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CCH® BENEFITS — 10/24/08

State Health Reform Update

From Spencer's Benefits Reports: For the last few years, states have been leading the way toward more comprehensive health care covarage to ensure that more people have or can obtain health insurance. Even though the health reform proposals of the 2008 presidential candidates would provide a national framework, state health reform efforts continue to lead in implementation. Because of the potential impact of this ongoing activity on employer-provided health insurance benefits, Spencer’s Benefits Reports will be providing regular updates about state health reform.

States and Sec. 125. As of Sept. 10, 2008, 13 states have enacted laws that rely on IRC Sec. 125 cafeteria plan pretax salary reduction as a health care reform measure, according to a report issued on October 8 by the National Conference of State Legislatures (NCSL). These laws primarily apply to small employers that either do not provide health insurance to their employees or that provide fully insured health care plans that require an employee premium contribution.

Four states (Connecticut, Massachusetts, Minnesota, and Missouri) have enacted mandates requiring employers with a certain number of employees that either do not provide health insurance or that provide it with employee premium sharing to allow employees to deduct pretax through a Sec. 125 plan premium contributions for either group or individual coverage, and to establish a Sec. 125 medical flexible spending account. The Connecticut and Massachusetts requirements went into effect in 2007, while the Missouri requirement went into effect at the beginning of 2008 and the Minnesota requirement is scheduled to begin on July 1, 2009.

Nine other states (Delaware, Florida, Iowa, Indiana, Kansas, Maryland, Maine, Tennessee, and Washington) have enacted voluntary Sec. 125 programs with the state offering some assistance, mostly financial, to purchase health insurance for their employees, but some also provide administrative services. The majority of these measures went into effect this year. In addition, at least six other states (Alaska, Colorado, Georgia, Illinois, New Jersey, and New Mexico) have considered enacting Sec. 125 pretax payroll deduction requirements or options for employers as either stand-alone programs or as part of broader health care reform. For more information, visit. http://www.ncsl.org/programs/health/cafeteriaplan.htm.

Massachusetts. Approximately 440,000 Massachusetts residents who were uninsured now have health insurance due to the Massachusetts Health Insurance Connector Authority, an agency created under Massachusetts’ universal health reform law. Also, the U.S. Census Bureau has found that Massachusetts was the state with the lowest percentage of uninsured at 7.9% in 2006-2007. For more information, visit http://www.mahealthconnector.org.

New York. New York state’s 2008-09 budget will extend the Health Care Reform Act (HCRA) through Dec. 31, 2011, according to Segal. The budget also includes an additional temporary assessment for the program, which is targeted to collect an additional $64.2 million for the period of Oct. 1, 2008 through March 31, 2009. The HCRA governs hospital reimbursements and targets funding for a multitude of health care initiatives. The law also requires that certain third-party payors and providers of health care services pay authorized surcharges and assessments to support the reform. For more information, visit http://www.health.state.ny.us/nysdoh/hcra/hcrahome.htm.

Illinois. The Illinois state appeals court has rejected a plan to preserve and expand health care coverage for low-income parents, American Medical News has reported. The ruling could jeopardize coverage for enrollees in the FamilyCare program, which offers coverage to parents whose children are eligible for the State Children’s Health Insurance Program (SCHIP) and who meet income requirements. In November 2007, Gov. Rod R. Blagojevich had tried to preserve the FamilyCare program by issuing a ruling that shifted the enrollees over to Medicaid, but the state’s legislative oversight committee rejected the rule as “contrary to public interest.” The court found that the state did not have the authority to shift FamilyCare enrollees to Medicaid without legislative approval. Mr. Blagojevich is considering an appeal to the state supreme court. For more information, visit http://www.familycareillinois.com and http://www.allkids.com.

Pennsylvania. On October 8, the Pennsylvania legislature failed to reach a compromise on legislation that would have expanded health care coverage to more than 118,000 adults on a waiting list for Pennsylvania’s adultBasic insurance program, according to the Philadelphia Inquirer. The adultBasic program provides health care coverage for uninsured adults who do not qualify for Medicaid. For more information, visit http://www.ins.state.pa.us/ins/cwp.

California. California lawmakers recently have sent several health care-related bills to Gov. Arnold Schwarzenegger, but the future of these bills is uncertain, according to the National Conference of State Legislatures. One bill (AB 1945) would mandate that health insurance companies standardize the questions on health insurance application forms, due to several insurers retroactively canceling insurance policies of sick customers, claiming that these consumers hid or lied about preexisting conditions when applying for health insurance. The bill also would bar insurers from canceling a policy unless they can prove that a consumer deliberately misled the company during the application process. Another bill (SB 1440) would require insurers to spend at least 85% of premiums on health care benefits. While the current law prohibits insurers from spending more than 15% of premiums on administrative costs, some say that companies often exclude profits from this calculation, which lessens the amount available for benefits. These bills are in the hands of the governor, who has threatened to veto much of California’s recent legislation, due to the legislature’s threat to veto the state budget. While the legislature and the governor have reached a compromise on the budget, the governor has not indicated the fate of these new bills. For more information, visit http://www.ncsl.org/shn/.

New Jersey. Starting Jan. 1, 2009, New Jersey workers must contribute to the state disability benefits fund or their employer’s private plan for family leave insurance benefits. New Jersey has released proposed rules under the new Temporary Disability Benefits law, and is accepting comments on the regulations until November 14.For more information, visit http://lwd.dol.state.nj.us/labor/tdi/tdiindex.html.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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