The Patient Protection and Affordable Care Act (signed into law on March 23, 2010) and the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010) comprise the new federal healthcare legislation. This sweeping legislation overhauls the current federal healthcare system with reforms to be implemented over the next 10 years.
The legislation implements measures, several of which are effective immediately, intended to provide access to quality, affordable health care to all Americans. This Article highlights the key provisions of the new legislation.
The Patient Protection and Affordable Care Act
The thrust of the new healthcare legislation is the Patient Protection and Affordable Care Act (the "PPACA"), which contains 9 titles, each addressing a component of reform:
- Quality, affordable health care for all Americans
- The role of public programs
- Improving the quality and efficiency of health care
- Prevention of chronic disease and improving public heath
- Health care workforce
- Transparency and program integrity
- Improving access to innovative medical therapies
- Community living assistance services and supports
- Revenue provisions
A detailed discussion of each title is beyond the scope of this Article, which seeks to highlight the PPACA's provisions for individual and employer responsibilities, insurance reforms, establishment of state health insurance exchanges, and changes to Medicaid and Medicare.
Individual and Employer Responsibility: The PPACA generally requires that as of January 1, 2014, all individuals must have health insurance or else be subject to a penalty on their federal tax return. Individuals without the required coverage will pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income. The penalty will be phased-in between 2014 and 2016, and thereafter increased by the cost-of-living adjustment.
There are certain hardship and religious exemptions, but otherwise the PPACA requires individuals to obtain and maintain "minimal essential coverage" for themselves and their dependents. "Minimal essential coverage" includes qualified coverage under any employer-provided plan, governmental programs (e.g. Medicare and Medicaid), any plan offered in the individual market, and certain grandfathered plans - those in effect as of the date of enactment of the PPACA. Qualified health insurance coverage is that which provides the essential health benefits package prescribed by the PPACA, limits annual cost-sharing to the high-deductible plan limit, limits the annual deductible for small group market plans to $2,000 for individuals and $4,000 for families, and does not require cost-sharing for preventive services or immunizations.
As of January 1, 2014, the PPACA requires employers with more than 50 employees to offer qualified health insurance coverage to their employees. It also requires employers with more than 200 employees automatically to enroll all new employees in healthcare coverage. Employees may opt out of coverage, but the PPACA assesses a penalty to employers of $2,000 annually per each full time employee not offered the required benefit.
Health Insurance Exchanges: By January 1, 2014, the PPACA requires each state to establish an American Health Benefit Exchange and Small Business Health Options Program Exchange, to be administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage. Four benefit categories are available through these exchange plans - bronze, silver, gold, and platinum - based on the actuarial value of the plans.
Funding for states to establish such exchanges is available until January 1, 2015. The PPACA requires exchange plans to meet standardized affordability, essential benefit, and consumer protection requirements. Additionally, it requires exchange plans to meet state benefit requirements, but pursuant to the PPACA, states must defray premium and cost-sharing costs related to additional benefits for subsidized individuals. The PPACA offers individual subsidies for exchange plans in the form of premium credits available to eligible individuals and families with incomes between 133% and 400% of the federal poverty level. The credit will be set on a sliding scale.
Insurance Reforms:
- Pre-existing conditions: As of the effective date of the PPACA and extending through January 1, 2014, the PPACA establishes a temporary high-risk pool to provide health coverage to individuals with pre-existing medical conditions. Effective January 1, 2014, insurance companies cannot deny coverage to anyone with preexisting conditions.
- Lifetime and annual limits: On and after September 23, 2010, small and large group market plans, including certain grandfathered plans, may not impose lifetime limits on coverage. Effective as of January 1, 2014, the PPACA prohibits small and large group market plans from establishing annual limits and requires that they provide the prescribed essential health benefits package.
- Premiums for clinical services and quality assurance: For 2010, health insurance plans are required to report the proportion of premium dollars spent on clinical services, quality assurance, and other costs. Effective in 2011, insurers must provide rebates to consumers for the amount of the premiums spent on clinical services and quality assurance that is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets.
- Dependent coverage: The PPACA requires that all insurers offering dependent coverage provide such for children through age 26 and not impose any pre-existing condition exclusions.
- Insurance ratings: Effective as of January 1, 2014, the PPACA prohibits insurance ratings based on health or gender. Variations will only be permitted based on tobacco use, age, family composition, and geographic area.
Changes to Medicaid and Medicare: The PPACA expands eligibility for Medicaid to a wider range of lower income persons including non-elderly patients, childless adults, and children and pregnant women with family income up to 133% of the federal poverty level. It also provides enhanced federal support for the Children's Health Insurance Program ("CHIP"). The PPACA allows for individuals to be able to apply for and enroll in Medicaid, CHIP and the state exchange plans described above through state-run websites to simplify the enrollment process.
The PPACA requires Medicare Advantage payments to be based on the average of the bids submitted by insurance plans in each market with bonus payments available to improve the quality of care based on an insurer's level of care coordination and care management. During the coverage gap beginning July 1, 2010, the PPACA requires that drug manufacturers must provide a 50% discount on the cost of brand-name drugs to Medicare Part D beneficiaries.
Finally, the PPACA required the Secretary of Health and Human Services to establish a Federal Coordinated Health Care Office as of March 1, 2010 to integrate care under Medicaid and Medicare and improve coordination among the federal and state governments for individuals enrolled in both.
Costs: The Congressional Budget Office estimates the cost of the coverage components of the new healthcare legislation to be $940 billion over the next 10 years. These costs are to be financed through a combination of savings from Medicaid and Medicare and new taxes and fees, including an excise tax on high cost employer-sponsored health coverage, an increase in tax on distributions from health savings accounts not used for qualified medical expenses, pharmaceutical manufacturer fees, medical device manufacturer fees, health insurance provider fees, modification of the threshold for claiming an itemized deduction for medical expenses, tax on elective cosmetic surgery, and an additional hospital insurance tax for high wage workers.
Conclusion
This Article only highlights the key provisions of the new legislation. There are many additional provisions of the new legislation. The healthcare lawyers at Sheehan Phinney would be happy to provide further details about those and the provisions highlighted in this Article.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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