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UnitedHealthcare is pleased to bring you this issue of the Health Care Modernization News Flash to update you on health care issues under discussion in Washington , D.C. and in the states, and to share our perspectives on modernization of the health care system.

“Together, We Can Build a Sustainable Health Care Future”
As Congress continues to debate health reform legislation, UnitedHealth Group is continuing to voice strong support for comprehensive, bipartisan health care reform. In a recent ad titled “Together, We Can Build a Sustainable Health Care Future”, we highlight our proposals to modernize the health insurance market to make health care more affordable and sustainable for current and future generations. UnitedHealth Group, along with the health insurance industry, has proposed market reforms that will guarantee quality, affordable, and portable coverage for all Americans, regardless of gender, health status, or pre-existing conditions. But these changes must be accompanied by a personal coverage requirement that brings everyone into the system, protects families that are already insured, and keeps coverage affordable and accessible for all. As the debate continues, UnitedHealth Group will continue to constructively participate in the process and share our expertise to make health care more effective, accessible, and affordable for all Americans.

Senate Finance Committee Passes Health Reform Bill
With a vote of 14 to 9 on October 13th with all Democrats and Republican Senator Snowe (Maine) voting yes, the Senate Finance Committee passed their health reform bill, entitled “America’s Healthy Future Act of 2009,” after two weeks of consideration of amendments. The CBO estimates that this bill would cost $829 billion over ten years and would cover 29 million of the 54 million uninsured. To pay for the cost of the bill, the Committee places a 40% excise tax on “high value” employer-based plans valued at over $8,000 for individuals and $21,000 for families, reduces spending for the Medicare Advantage program, reduces provider payment rates under Medicare, places annual fees on pharmaceutical companies, medical device manufacturers, and health insurers, and secures prescription drug rebates and discounts for Medicaid and Medicare Part D from pharmaceutical companies. The Finance Committee bill will now need to be reconciled with the bill passed by the Health, Education, Labor, and Pensions (HELP) Committee in July, before it is voted on by the full Senate. Details of the bill passed by the Finance Committee include:

· Coverage Mandates, Penalties, and Subsidies: I n 2013, individuals would be required to have health insurance coverage through a “grandfathered plan,” a large employer group plan, a government program (Medicaid, Medicare, VA, and the like), or through an individual or small group plan that meets or exceeds minimum requirements (“Bronze” plan or “Young Invincible” plan for those under age 26), or pay a penalty. Waivers of the penalty would be allowed for Native Americans, those with religious objections, and individuals with a financial hardship defined as premiums that exceed 8% of income. The penalty would be effective in 2014 and phased-in over five years to a maximum of $1,500 per family. Individuals up to 400% of the federal poverty level ($88,000 for a family of four) would be eligible for premium and cost-sharing subsidies. Employers would not be required to offer health insurance coverage, but those with 50 or more employees not offering coverage would be required to pay a fee for employees obtaining a subsidized plan through a state Exchange. Low wage employers (average salary less than $40,000) with 25 or fewer employees would be eligible for a 50% premium credit for two years.

· Benefit Plans: Individuals and small groups (defined as 1 to 50 employees, increasing to 100 by 2015, and potentially to all employers starting 2017) would have a choice of up to five plan types including “Bronze” (65% actuarial value), “Silver” (70% actuarial value), “Gold” (80% actuarial value), “Platinum” (90% actuarial value) and “Young Invincible” (50% actuarial value, available for adults under age 26 and for those for whom a premium for a higher value plan would exceed 8% of their income). Individuals between 133% and 200% of the federal poverty level without access to employer-based coverage would be enrolled in a state-negotiated “Basic Plan” where available. Large employers would be required to eliminate cost-sharing for preventive care, limit out-of-pocket spending to HSA limits, and not impose “unreasonable” annual or lifetime benefit limits. Wellness incentives up to 30-50% of the cost of coverage would be allowed for employer-based plans.

· Insurance Market Rules: Insurance market reforms that require guarantee issue, prohibit pre-existing condition exclusions as well as premium variations based on health status, and also limit premium variation for tobacco use, age, family composition, and geography would apply to the individual and small group market (defined as 1 to 50 employees, increasing to 100 by 2015, and potentially to all employers starting 2017). States could pass legislation to form “Health Care Choice Compacts” to allow the purchase of individual insurance across state lines. “National Plans” would also be established with uniform benefit packages not subject to state benefit mandates, unless states elect to opt-out. States could seek a waiver from HHS to adopt their own rules in lieu of the new federal standards as long as the state standards would result in similar outcomes.

· Consumer Operated and Orientated Plans (CO-OPs): The Finance Committee bill creates new CO-OPs (defined as non-profit, member-governed health insurers) to provide coverage in the individual and small group markets. Federal funding ($6 billion) would be available from 2012 to 2015 for start-up loans and solvency grants for CO-OPs not already in existence. CO-OPs would be held to the same rules as other insurers.

· State Exchanges: The Senate Finance Committee bill establishes state-based “Exchanges” to help individuals and small groups (defined as 1 to 50 employees, increasing to 100 by 2015, and potentially to all employers starting 2017) compare plans, receive subsidies, and purchase coverage starting in 2013. States would continue to oversee health plans offered through these Exchanges.

· Medicaid and the Children’s Health Insurance Program (CHIP): By 2014, Medicaid eligibility would be expanded for all individuals, including childless adults, up to 133% of the federal poverty level and states would receive additional federal funding to cover these populations. States could transition these beneficiaries into the Exchange. States would be required to maintain existing Medicaid eligibility levels. States would also receive additional federal funding to cover kids under the Children’s Health Insurance Program (CHIP), but would be allowed to transition CHIP enrollees to the Exchange if they run out of their allotment of federal funds.

· Medicare: The Finance Committee bill would reform the payment structure for Medicare Advantage by reducing payments, creating a competitive bidding process, and providing financial incentives for care coordination programs and quality achievement. Pharmaceutical manufacturers would provide a 50% discount for brand name drugs purchased in the “donut hole” or coverage gap under Part D and the income subsidy exclusion for employers who maintain prescription drug plans for Part D eligible retirees would be eliminated. The Finance proposal would also link provider payments to quality outcomes, encourage the delivery of coordinated care, test and implement new provider payment methods, evaluate the accuracy and adequacy of provider payment levels and make appropriate adjustments, establish penalties to reduce hospital acquired infections and preventable readmissions, and increase payments for primary care physicians. Annual provider payment updates would be reduced for Medicare Part A and Part B and an independent Medicare Commission would be established to recommend policy changes to limit the rate of growth in Medicare spending.

Actuarial Firms Evaluate the Impact of Health Reform Provisions on Premium Levels
Earlier this week, research studies conducted by Price Waterhouse Coopers and Oliver Wyman Inc. were released that estimate the impact of health reform provisions on the level of health insurance premiums in the individual and group markets. Price Waterhouse Coopers found that four components of the Senate Finance Committee bill (insurance market reforms with weak coverage requirements, a new tax on “high value” employer-based health plans, Medicare provider payment cuts shifting costs to private plans, and new taxes on pharmaceutical companies, medical device manufacturers, and health insurers) would increase premiums by 49% in the individual market, 28% in the small group market, 11% in the large group market, and 9% for self-insured employers. Oliver Wyman Inc. found that without strong incentives for all Americans (particularly the young and healthy) to purchase health insurance coverage, that provisions in legislation now before Congress to guarantee issue coverage without pre-existing condition exclusions, discontinue rating based on health status and gender, limit premium variation by age, and set a minimum benefit level above what is currently sold in the market, would increase premiums by 50% in the individual market and 19% in the small group market. Both studies conclude that strong incentives for all Americans to have coverage are critical to ensure that insurance market reforms do not encourage the young and healthy to forgo coverage, resulting in sicker risk pools and higher premiums for everyone.

On October 5th , national insurance industry organizations and health plans in Ohio launched an initiative to make accessing and delivering health care easier for patients and their physicians by reducing the time, effort, and expense for the “paperwork” required for each patient office visit. The Ohio initiative provides a one-stop service or “web portal” for electronic transactions between physicians and health plans to determine eligibility and benefit information, submit and track billing claims, and confirm referrals and pre-authorization for services. National insurance industry organizations are seeking to develop regional portals, such as the one in Ohio , to serve the entire country. It is estimated that initiatives like this to standardize and automate administrative processes could save the health care system hundreds of billions of dollars.

For more information on health reform and modernization and for copies of previous newsletters and reports visit: www.unitedhealthgroup.com/reform.