On March 23, 2010, President Obama signed H.R. 3590, the Patient Protection and Affordable Care Act. The House has already passed a number of amendments to the Act, which will be taken up by the Senate. Republicans are likely to campaign this fall calling for repeal of the health care reform legislation. There also will likely be a challenge as to the constitutionality of the new law. One of the key elements of the law is that, starting in 2014, virtually all legal residents will be required to purchase health insurance or pay a penalty. There has never been a federal law requiring people to purchase a product or service.
Other key provisions of the new law include:
- Effective January 1, 2014 (delayed effective dates apply to collectively bargained plans):
- Anyone will be able to purchase health insurance, regardless of health status, during open enrollment periods and special enrollment periods.
- Pre-existing conditions exclusions will be prohibited.
- There will berules regarding the minimum coverage that must be purchased.
- States will create health insurance exchanges.
- There may be one exchange or separate exchanges for small groups and individuals.
- There will be tax credits for low-income people who purchase health insurance through new insurance exchanges.
- There will be penalties on employers with at least 50 employees that fail to offer the minimum essential coverage and who have employees who receive tax credits.
- Employers will have the right to maintain existing coverage.
- There will be limits on cost sharing under minimum essential coverage.
- Waiting periods cannot exceed 90 days.
- There will be limits on the variations in premiums.
- Incentives for adherence to wellness plans can be as high as 30% of premium.
- All licensed health care providers must be covered.
- Exchanges will have child-only plans with lower rates.
- There will be expanded availability of Medicaid.
- New taxes to fund the tax credits, including:
- Beginning in 2018, a tax on employer-sponsored health insurance worth more than $10,200 for individual coverage or $27,500 for a family plan. The tax is 40% of the value of the plan above the thresholds, which are indexed for inflation.
- Beginning in 2013, Medicare payroll taxes will increase on high incomes and will be imposed for the first time on passive income.
- A tax on brand-name drugs.
- 10% tax on indoor tanning.
- Medicare payments to health care providers will be reduced, starting this year.
- There will be reductions in the amount Medicare pays to Medicare Advantage plans, starting in 2011.
- There will be increased regulation of insurance companies.
- Salary reductions for health flexible spending accounts will be limited to $2,500 (indexed).
- The retiree drug subsidy will no longer be tax-free
- Certain changes will be effective immediately, meaning for plan years beginning six months after the date of enactment, which was March 23. These changes include:
- No lifetime limits.
- No “unreasonable” annual limits.
- Health insurers will generally not be able to cancel coverage.
- No cost sharing for certain preventive services.
- Children can continue to be covered under group plans until age 26.
- Minimum loss ratios of 85% for large group plans and 80% for small groups and individual policies.
- External reviews of claims upon appeal.
- There will be tax credits for employers with 25 or fewer employees who help pay for health insurance for their employees.
- Within 2 years after enactment, insurers will have to use standard summaries of coverage and definitions.
- Within 90 days of enactment there will be:
- Federal reinsurance of claims for early retirees.
- State high risk pools where certain people will be guaranteed the right to purchase health insurance.
- By July 1, 2010 there will be an Internet portal available to help people identify affordable coverage options.
- The coverage gap in Medicare Part D will be eliminated by 2020, starting with a $250 rebate to Medicare beneficiaries in the gap in 2010 and a 50% discount on brand-name drugs in 2011.
- A new voluntary long-term care insurance program, called the CLASS Act, will begin collecting fees in 2011 and paying benefits in 2016 to those who have been enrolled for 5 years.
- In 2011 there will be bonuses under Medicare for health care providers in underserved areas.
- In 2011 there will be increased funding for community health centers.
- Employers will be required to report the value of health benefits on W-2s, starting in 2011.
- Nonprofit insurance cooperatives will compete with private insurers.
- Medicare will create “accountable care organizations” intended to encourage better quality of care in 2012.
According to the Congressional Budget Office (CBO), the health care reform legislation, in combination with the pending amendments, will reduce the number of people who are uninsured by 32 million, meaning that 94% of nonelderly legal residents will have health insurance, up from 83%. The CBO estimates that 6 to 7 million more people will enroll in employer-sponsored plans due to the new insurance mandate, but that 8 to 9 million people will lose employer-sponsored coverage as small employers drop plans (because insurance will be available through exchanges) and 1 to 2 million people will drop employer-provided coverage in order to elect coverage through an exchange, where tax credits will be available to reduce coverage. The overall impact on employer-sponsored plans will be a reduction of about 3 million covered lives.
