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Sweeping Health Care Reform
 The Impact on Individuals and
Businesses
On
March 23, 2010, the President signed into law H.R. 3590, the Patient Protection
and Affordable Care Act. The Act, as amended by the Health Care
and Education Reconciliation Act of 2010 on March 30, 2010,
implements sweeping health care changes that will affect individual and
employer-sponsored health plans. While many of the provisions will not
take effect until 2014, a number of reforms will take place this year.
The
following are some of the key highlights of the legislation:
For Individuals
Employer
Coverage
Generally, individuals would not be required to give up their
employer-provided health coverage.
Risk
Pool: 2010
Within 90 days of the bill becoming law, certain individuals without
employer coverage may be able to purchase coverage through a temporary
national high-risk pool. The temporary high-risk pool will offer coverage
to U.S. citizens and legal immigrants who have not been insured for at
least 6 months, at reduced premiums.
Annual
and Lifetime Caps: 2010
Beginning six months after passage of the Act, plans will not be
permitted to impose lifetime limits on coverage. The law also restricts
the use of annual limits. Beginning in 2014, plans may not impose annual
limits on coverage.
Extended
Child Coverage: 2010
Beginning six months from passage of the law, dependent adult children
will be eligible for coverage under their parents' health plan up to age
26.
Rescission
of Coverage: 2010
Beginning six months from passage, insurers will not be permitted to
rescind coverage except in cases of fraud.
Grandfathering
Grandfathering may relate to existing individual and group plans with
respect to new benefit standards. However, these grandfathered plans must
extend dependent coverage to certain adult children up to age 26 and
prohibit rescission of coverage. In addition, grandfathered group plans
are required to eliminate lifetime limits on coverage, and beginning in
2014, eliminate annual limits on coverage. Grandfathered group plans must
eliminate pre-existing condition exclusions for children within six
months and by 2014 for adults.
Medicare
Tax Increase for High Earners: 2013
Beginning 2013, individuals making $200,000 and joint filers making
$250,000 must pay an increase of 0.9% in the Medicare tax. A 3.8% tax on
unearned income for high-income individuals will also take effect.
Individual
Mandate: 2014
Starting in 2014, the law will require most U.S. citizens and legal
residents to obtain health insurance. Increasing levels of penalties will
be assessed on certain individuals who do not obtain coverage.
Pre-existing
Conditions: 2014
Starting in 2014, plans will not be permitted to exclude individuals from
coverage on the basis of pre-existing medical conditions. The prohibition
on exclusions of children on the basis of pre-existing conditions would
begin 6 months from the date the law was enacted.
Establishment
of State Exchanges to Obtain Health Insurance: 2014
Starting in 2014, people without employer-sponsored coverage will be able
to buy insurance on state-administered "exchanges." State-based
American Health Benefit Exchanges and Small Business Health Options
Program (SHOP) Exchanges will be administered by a government agency or
non-profit organization, and allow individuals and small businesses with
up to 100 employees to buy certain coverage.
Premium
Subsidies: 2014
In 2014, the law will provide tax credits to individuals and families
with incomes above Medicaid eligibility and below 400% of the Federal
Poverty Level to buy coverage through state-based Exchanges. These
individuals and families would be entitled to the credits if they are not
eligible for or offered other "acceptable coverage".
Age
Differences: 2014
Starting in 2014, the law would prohibit premiums of older individuals
from being more than 3 times the cost of younger peoples' premiums.
For Businesses
Tax
Credits for Some Small Businesses: 2010-2013
For tax years 2010-2013, employers of 25 or fewer employees with average
annual wages of less than $50,000 may be able to receive a tax credit if
they contribute at least 50% of total premium costs, or 50% of a
"benchmark" premium. Employers of 10 or fewer employees with
average annual wages of less than $25,000 may be able to receive a full
tax credit for their contributions.
Temporary
Reinsurance Program: 2010-2013
Within 90 days of enactment of the law and until Jan.1, 2014, a temporary
reinsurance program will provide coverage for retirees who are over age
55 but not eligible for Medicare. The reinsurance program will reimburse
employers or insurers 80% of retirees' claims that are between $15,000
and $90,000.
Preventive
Coverage: 2010
Six months from enactment, group health plans and issuers that offer
health insurance coverage will be required to provide preventive
coverage. Plans and insurance providers will also be prohibited from
imposing any cost sharing requirements for preventive coverage. Some of
the preventive coverage includes certain immunizations and preventive
care for children, adolescents and women.
Salary
Nondiscrimination for Eligibility: 2010-2011
Six months from passage (Jan. 1, 2011, for calendar year plans), plan sponsors
of group health plans, except self-insured plans, will not be permitted
to establish rules relating to coverage eligibility for full-time
employees that are based on the total hourly or annual salary of the
employee, or otherwise have the effect of discriminating in favor of
higher wage employees.
Appeals
Process: 2010-2011
Six months from passage (Jan. 1, 2011, for calendar year plans), group
health plans and health insurance issuers will be required to have
effective appeals processes for challenges to coverage and claims
determinations.
Tax
Increase on Nonqualified Medical Expense Distributions from HSAs: 2011
Starting in 2011, the law would increase the tax on distributions from a
Health Savings Account or Archer MSA if the distributions are not for a
qualified medical expense. The tax on these distributions would increase
to 20%, from 10% for HSAs and 15% for Archer MSAs. The threshold to
itemize unreimbursed medical expenses as a deduction on tax returns would
increase from 7.5% to 10% of adjusted gross income. The law also
prohibits reimbursement of costs for over-the-counter drugs if they are
not prescribed by a doctor, in relation to HSAs, Archer MSAs, FSAs and
HRAs.
FSA
Contribution Limits: 2013
Starting in 2013, the law also limits the amount of contributions to a
flexible spending account (FSA) to $2,500 annually.
Small
Business Tax Credit: 2014
For 2 years starting in 2014, eligible small businesses that buy health
coverage on new state insurance exchanges may receive a tax credit of up
to 50% of the contribution if the employer contributes at least 50% of
the total premium cost.
State
Exchanges to Obtain Health Coverage: 2014
Starting in 2014, small businesses with up to 100 employees will be able
to buy insurance on state-administered "exchanges." State-based
American Health Benefit Exchanges and Small Business Health Options
Program (SHOP) Exchanges will be administered by a government agency or
non-profit organization. A qualified health plan, to be offered through
the new American Health Benefit Exchange, must provide essential health
benefits which include cost sharing limits. No out-of-pocket requirements
can exceed those in Health Savings Accounts, and deductibles in the small
group market cannot exceed $2,000 for an individual and $4,000 for a
family. Plans participating in the Exchanges will be accredited for
quality, will present their benefit options in a standardized manner for
comparison, and will use one enrollment form. Individuals qualified to
receive tax credits for Exchange coverage must be ineligible for
affordable, employer-sponsored insurance or any form of public insurance
coverage.
Vouchers:
2014
Starting in 2014, employers who offer coverage to their employees will be
required to provide a voucher for purchasing health care to employees
with incomes less than 400% of Federal Poverty Level whose share of the
premium exceeds 8% but is less than 9.8% of the employee's income. These
vouchers are for enrolling in a plan in the Exchange. The voucher amount
is equal to the premium amount for coverage of the employee under the
employer's plan and will be used to offset the premium costs for the plan
in which the employee is enrolled.
Penalties
for Large Businesses: 2014
Starting in 2014, employers of 50 or more employees that have employees
receiving premium subsidies created by the legislation will be assessed
fees. Such employers could face fines of $2,000 per full-time employee,
with some exceptions.
Excise
Tax on High Cost Employer-Provided Health Coverage: 2018
In 2018, insurers and plan administrators will pay a 40% tax for any
health insurance plan that is above the threshold of $10,200 for singles
and $27,500 for families. This excise tax would apply to the amount of
the premium that is above these thresholds.
Other Key Areas
Medical
Loss Ratio: 2010-2011
Effective for plan year 2010, health plans are required to report the
percentage of premium dollars spent on medical services. As of Jan.
1, 2011, enrollees will receive rebates for the amount of the premium
spent on medical services that is less than 85% for large group
plans, and 80% for individual and small group plans.
Medicare
Part D: 2010
In 2010, the law closes the Medicare prescription drug coverage gap by
$500, and provides a 50% discount on brand name drugs for beneficiaries
who fall into the coverage gap. There is a current gap in coverage for
total drug costs between $2,700 and $6,154. After being amended, the law
authorizes a $250 rebate to all Medicare Part D enrollees who enter the
"donut hole" in 2010.
Expanded
Medicaid and CHIP: 2014
By 2014, states would be required to extend Medicaid coverage to all
individuals under 65 who have incomes up to 133% of the federal poverty
level. The law would also fund the Children's Health Insurance Program
through 2015, and require states to maintain the current eligibility
levels for children in the Medicaid and CHIP programs.
Community
Living Assistance Services and Supports
The law creates a voluntary long-term care insurance program called the
CLASS Independence Benefit Plan. The program will permit individuals to
purchase community living assistance services and supports. The coverage
would have a 5-year vesting period for eligibility of benefits and
provide an average cash benefit of at least $50 per day.
Federal
Loan Program
The Health Care and Education Reconciliation Act of 2010 also overhauls
the federal student loan program and expands access to Pell Grants. For
more information on this bill, please click here.
For
additional information:
Sources: H.R 3590; H.R. 4872; Kaiser Family Foundation; NY
Times; Democratic Policy Committee.
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