the Lockton Pharmacy Analytics Practice evaluate your pharmacy contract.
Below are five strategies that could be practiced by pharmacy benefit managers (PBMs) to increase their margins while eroding the savings for you as a plan sponsor.
The patent cliff for brand drugs going generic during the next several years is significant. This means there will be billions of dollars of brand drugs losing patent protection, which could increase the generic fill rate to more than 80 percent. Considering the projected trend in generics, it is critical that your contracts are written in such a way that will allow you to realize all the future value from new generics coming to the marketplace. PBMs will often include single-source generics in the brand bucket, which will artificially inflate both the generic and brand discounts. This strategy could lead you to believe that you are receiving a high generic discount guarantee, which is far from the truth.
Permissible Plan Expenses and Those That Fall on the Wrong Side of the Fence: On Which Side of the Settlor Fence Do Your Plan Expenses Fall?
It is a simple concept: retirement plan expenses are either payable from the plan’s assets or they are not. In practice, it can be much more difficult.
The Employee Retirement Income Security Act (ERISA) requires the plan fiduciary to evaluate all fees paid by the plan to ensure those expenses are related to a necessary fiduciary function. The kicker is, many expenses incurred by a plan are not related to a fiduciary function but are instead settlor in nature and are not permissible plan expenses. Expenses that fall outside of the fiduciary bucket must be paid for directly by the employer and may not come out of, derive from, or originate from plan assets. The failure to pay an expense from the proper source can result in significant penalties and costs for a plan sponsor.
Settlor Functions vs. Fiduciary Functions
In retirement plan sponsorship, one of the most difficult questions to address is, What are the differences between settlor and fiduciary functions?
Settlor functions are those that relate to the employer’s business, such as the establishment, design, or termination of a plan. All…