Global Health Care Update
May/June 2011
This bimonthly Update summarizes recent legislative developments and trends related to health care and highlights recently passed and pending legislation that may require employers to take action to comply with new rules or review existing plans.
Recent Developments
U.S. Health Care Reform
President Obama signed the FY2011 budget into law, which includes provisions that affect the Patient Protection
and Affordable Care Act (Affordable Care Act), including:
-- A repeal of the Free Choice Voucher program that, effective in 2014, would have required employers to provide vouchers in the amount of the employer’s health care contribution for certain low-income workers whose
employer-provided health insurance premiums cost between 8.0% and 9.8% of household income. The employee could have then used the vouchers to purchase health insurance in the exchanges and keep any excess amount if the voucher exceeded the cost of health coverage;
-- A reduction of USD 2.2 billion (from an original USD 6 billion) in funding to support the Consumer Operated and Oriented Plan program that would have been used to create private nonprofit insurance plans; and
-- Several GAO reports related to specific provisions in the Affordable Care Act, including a list of contracts, outside firms, and consultants used to implement the Affordable Care Act; a report by the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary on the estimated impact of the guaranteed issue, guaranteed renewal, and community rating requirements on premiums for individual and families with employer-provided health insurance; and an audit of expenditures that have been made for comparative effectiveness research funds.
Americas
The U.S. Internal Revenue Service (IRS) issued inflation-adjusted limits for contributions to a health savings account (HSA) for calendar year 2012. For calendar year 2012, the limit on contributions for an individual with self-only coverage under a high-deductible health plan is USD 3,100 (USD 6,250 for family coverage). A
high-deductible health plan for calendar year 2012 is defined as a health plan with an annual deductible of not less than USD 1,200 for self-only coverage (USD 2,400 for family coverage) (both unchanged from calendar year 2011). The limit on annual out-of-pocket expenses is USD 6,050 for self-only coverage (USD 12,100 for family coverage). The limit on catch-up contributions for individuals age 55 or older is USD 1,000.
The U.S. Department of Health and Human Services (HHS) issued a proposed rule to modify the Health
Insurance Portability and Accountability Act (HIPAA) privacy rule’s standard for accounting of disclosures of
protected health information. The purpose of the modifications is to implement the statutory requirement under the
Health Information Technology for Economic and Clinical Health Act (HITECH) to require covered entities and
business associates to account for disclosures of protected health information to carry out treatment, payment, and health care operations if such disclosures are through an electronic health record. HHS proposes to expand the accounting provision to provide individuals with the right to receive an access report indicating who has accessed electronic protected health information in a designated record set. HHS also proposes changes to the existing accounting requirements to improve their workability and effectiveness. Comments on the proposed rule must be received by August 1, 2011.
In June 2011, the Canadian federal government reintroduced its March budget with several health care initiatives. Few substantive changes were introduced in the budget, and none relating to the following health care initiatives: 1) in relation to insolvencies arising before 2012, clarification that lump-sum amounts received by former
employees or retirees in lieu of their right to health and dental coverage from employers that have become
insolvent would not be treated as income for tax purposes; 2) introduction of a new Family Caregiver Tax Credit, a 15% nonrefundable credit on CAD 2,000 that would provide tax relief to caregivers of all types of infirm dependent relatives, including for the first time, spouses, common-law partners, and minor children; 3) for the 2011 and subsequent taxation years, removal of the CAD 10,000 limit on the amount of eligible expenses a taxpayer can claim under the Medical Expense Tax Credit with respect to a financially dependent relative; 4) a one-time CAD 3 million contribution to support community integration of palliative and end-of-life care services; and 5) Canada Student Loan forgiveness for family physicians and nurse practitioners who practice medicine in under-serviced areas of Canada.
In Argentina, President Fernández de Kirchner has signed into law a bill reforming the voluntary health insurance plan industry (prepagas). Previously, the voluntary health insurance industry was largely unregulated. Under the new law, 1) premium increases must receive the prior authorization of the Ministry of Health and Secretary of Commerce; 2) insurers cannot reject individuals based on age, and the premiums for individuals age 65 and over cannot increase for at least ten years; 3) individuals cannot be rejected on the basis of a preexisting condition; however, a higher premium may be charged; 4) the government will fix minimum fees to be paid to clinics and professionals providing services under the plan; 5) the voluntary insurers must guarantee the Compulsory Medical Plan (PMO), a standardized basket of health benefits provided by the Obras Sociales; and 6) contracts cannot establish a waiting period. Voluntary health insurers have indicated that they may file legal action in the courts against the new law.
Asia
The Australian government’s federal budget for 2011–2012 confirms that means testing the private health insurance rebate remains a priority. Means testing was first introduced in the 2009–2010 budget. Three income tiers would be introduced, with the rebate reduced as personal income increased. Individuals with income over
AUD 120,000 per year (AUD 240,000 for families) would receive no rebate; individuals with income over AUD 90,000 per year (AUD 180,000 for families) would receive a 10% rebate; and individuals earning over AUD 75,000 (AUD 150,000 for families) would receive a 20% rebate. Individuals with income below AUD 75,000 (AUD 150,000 for families) would continue to be eligible for the full rebate. Legislation to enact the measure failed in 2009. It is not clear whether there is sufficient support to pass this measure in the current parliament.
The Filipino government wants to expand the mandate of PhilHealth to make health care universal. The Senate and House have passed bills that would amend the National Health Insurance Act to allow universal health care coverage for Filipino citizens. Citizens would fall into one of four categories—indigent, informal sector, practicing professionals and the self-employed, and formal-sector employees whose health care contributions are deducted automatically from their pay. The national government would cover contributions for the indigent, while local governments would fund care for the informal sector. Services would include medical consultations, pre- and post-natal care, immunizations for infants and children, and dental services. A case-based payment system would be established, replacing the current fee-for-service system.
Europe
Cash sickness benefits may be extended for some employees in Finland, even if the maximum amount of benefits has been received. The social security system (KELA) pays cash sickness benefits for the same illness for a maximum of 300 workdays. If an employee has returned to work but the illness continues to cause disability after 30 consecutive days of work, a daily allowance will be paid for an additional 50 days, even if the cash sickness maximum has been reached.
Under a draft reform proposal, individuals in the Czech Republic would pay more for their health care. The coalition government has reached an agreement on health care reform. Copayments would increase from 17% to 24% of health care costs by 2014. Patients would be able to pay for specialized care at state-run hospitals, and fees for hospitalization would increase from CZK 60 to CZK 100. In related news, the Minister of Finance
indicated that it will submit a proposal to reduce employers’ social security and health care contributions from 34% to 32.5% in 2013.
Pensioners in Romania will have to continue to make a 5.5% health care contribution through 2012. The contribution applies to “high-income”—at least RON 740 each month—pensioners. The temporary contribution was originally scheduled to expire at the end of 2011.
Russia’s Deputy Minister of Health has submitted a draft bill “On the Basics of Health for Citizens” to the Duma. The draft bill would restructure the provision of health care in the country. It would establish standards for the quality of care and link these standards to costs, and hospitals would no longer receive fixed financing regardless of the number of patients and the outcome of their treatment. The most controversial measure is the recognition of privately paid care. Individuals would be given the option to pay for “extra” or alternative services.
Middle East
Expatriate employees seconded to the UAE may be required to undergo health screening in their home country and in the UAE. The Ministerial Service Council has asked the Ministry of Health to draft legislation that would require health screening to be conducted in both the employee’s home country and in the UAE before a work visa
is issued. The government is concerned about the number of expatriate employees arriving in the country with communicable diseases.
Recent Market Trends
Argentina
Health care services are provided by:
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The “public” sector—Networks of provincial and municipal hospitals and clinics that serve the uninsured and underinsured within their territories. Public services are primarily hospital based and free of charge.Increasingly, Centers of Primary Health Attention (CAPS) are providing services at the provincial level;
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Obras Sociales—Group insurance plans, largely organized according to employee occupation. There arethree groups of Obras Sociales: national Obras, which cover employees and their dependents as per collective agreement; provincial Obras, which cover employees of provincial and municipal governments and their dependents; and special Obras, which cover certain public-sector employees such as the military or members of the judiciary. Retirees and pensioners also have a special fund, the Integrated Medical Care Program (PAMI); and
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Voluntary insurance plans (empresas de medicina prepaga)—Privately owned hospitals and clinics. The Argentine public health care sector is decentralized, with considerable management and policy decisions handled at the provincial level. Currently, an estimated 33% of the population rely on the public sector for health care. The Obras Sociales cover approximately 46% of the population and the prepagas cover an estimated 8% of the population.The coverage provided by the Social Security system is generally considered to be insufficient. Based on Aon Hewitt data, almost 100% of companies provide additional medical coverage to their employees. Usually, coverage for union employees is through an Obra Social, and benefits for exempt employees are covered by contracts with medical care providers.
Characteristics of medical benefits include:
■ Cost sharing: Most companies (91%) currently provide medical benefits without any cost sharing. This may eventually change, however, as Argentina is experiencing significant increases in medical costs—there has been an increase of approximately 40% in costs since 2007.
■ Upgrades to statutory coverage: Employer and employee contributions to Social Security can be used to offset the cost of a private medical plan. A portion of the contribution is retained by the Obra Social, and the balance is paid to private providers for upgrades such as access to better quality providers and facilities. This arrangement is made possible through agreements between the Obras Sociales and the private providers.
■ Coverage: In general, executives have more comprehensive coverage than other employees. Main differences among the plans are the reimbursement amounts (out-of-network coverage). Prescription drugs are included in the medical coverage. The full cost of inpatient drugs and 40% of the cost of outpatient drugs is covered. Dental benefits also are included in the medical benefits.
■ Retiree medical: A national Obra Social known as PAMI automatically covers employees on retirement. PAMI service is poor, however, so retirees tend to join private HMOs on an individual basis.
Employer-provided retiree medical is rare.
Ireland
Ireland has a system of universal health care for all residents that provides primary, inpatient, and ambulatory care as well as prescription drugs. All persons ordinarily resident in Ireland are covered. There are two categories: Medical Card holders (low-income persons) and employed persons earning over the “means test” level.
The government-provided health services have been plagued by long waits for nonessential treatments. Supplemental private health insurance has, therefore, been available and quite popular; almost 50% of the population purchases private health coverage, either as individuals or through their employers. Of this,
approximately 70% do so on a voluntary basis and 30% are covered by their employer (80% of respondents to the IBEC Management and Executive Salaries and Benefits Report advised that they had a PMI group scheme in operation in their companies).
Individuals using public hospital services (inpatient or outpatient) may choose either public or private patient status. Patients choosing public inpatient status are assigned to a public bed in a ward room (usually six to eight persons to a room) and are not the private patient of any medical consultant or specialist (such as a radiologist, pathologist, or anesthetist) and, therefore, would not pay consultants’ fees.
On the other hand, a person choosing private inpatient status would:
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Be assigned to a private or semiprivate room (rates for private and semiprivate accommodations are set by the Health Boards);■
Be the private patient of any consultant or specialist involved in his/her care and would be liable for payment of the related fees; and■
Use the consultant’s private rooms or private clinic rather than a public clinic.In a medical emergency, or if beds are not available in the appropriate class of room, patients are accommodated on the basis of whatever is available, with possible adjustments to be made later.
The Voluntary Health Insurance (VHI) Board is the largest private health insurance provider. The VHI is a
government-owned nonprofit organization that provides insurance for treatment of sickness, injury, or disease for those who wish to purchase private insurance. The VHI has generally operated under a somewhat restrictive
government mandate, in terms of the programs that can be offered and their cost, and enjoyed near-monopoly status until January 1997. VHI had roughly 1.5 million members at the start of 2009 and claims to have 80% of the private health care market.
The Health Insurance Act of 1994 was designed to allow competition with the VHI, following the Third EU Directive on Non-Life Insurance. Only one major insurer—BUPA (British United Provident Association) entered the market to compete with VHI. In late 2006, BUPA withdrew from the Irish market; Quinn-healthcare is now the second largest provider of voluntary private health insurance. Vivas is the third provider to operate in Ireland. All private health insurers must comply with four basic principles:
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The insurers must base premiums on community rating—that is, the same premium is charged for all adults for a given level of benefits, regardless of age, gender, or health rating;■
The insurer must have open enrollment, providing coverage to any individual who applies, regardless of age or health condition;■
Coverage must be lifetime, so that the insurer may not refuse coverage later, after an individual has been enrolled, regardless of what long-term illness might befall the individual; and■
Insurers are heavily regulated as to the minimum level of benefits across a range of services, including general hospital care, outpatient care, maternity benefits, convalescence, psychiatric treatment, and substance abuse.There also are a number of private insurers who offer “Hospital Cash Protection,” which pays the insured a fixed amount for each day of hospitalization, regardless of actual hospital costs.
Insurers typically provide five levels of programs that vary in coverage based on inpatient and outpatient
treatment, each with a “step-up” option at each level (for example, plan “A” or Plan “A option”). For example, VHI’s Plan A meets the minimum required level of benefits. The minimum required level covers the cost for a
semiprivate room in a public hospital. VHI claims that their Plan B is their most popular program. Each plan reimburses or covers a percentage of the costs for the appropriate treatment or accommodation, including related hospital fees such as ambulance, X-rays, operating room, blood transfusion, pathology, drugs, and nursing home convalescence after hospitalization (limited to two weeks). Surgical and medical benefits, including fees for specialists and consultants, are paid according to the level of coverage selected.
PMI in Ireland indemnifies costs for all treatment (e.g., no distinction between acute and chronic). There are limitations on outpatient limits. Copayments and deductibles (known as excesses in Irish terminology) are used as risk control measures.
Employers pushing for further innovation in PMI are leading the trend to improved terms in group plans such as covering preexisting conditions, waiving maternity waiting times, etc. Progressive employers tend to pay the full cost of family coverage. Other employers may simply cover the employee at “Plan B” level and allow the employee to purchase top-up coverage for dependents while attracting the employer discount.
Russia
More than two-thirds of international companies provide an additional health insurance program for all employees. Dependents are sometimes covered.
To date, private health insurance policies generally have not had copayments or deductibles because medical facilities are not equipped to handle this type of administration. Prescription drugs are generally not covered by private health insurance.
Many of the Russian insurance companies that manage the mandatory health insurance foundations also offer supplemental health insurance policies, usually as group policies for employers. A few foreign insurance companies offer group medical, life, and savings plans to multinationals through their Russian operations. Demand for private health insurance has increased sharply among private-sector Russian employers over the past few years in recognition of the need for competitive pay and benefits packages in line with the practice among foreign multinational companies in Russia. The change has been most acute in those sectors competing directly with multinationals for talent.
Individuals can purchase private health insurance policies, although it is not common practice. Employers generally are the purchasers of voluntary health insurance policies for their employees.
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For more information on the impact of U.S. health care reforms on non-U.S. multinational employers, please contact your local Aon Hewitt consultant.
For more information on the topic and countries in this newsletter, please refer to the Aon Hewitt Country Profiles eGuide. You can learn more about the Country Profiles eGuide here.
About Aon Hewitt
Aon Hewitt is the global leader in human resource consulting and outsourcing solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit www.aonhewitt.com.
Copyright 2011 Aon Hewitt Inc.
This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt's preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document.
