Following considerable political harrangue, the Patient Protection and Affordable Care Act (HR 4872) has become law. The Senate Bill, which among other matters, imposes a tax on tanning salon services, is roughly 2400 pages long. (Although the Senate Bill approved Sunday by the House becomes law with the President’s signature, the Senate must also ratify the separately-passed House measure that would amend the “Patient Protection” Act).  While this landmark health care legislation will impact virtually all Americans, some of its provisions become effective immediately, while many do not activate until 2014 and beyond. 

 

Subsidized Medicaid coverage will be available to families of four making up to $29,327. ($14,004 for individuals)  For some, the benefits start almost immediately. 

 

 

 

In 2010, seniors facing the Part D coverage gap (the so-called the "doughnut hole under which, in 2010,  seniors participating in Medicare Part D receive no coverage for outpatient prescription drug expenses ranging from $2,830 to $4,450) receive a $250 rebate to help pay for their medications.   In 2011 the cost of drugs in the coverage gap will decrease in retail cost by 50 percent.  Beyond that, the Bill requires pharmaceutical - company discounts on brand-name drugs and federal subsidies and discounts for all drugs. These mandates will gradually reduce the “donut hole,” eliminating it entirely by 2020. (But seniors generally will have to absorb 25% of the cost of their drugs.) Beginning this year, the Bill would make all Medicare preventive services, such as sc screenings for colon, prostate and breast cancer, free of deductibles or copayments. Medicare will begin paying for annual wellness visits and increase reimbursements for primary care physicians.  Currently Medicare only pays for a general checkup only when someone first enters the program.  

 

There are relatively few changes in the Act that are germane to traditional Medicare benefits.  However,  meaningful cuts will impact Medicare Advantage programs, namely programs under which private insurers such as Humana and UnitedHealth Group deliver Medicare benefits. Many of these providers offer extra coverage and some of those extras could be dropped as Medicare Advantage subsidies become more aligned with the cost of traditional Medicare benefits. Medicare Advantage payment rates will be frozen in 2011, then gradually reduced.

 

Also, starting in 2010, government subsidies will become available for small businesses to provide employee health insurance coverage. However, The Patient Protection and Affordable Care Act does not require any business to purchase insurance for its employees. That said, incentives for small businesses to provide their employees with group health insurance coverage are noteworthy:  Beginning immediately, and operating until Small Business Health Options Programs “SHOP” Exchanges become operational, businesses with 10 or fewer full-time-equivalent employees earning less than $25,000 a year on average will be eligible for a tax credit of 35% of health insurance costs. (Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits.) (Beginning in 2014, the small business tax credits will cover 50 percent of premiums through 2016.

 

By no later than 2014, individual states must establish Small Business Health Options Programs, ("SHOP Exchanges" )  through which small businesses will be able to pool together to buy insurance. (If states do not comply, a federally operated exchange will be set up.) Under the Act, "small businesses" mean those having no more than 100 employees( though states may limit pools to businesses with 50 or fewer employees through 2016-- companies that grow beyond the size limit will also be grandfathered for participation in the exchanges.) The Congressional Budget Office predicts that exchanges would slightly lower small business health insurance costs, by an estimated 1%to 4% (with the amount of benefits increasing by up to 3%.) The “SHOPS” are expected to foster competiton among insurers for the business of the applicants. New policies offered through the exchanges would be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.  Insurance companies participating in exchanges may not deny coverage to anyone with pre-existing illness. Meanwhile,, the Act creates a temporary high-risk insurance pool for applicants with medical problems already rejected rejected by insurers and uninsured at least six months which is available to U.S . citizens and legal immigrants.  That would occur this year.

 

Beginning in 2011, individual states will set up “partnering” programs for long-term care benefits. Under the Bill, if citizens pay premiums for at least five years, they become eligible for support payments if they need assistance in daily living or suffer from cognitive impairments.  The amount of benefits would vary, depending on the degree of a person’s disability, but could not average less than $50 per day. The Congressional Budget Office estimates premiums at $123 a month for benefits averaging  $75 a day,( about $27,000 per year). The amount of benefits would vary, depending on the degree of the insured’s disability. The secretary of health and human services will have the power to increase premiums to ensure “the financial solvency” of the program over 75 years.

 

Beginning in 2013, if, like many Americans, your clients’ health insurance coverage is provided by their employers, the Patient Protection Act offers good news.   Group health insurance companies must renew or continue coverage at the option of the employer sponsoring the plan, or, under certain circumstances, the insured individual. Employers with more than 50 employees failing to offer employees affordable coverage must pay a fine if employees then receive federal tax credits to buy insurance. Presuming the Amendment to the Act passes, the fine would typically be $2,000 per employee, but a business’ first 30 employees are excluded. For example, Busby Businessowner owns a company with 51 employees. Bud chooses not to provide health insurance as an employee benefit . His company would face a fine of $42,000 a year (or $3,500 a month).

 

Of course, nothing comes for free.  Beginning in 2013, new proposed Medicare taxes on individuals earning more than $200,000 a year and couples filing jointly earning more than $250,000 a year in wages rise to 2.35% from 1.45%.  Further, a new 3.8% tax will be levied on “net investment income” Net investment income is interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income is reduced by properly allocable deductions to such income.

 

2014 will be a key year in implementing the provisions of the Act. Starting that year, Americans failing to acquire health insurance must pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to a cap of $695, or 2.5 percent of income, by 2016. Families will have a limit of $2,085. Employer-provided coverage would generally satisfy the (individual mandate) requirement. Lower-income individuals, as well as some middle-class families, would receive a credit or voucher to help pay for health insurance. Certain citizens would be exempted from the insurance requirement, (individual mandate), because of financial hardship or religious beliefs. Native Americans will not be held to the requirement.

 

After January 1, 2014, a health insurance plan will be prohibited plan from imposing lifetime benefit  limits or annual benefit limits on for any participant in a group health insurance plan or beneficiary of an individually owned health insurance plan. This is a noteworthy improvement for patients suffering from severe acute or chronic illnesses such as AIDS, cancer or heart disease.

 

Also beginning in 2014, the Act will ban health insurance companies from imposing preexisting condition exclusions. In fact, it prohibits discrimination in both underwriting (willingness to accept the risk) and premiums on the basis of any health actor. Coverage eligibility may no longer depend on factors such as current or past medical conditions, prior health insurance claims, past treatments and medications, genetic information, and passing the insurance company physical (The insurance industry called this “evidence of insurability.”Nevertheless, premium rates may be adjusted from standard coverage charges under a few circumstances, for example, by individual versus family coverage, age, or smoking habits. Even so, premium differences for “rated policies” will only be able to vary by a 3-to-1 ratio. Health insurance plans may no longer rescinding coverage except in the case of fraud or intentional misrepresentation of material fact.

 

The Act specifies four benefit categories for health insurance plan designs, in addition to a “catastrophic” The Bronze plan, would cover 60% of the benefit costs of the plan with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit of $5,950 for individuals and $11,900 for families. The Silver plan, which carries a higher premium (other factors being equal) covers 70% of the benefit costs of the plan with the HSA out-of-pocket limits. The Gold plan, is intended to cover 80% of the benefit costs with the HSA out-of-pocket limits also operating. The most generous benefits come from the Platinum plan, which covers 90% of the benefit costs of the plan with the HSA out-of-pocket limits applying.

Out-of-Pocket limits will be reduced for those with incomes up to 400% of the Federal Poverty Level (FPL). For citizens with incomes ranging between 100% to 200% of the FPL, out-of-pocket limits will be one-third of HSA or $1,983 for an individual and $3,967 for a family. Those earning between 200% and 300% FPL will see their out-of-pocket limits lowered to one-half of the HSA limits.

 

Insurers will have to report on how they spend policy holder premiums. They must compute a ratio showing what percent is used to cover medical care versus how much is spent on executive salaries and administrative costs. Carriers will have to allocate least 85% of group plan premiums and 80% of individual policy premiums on medical care.

 

For the first time in history, the federal government will impose rules designed to control some of the risk-avoiding (and profit making) activities of insurance companies. Under the Patient Act, the Secretary of Health and Human Services will establish a system to annually review “unreasonable” increases in health insurance premiums. The Act requires every U.S. hospital to publish a list of its standard charges for items and services.

 

In 2018, a proposed excise tax on so-called "Cadillac plans" would impose a whopping 40 percent tax on every premium dollar spent on an insurance policy above $10,200 for single coverage and $27,500 for family coverage ($11,850 and $30,950 for retirees and employees in high risk professions).  These numbers are to be inflation indexed.) So if your working client’s family policy costs $27,600, the final $100 would be harshly taxed (Technically, the insurer pays the tax; However, that cost must be passed on to the ultimate premium payer ).   The legislative intent of this excise tax is ostensibly to motivate all parties to keep the cost of medical care (and thus, health insurance) down.

 

The intent is that individuals or their employers, will evade the excise tax by acquiring insurance that holds its costs down more aggressively. That gives insurers who hold costs down a competitive advantage against insurers who don't, because those who don't are not only offering pricier insurance, but are also passing along a hefty tax attached to their substantial premiums.