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 health insurance 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 tobacco 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 pre-approved private insurance policy. 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 – essential health benefits.
  • 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 consumer assistance programs in states.
  • 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 Medicare 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 50 or more employees 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 low-income group who fall above 100% and up to 400% of the federal poverty level will get federal subsidies on purchasing insurance through health care exchange.
  • Medicaid and CHIP Eligibility: The act expands Medicaid eligibility to individuals and families belonging to an income group up to 133% to 138% of the poverty level. The CHIP 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

 

The Affordable Care Act Timeline:

On March 23, 2010, The Affordable Care Act was signed into law by the United States President. The ACA is divided into 10 titles, and contains provisions that will be enacted at different times. The following is the key elements timeline.

Effective as of Enactment

  • The FDA was immediately authorized to approve generic versions of biologic drugs and grant the manufacturers of the generics 12 years of exclusive use before generics can be developed.
  • The Medicaid drug rebate for brand named drugs (paid by manufacturers to the states) increased to 23.1% . With the exception of clotting factor drugs and drugs used exclusively for pediatric patients, which increased to 17.1%. This rebate was extended to Medicaid managed care plans.
  • The establishment of a non-profit Patient Centered Outcomes Research Institute – independent of the government. Tasked with examining the relative health outcomes, clinical effectiveness and the appropriateness of different medical treatments and consisting of a 19 member board made up of doctors, patients, hospitals, drug makers, insurers, drug and device manufacturers as well as government officials and health experts.
  • The creation of the Prevention and Public Health Fund – designed to fund both programs and research for the prevention of chronic disease.
  • The National Prevention, Health Promotion and Public Health Council was created, within the Department of Human Services, to develop a national strategy on the prevention of illness and the promotion of public health. The Surgeon General of the United States serves as Chairperson.
  • The reauthorization of an amended Indian Health Care Improvement Act.
  • All chain restaurants, with 20 or more locations, must display the caloric content of all the foods on all menus and vending machines.
  • States can apply for a state amendment which would expand family planning eligibility to the equivalent of pregnancy related care through a state option instead of having to apply for a federal waiver.

Effective as of June 21, 2010

  • Uninsured adults with pre-existing conditions became eligible to join a temporary high-risk pool – this will be replaced by the Health Care Exchange in 2014. In order to qualify, applicants must have been uninsured for a minimum of the last six months and have a pre-existing condition.

Effective as of July 1, 2010

  • A 10% federal sales tax on indoor tanning took effect.
  • The National Prevention, Health Promotion and Public Health Council was created, within the Department of Human Services, to develop a national strategy on the prevention of illness and the promotion of public health. The Surgeon General of the United States serves as Chairperson.

Effective as of September 23, 2010

  • With all new policies issued, insurers are now prohibited from imposing a lifetime dollar amount on essential benefits.
  • Dependents – mainly children – will be permitted to remain insured under their parents insurance plan until their 26th birthday. This includes dependents that are no longer living with their parents, are not a dependent on their parents income tax returns, are no longer a student and those that are married.
  • Insurers are not allowed to exclude pre-existing medical conditions for children under the age of 19. With the exception of those in grandfathered individual health insurance plans.
  • Any new insurance plan, issued from this day forth, must cover preventative care and medical screenings. Insurers are prohibited from charging co-payments, deductibles and co-insurance for these services.
  • Those who were previously affected by the Medicare Part D coverage gap will receive a $250 rebate. 50% of the gap will be eliminated in 2011 and the gap will disappear completely by 2020. The gap is commonly called the ‘donut hole’.
  • Insurers ability to enforce an annual spending cap became restricted. These caps will be completely prohibited by 2014.
  • Insurers became prohibited from dropping an insured person when they become sick.
  • Insurers are now required to reveal details about executive and administrative expenditures.
  • Insurers are new required to implement an appeals process for coverage determination as well as for claims on all new plans.
  • Enhanced methods of fraud detection are implemented as of today.
  • Medicare has been expanded to include small, rural hospitals and facilities.
  • Medicare patients with a chronic illness must now be monitored and evaluated on a three month basis for coverage of medications for the treatment of their chronic condition.
  • Companies that provide benefits for early retirees (ages 55-64) are now eligible to participate in a temporary program that reduces the costs of premiums.
  • The Secretary of Health and Human Services is to create a new website that provides consumer insurance information for individuals as well as small businesses in each state.
  • The creation of a new and temporary credit program designed to encourage private investment in new therapy for disease treatment and prevention.
  • From this day forth, all new insurance plans must cover childhood immunizations and adult immunizations without charging co-payment, co-insurance or deductibles when provided through by an in-network provider.

Effective as of January 1, 2011

  • Insurers must spend 80% of premium dollars paid by individual or small group insurers, and 85% or premium dollars paid by large group insurers on health costs and claims. This leaves 20% or 15% respectively for administrative costs and profit. Insurers failing to meet this will not suffer a penalty, instead they must issue a rebate to the insured.
  • From this day forward, the Center for Medicare and Medicaid services is responsible for developing the Center for Medicare and Medicaid Innovation. Tasked with designing an innovative payment and delivery model.
  • With the exception of insulin, all over the counter drugs – purchased without a prescription – cannot be paid for using health savings accounts, flexible spending accounts or health reimbursement accounts.

Effective as of September 1, 2011

  • The policy known as ‘rate review’ went into effect. This means that all health insurance companies must inform the public when they wish to increase health insurance rates for individuals or small group insurance policies by an average of 10% or more.
  • States are provided Health Insurance Rate Review Guides which will enhance the rate review programs and bring greater transparency to the rate review process.

Effective as of January 1, 2012

  • Employers, from this date forward, must disclose the value of health benefits provided for each employees health insurance coverage on the employees W-2 form.
  • New tax reporting changes went into effect as of this day.

Effective as of August 1, 2012

  • All new insurance plans, effective as of this date, must cover certain preventative services such as mammograms and colonoscopies without a charge to co-payment, co-insurance or deductible. Women’s preventative services – including well-woman visits, gestational diabetes screenings, HPV DNA testing for woman over the age of 30, STD infection counseling, HIV screening and counseling as well as FDA approved contraception method and counseling are all covered under this portion of the Act. The requirement to cover FDA approved contraceptive methods is known as the Contraceptive Mandate.

Effective as of October 1, 2012

  • The Readmissions Reduction Program goes into effect as of this day. Essentially the program is designed to force hospitals to correctly treat a patient the first time they are hospitalized for a medical condition, or face penalties when readmission for the same health problem is required. Medicare and Medicaid will begin a wide ranging push to start paying health care providers based solely on the quality of care they provide.

Effective as of January 1, 2013

  • Income in excess of $200,000 annually –for self-employed single individuals – will be subject to a 0.9% additional tax. The threshold amount if $250,000 for a married couple (filing jointly) or $125,000 for a married person (filing separately)
  • A new Medicare tax of 3.8% will begin today for unearned income for those with a gross income in excess of $200,000 for a married couple filing jointly and $125,000 for a married person filing separately.
  • Beginning today, a cap on the pre-tax contributions to a healthcare flexible spending account is set at $2,500 per year.
  • Most medical devices became subject to a 2.3% excise tax – collected at the time of purchase. This tax also applies to certain devices used in veterinary medicine such as exam gloves and catheters.
  • As of today, insurance companies are required to use a simpler and more standardized paperwork and forms. The intention is to help consumers compare pricing and benefits.

Effective as of August 1, 2013

  • Non-exempt, non-grandfathered group health plans which were established and maintained through non-profit organizations which are religious based are no longer exempt from implementing the contraceptive mandate.

Effective as of October 1, 2013

  • Uninsured individuals, may begin enrolling in health insurance plans offered through state based health insurance exchanges. Coverage will begin on January 1, 2014. Open enrollment ends on March 31, 2014, after which individuals may not purchase insurance through an exchange until the following open enrollment period.

Effective as of January 1, 2014

  • Beginning this date, insurers are forbidden to charge higher rates or discriminate against any person applying for insurance based on any pre-existing condition or gender.
  • Insurers are prohibited from imposing annual caps on essential health benefits.
  • Under the Individual Mandate which 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 pre-approved private insurance policy. 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. Everyone not covered by insurance will pay a penalty. Penalty amounts will be $95 per year or up to 1% if income over the filing minimum. These penalties will increase yearly.
  • In participating states, the eligibility for Medicaid will be expanded. All adults, even those without dependent children, with an income of up to 133% of the poverty line will qualify. The new law also provides a ‘income disregard’ of up to 5%, making the effective income eligibility limit 138%.
  • Health insurance exchanges are established. Subsidies for insurance premiums will be given to individuals who purchase insurance through an exchange and have a household income between 133% and 400% of the poverty line.
  • Two multi-state plans become available in some states health insurance exchanges as of this date. Both are federally regulated. One will be offered by a non-profit while the other cannot include abortion services.
  • Public Health Services Act Section 2708 becomes effective on this date. This section prohibits a patient’s eligibility waiting period in excess of 90 days for coverage under a group plan. This limitation means that insurance coverage must be effective no later than the 91st day of employment.
  • Qualified small businesses will receive two years of tax credits. In order to qualify, a small business must have an average payroll for full time employees of no more than $50,000 and no more than 25 full time employees.
  • Employers with more than 50 full time employees and do not offer health insurance will receive a $2,000 penalty per employee.
  • Employer-sponsored plans – a $2,000 maximum annual deductible for any plan covering a single individual or a $4,000 maximum annual deductible for any other plan. These limits can be increased.
  • Spending and coverage cuts, are made on effective in this day, to Medicare Advantage. This will help finance parts of the new spending.
  • Growth in Medicare Provider payments are slowed, in part, through the creation of an Independent Payment Advisory Board.
  • Medicare and Medicaid drug reimbursement rates are decreased, and other Medicare and Medicaid spending is cut.
  • A new limit of $2,500 on tax free contributions to flexible spending accounts which allow for payment of health costs – resulting in an increase in revenue.
  • Members of congress and their staff will only be offered health care plans through health care exchanges and other plans otherwise established by the bill. This is instead of the Federal Employee Health Benefits program they currently have.
  • Additional revenues to help cover the costs of the Affordable Health Care Act will come from a new excise tax that goes into effect as of his date. The tax will be charge to pharmaceutical companies and is based on the market share of the company. This tax is expected to bring in $2.5 Billion in annual revenue.
  • Health insurance companies will also begin paying a new excise tax, as of this date, the rate will gradually rise between 2014 and 2018. After 2018, the tax will increase at the rate of inflation. This tax is expected to bring in up to $14.3 Billion in annual revenues.
  • Medical expenses which qualify for deduction on Schedule A tax filings increases from 7.5% to 10% of adjusted gross income.
  • Consumer Operated and Oriented Plans (CO-OP), which are both member-governed and non-profit insurers are entitled to a 5-year federal loan, are also permitted to start providing health care coverage as of this date.

Effective as of October 1, 2014

  • Federal payments to disproportionate share hospitals – hospitals that treat large numbers of indigent patients – are reduced as of this date. These payments will subsequently be allowed to rise based on the percentage of the population that is uninsured in each state.

Effective as of January 1, 2015

  • The Centers for Medicare and Medicaid Services (CMS) will begin using the Medicare fee schedule to make larger payments to doctors who provide a higher quality of care compared with the cost of that care.
  • Employers with more than 50 full time employees and do not offer health insurance will receive a $2,000 penalty per employee.

Effective as of October 1, 2015

  • States will be permitted to shift eligible children for care under the Children’s Health Insurance Program to a health care plan sold on their exchange, as long as HHS approves the shift.

Effective as of January 1, 2016

  • The threshold for itemizing medical expenses on tax returns increases from 7.5% to 10% for seniors.
  • As of this date, states will be allowed to form health care choice compacts. Insurers will be allowed to sell policies in any state participating in the compact.

Effective as of January 1, 2017

  • As of this date, states may allow large employers and multi-employer health plans to purchase coverage in the health insurance exchange.
  • The two federally regulated multi-state plans – MSPs – that began in state health insurance exchanges on January 1, 2014, will become available in every state as of today.
  • Any state may make an application of ‘waiver for state innovation’ to the Secretary of Health and Human Services. This, providing the state passes legislation implementing an alternative health care plan which meets certain criteria. The decision to grant the waiver lies solely with the Secretary. The Secretary will report annually to Congress on the waiver process.

Effective as of January 1, 2018

  • All health care insurance plans must cover preventive care and checkups without co-payment, co-insurance or deductible payments.
  • A new 40% excise tax goes into place today on high cost insurance plans. This tax applies to insurance premiums for families in excess of $27,500 annually and $10,200 on individual plans annually.

Effective as of January 1, 2019

  • Medicaid extended coverage kicks in today, this applies to former foster care youths who resided in foster care for a period of at least six months and are under the age of 25.

Effective as of January 1, 2020

  • Medicare Part D coverage gap – more commonly known as the ‘donut hole’ – will be phased out completely

For more information on the Affordable Care act, and how it affects you, use the following links: