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Edited on Fri Apr-07-06 02:21 PM by caligirl
sent this to me today.
The Small Employers Health Benefits Program Act, S.2510
Senators Richard Durbin & Blanche Lincoln
Summary
The Small Employers Health Benefits Program (SEHBP) is based on the successful Federal Employees Health Benefits Program (FEHBP), which has provided extensive benefit choices at affordable prices to members of Congress and federal employees for decades. Last year, more than eight million people were banded together in the FEHBP purchasing pool and given choices among 10 national health insurance plans and a variety of local insurance plans. A total of 278 private insurance plans offered benefits to, and competed for the business of FEHBP enrollees in 2006.
By pooling small businesses across America into one risk and purchasing pool like FEHBP, the new SEHBP program will allow employers to reap the benefits of group purchasing power and streamlined administrative costs, as well as access to more plan choices. Health plans will bid to offer benefit packages to SEHBP enrollees.
While all plans participating in the SEHBP program must adhere to state benefit mandates the Office of Personnel Management (OPM), which has been efficiently managing FEHBP for decades with less than one percent administrative cost, will ensure that the health insurers bidding for access to the pool are offering reasonable prices. OPM will free small business owners from the burden of negotiating with health plans.
Finally, participating employers will receive a tax credit to reduce the cost of covering lower income employees. If the employer contributes 60 percent or more to the health insurance premium of an employee making $25,000 or less, the employer will receive a 25 percent tax credit. The tax credit increases with the number of people covered and the proportion of premium the employer chooses to cover.
Eligibility Requirements
The SEHBP program will be open to all employers with up to 100 employees, including the self-employed. OPM will have the authority to grant participation waivers to businesses with more than 100 employees.
To receive the tax credit, employers must agree to pay at least 60 percent of each employee’s health insurance premium.
All employees of participating SEHBP employers will be eligible to receive coverage through SEHBP.
Participation and Coverage
Employees may join SEHBP upon being hired or during an annual open enrollment period.
Prior to each annual enrollment period, employers will receive a booklet detailing the insurance plans available. OPM will work to ensure a range of choices are available, like in the federal employees plan.
Coverage choices are made by the employee. Each individual may choose a health plan according to his or her own needs. Like the federal employees plan, the options are likely to range from fee-for-service, in which most services provided by any doctor are covered with a co-payment, to HMOs, which offer lower prices with a more limited panel of doctors, to high-deductible plans, which require the first several thousand dollars of health care coverage be paid by the employee. The bill requires OPM to ensure a range of benefit plans is available.
SEHBP enrollees who have at least six months of health insurance coverage immediately prior to enrollment in an SEHBP plan will face no pre-existing condition waiting period. To prevent people from waiting until they get sick to enroll, health plans will be allowed to exclude coverage for pre-existing conditions for up to six months for people without coverage immediately prior to enrollment (reduced by one day for each day of immediately previous coverage). The pre-existing condition provisions are consistent with HIPAA.
In an effort to balance premium prices with consumer protections, participating plans will be allowed to apply “adjusted community rating” to their premiums. The SEHBP plan is similar to a model developed by the National Association of Insurance Commissioners in 2000, which allowing plans to vary premiums based on age, geography and family composition within strict limits or to prevent extreme variations in price. Rating on health status, gender or industry is prohibited under SEHBP rating rules. If a state has rating rules that are stricter than the rules laid out in this bill, the state is held harmless, meaning they can maintain their current rating structure. In other words, SEHBP sets a floor.
Consumer Protections
SEHBP enrollees will be covered by state consumer protection laws, such as benefit mandates and solvency standards. State insurance commissioners will continue to regulate solvency, grievance processes, internal review and network adequacy laws, among other things.
Like in the FEHBP program, OPM will have the authority to require plans to limit enrollees’ annual out-of-pocket expenses, include patient consumer protections and provide parity for coverage of mental and physical health care.
Encouraging Participation among Health Plans
Health plans would be encouraged to participate in the new program through temporary use of a three percent risk corridor and a reinsurance pool for high-cost individuals. Risk corridors are contractual safeguards that limit the downside risk and upside gain for an insurer. The federal government has experience with risk corridors in TriCare. The risk corridor would be in place for two years.
In addition to the risk corridors, the SEHBP Act would set up a reinsurance pool that will initially protect participating insurers from unexpectedly high claims from individual beneficiaries. The reinsurance pool would pay 90 percent of an individual’s cost when claims exceed $50,000. The reinsurance pool would also be in place for two years.
Once the risk pool stabilizes and insurers have claims experience on which to accurately base their premiums, the program would switch to the “service charge” system currently employed by FEHBP.
Tax Credit
Under SEHBP, premiums will not be government-subsidized, but employers will receive an annual tax credit to defray part of the employer contribution. The SEHBP Act provides a refundable tax credit to employers for their payments on behalf of low-wage workers (those who make $25,000 or less per year.) The tax credit will be equal to 25 percent of their costs for self-only policies, 30 percent for those employees who are either married or single with a child and 35 percent for family policies. The wage limitation will be adjusted annually for inflation rate based on the CPI.
Employers who cover more than 60 percent of their employee’s premium will receive a bonus tax credit. The bonus will be equivalent to a 5 percent add-on per additional 10 percent of premium covered. So, an employer who covers 10 percent over the required employer portion will receive an additional 5 percent tax credit. If the employer covers an additional 20 percent of the premium, an additional 10 percent tax credit will be granted.
Employers who enroll in the first year will receive a 10 percent bonus refundable tax credit that year.
Table 1a: Example of Potential Costs assuming the Employer covers 60% of costs
Single Couple/Single Parent Family
Cost $4,000 $8,000 $10,000
Employer’s 60% $2,400 $4,800 $6,000
Tax Credit - $600 - $1,440 - $2,100
Net Employer Cost $1,800 $3,360 $3,900
Employee Cost $1,600 $3,200 $4,000
Table 1b: Example of Potential Costs assuming the Employer covers 80% of costs
Single Couple/Single Parent Family
Cost $4,000 $8,000 $10,000
Employer’s 80% $3,200 $6,400 $8,000
Tax Credit -$1,120 -$2,560 -$3,600
Net Employer Cost $2,080 $3,840 $4,400
Employee Cost $800 $1,600 $2,000
Endorsers of SEHBP
American Academy of Family Physicians
American Medical Association
American Osteopathic Association
Consumers Union
Federation of American Hospitals
National Association of Community
Health Centers
FamiliesUSA
National Partnership of Women and Families
National Association of Women Business Owners
Small Business Majority
American Diabetes Association
American Cancer Society
National Mental Health Association
American Academy of Pediatrics
National Women’s Law Center
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