On March 23, 2010, The Affordable Care Act was signed into law by the United States President. The Affordable Care Act was designed to bring about health care reform and create a comprehensive reform. Some portions of the Affordable Care Act are already in effect and the remaining portions will go into effect in a time delay format. The full force of the Affordable Care Act will be in place in 2020.

The Affordable Care Act aims to lower the rate of uninsured Americans while increasing the quality of care and the affordability of health insurance by expanding both public and private insurance coverage. This will also reduce the costs of health care for individuals and the government. The law requires all insurance companies to cover any and all applicants with the same rates regardless of gender or any pre-existing medical conditions. One of the aims of the Affordable Health Care Act is directly aimed at the quality of the care patients receive – Quality over quantity being the goal.

The following are the key features of the Affordable Care Act:

  • Uniform Glossary: A uniform glossary of terms used in health care coverage.
  • Uniform SBC: All insurance companies, as well as group health plans, must use the same standardized Summary of Benefits and Coverage (SBC). This will enable consumers the ability to compare health care plans.
  • SBC Provided: All insurance companies must provide this SBC, when requested, when shopping for – or enrolling – for coverage.
  • Native Language Documents: SBC and the glossary of terms must be provided in the consumer’s native language.
  • Online Access: In order that consumers are able to compare insurance coverage, all insurance information must be provided through the internet.
  • Guaranteed Issue: Insurance policies must be issued to any consumer enrolling, regardless of pre-existing medical conditions.
  • Partial Community Ranking: This requires insurers to offer the exact same premium to all applicants of the same age and of the same geographical location. This, regardless of gender and most pre-existing conditions – excluding use.
  • Individual Mandate: Requires every legal citizen of the United States not covered under employer sponsored health plan, Medicaid, Medicare or other public insurance program to secure a . This goes into effect on January 1, 2014. Exempt from this mandate are those members of a recognized religious sect exempted by the Internal Revenue Service, or waived in case of financial hardship. All others will pay a penalty if they are without insurance as of 1/1/2014.
  • Minors: The provisions within the Affordable Care Act prohibits insurance companies from denying coverage to those under the age of 19.
  • Application Issues: The provisions within the Affordable Care Act prohibits insurance companies from denying coverage on the basis of a technical mistake made during the application process.
  • Minimum Standards: The establishment of Minimum Standards – .
  • Eliminations: Co-payments, deductibles and co-insurance will be eliminated for health care benefits which are considered part of the essential benefits package.
  • Caps Ban: Annual and Lifetime Caps are banned.
  • Appeals: The Affordable Care Act enables consumers to appeal against coverage or claims to insurance company and it will be externally reviewed.
  • Consumer Assistance: The Affordable Care Act provides for establishment of .
  • Business Tax Credits: The act provides tax credit to almost 4 million businesses to help them able to provide insurance benefits to their workers.
  • Medicare Donut Hole: Four million seniors will reach the gap in prescription drug coverage known as the “donut hole” this year. They will get a one-time tax free rebate check. New plans have to cover certain preventive services.
  • Medicare Fraud: The Affordable Care Act has provisions aimed at reducing fraud and waste in Medicare by investing more resources in this field.
  • Medical Payments: The Affordable Care Act has provisions for bundle payment as medical reimbursement that is a single payment is paid to a hospital or physician group for a defined episode of care instead of individual payments made to each service provider.
  • Employers: Firms having more than have to pay a shared responsibility requirement in case of government subsidy to employee’s health care, if they are not providing insurance.
  • Health Care Exchange: People in who fall above 100% and up to 400% of the federal poverty level will get federal subsidies on purchasing insurance through .
  • Medicaid and CHIP Eligibility: The act expands eligibility to individuals and families belonging to an income group up to 133% to 138% of the poverty level. The enrolment process has also been simplified. States opting against Medicaid expansion are free to set their own Medicaid eligibility thresholds.
  • Subsidies: Small businesses will be able to get subsidies if they purchase insurance through an exchange.

Funding the Affordable Care Act

The funding for the Affordable Care Act will come from a variety of taxes and offsets. The major sources of new revenues will include a much broader Medicare tax on incomes over $200,000 for individuals and $250,000 for joint filers, an annual fee on insurance providers and a 40% excise on what is termed “Cadillac” insurance policies.

Income levels will not be adjusted for inflation, which leaves the possibility open for increased taxes on incomes over $250,000 inflation-adjusted dollars are more than two decades without indexing through. There are also new taxes on pharmaceuticals, high-cost diagnostic equipment and a 10% federal sales on indoor tanning.

The offsets are from intended cost savings such as changes put in place on the Medicare Advantage program which is relative to traditional Medicare.

The following is a 10 year projection of the tax increases which will fund the Affordable Care Act:

  • Increase in the Medicare tax rate by 0.9% and a new tax of 3.8% on unearned income for high income taxpayers = $210.2 Billion
  • New annual fee on health insurance providers = $60 Billion
  • New 40% excise tax on health insurance annual premiums which exceed $10,200 for individuals and $27,500 for families = $32 Billion
  • New annual fee on manufacturers and importers of brand name drugs = $27 Billion
  • New 2.3% excise tax on manufacturers and importers of certain medical devices = $20 Billion
  • Increase the 7.5% adjusted gross income floor on medical expenses deductions to 10% = $15.2 Billion
  • Impose a limit on annual contributions to flexible spending arrangements in a type of tax deferred employee health benefit plan (known as cafeteria plans) to $2,500 = $13 Billion
  • Other sources of revenue = $14.9 Billion

The following is a 10 year projection in spending offsets which will fund the Affordable Care Act:

  • A reduction in certain Medicare hospital payments = $22 Billion
  • A reduction in Medicare home health payments = $40 Billion
  • A reduction in funding for Medicare Advantage policies =$132 Billion