Health Net on Health Reform: What Next?

The future will be filled with both opportunity and challenge; and we are focused on developing and creating the opportunities that best support our mutual efforts.

Jay's Message

The President's signing of sweeping health reform legislation last week includes a $1 trillion commitment of federal funding to bring access to health care coverage to roughly 32 million currently uninsured Americans. We applaud this significant step that will improve the lives of so many.

The legislation includes changes that our industry has been proposing for several years, such as guaranteed coverage, discontinued use of ratings based on health status or gender and an individual mandate. We're pleased to see many of these reforms in this legislation.

Using a reconciliation process, H.R. 4872 must still be debated and voted on by the Senate. Assuming the Senate passes this bill with no changes, the health reform package will be complete.

At a very high level, the basics of the reform package are these:

• Our employer-based health care system remains essentially in place, although federal regulation of health care is expanded.
• Health plans are required to cover all regardless of their health status (guarantee issue), which means an end to disqualification for pre-existing conditions.
• Beginning in 2014, individuals will be required to obtain health insurance or pay a penalty for not acquiring coverage. Also, beginning in 2014, large employers will be required to provide insurance to employees or pay a significant penalty.
• States must organize "exchanges" where individuals and small businesses can purchase insurance if their employer does not provide it. Requirements for a minimum set of benefits are outlined in the legislation, including provisions for preventive care and mental health services. Subsidies are provided to help low- and moderate-income individuals, as well as small businesses, buy insurance.
• Medicaid eligibility will expand to a broader range of income levels reaching an additional 16 million individuals across the country. The Senate bill also requires states to establish state enrollment websites to promote seamless enrollment and to coordinate with state insurance exchanges.
• Medicare Advantage plan payments for 2011 are frozen at 2010 levels.
• The federal government will implement a new system for commercial premium rate review immediately.
• New taxes will be levied on investment income, high-cost or "Cadillac" health plans, medical device companies, pharmaceutical companies and health plans, among others.

There are opportunities for Health Net under the new legislation. Managed care, with its emphasis on preventive care, is perfectly aligned with the new minimum benefit sets. Health Net's HMO-model coverage is particularly cost effective, and inclusion in the insurance exchange is the equivalent of inclusion in a large marketing campaign. It makes the market more competitive and levels the playing field with larger competitors. Customers will be able to view our offerings compared with others, and see what value Health Net can provide.

Also, Health Net's Medi-Cal (Medicaid) program is already the most successful in the state of California. As the eligible population increases, Health Net will be positioned to serve many new members.

Regarding the exchanges, the reform measures will allow individuals and employers with up to 100 employees to buy coverage from the exchanges. The ultimate impact that exchanges will have on brokers will be determined in the future by the U.S. Department of Health and Human Services; however, language in the Senate bill makes it likely that brokers will continue playing an important role in the individual and small-group arenas. Health Net has been in contact with the National Association of Health Underwriters, which tells us that it believes brokers will be able to sell within the exchanges. You may contact NAHU for any clarification on this matter.

There will be challenges, as well. The legislation does little to address cost-containment issues – underlying medical costs – and this is critical to managing the overall cost of health care. Cuts to the Medicare Advantage programs contained in the legislation may impact the benefits we are able to offer our Medicare Advantage beneficiaries as well. Health Net will continue working to keep coverage affordable for everyone.

Although we won't see many immediate changes, preparing for the changes to come and adjusting to new market rules will require patience and tenacity by everyone involved. Implementation of the new legislation and transitioning to new rules will be complicated. The health plan industry and individual health plans have a great deal of work ahead.

Health Net will continue to advocate for cost containment throughout the health care industry, as we work to bring high-quality, affordable health care services to our members. We will work to ensure that this legislation works for our customers, for our providers and business partners, and for our communities.