Health Care Reform: The Bill in a Nutshell

May 19, 2010
Jamie L. Habib
Jamie L. Habib

Now that President Obama has signed the Patient Protection and Affordable Care Act of 2010 into law (signed March 23, 2010), what will happen?

Now that President Obama has signed the Patient Protection and Affordable Care Act of 2010 into law (signed March 23, 2010), what will happen? According to some of the pundits, the sky was supposed to have fallen. Thankfully, that did not happen.

Following is a general review of what has happened. (For the immediate effects of the health care reform bill, see the Table.)

Cost. The expected cost of the health care reform bill is $940 billion over 10 years. Even more impressive is that the deficit is expected to decrease by $143 billion over the same 10-year period, according to the Congressional Budget Office (CBO). If all goes well, preliminary findings by the CBO show that an additional $1.2 trillion would be shaved off the deficit over the second 10-year period.

Coverage. Health care coverage will be expanded to 32 million Americans who are currently uninsured.

Health insurance exchanges. Uninsured persons and the self-employed will be able to purchase insurance through state-based health insurance exchanges. Subsidies will be available to these individuals and families with income between 133% and 400% of the federal poverty level (FPL), which is $10,840 for an individual and $22,050 for a family of 4. Federal funding will be available to states to establish exchanges within 1 year of enactment and until January 1, 2015. Beginning in 2014, separate exchanges will be available for small businesses to purchase coverage.

Subsidies. Individuals and families who earn between 100% and 400% of the FPL and want to purchase health insurance on an exchange are eligible for subsidies. To qualify for these subsidies, they cannot be eligible for Medicare or Medicaid and cannot receive health insurance through an employer. Premium credits will be given to eligible buyers, and the amount that buyers will have to contribute towards their premiums will be capped on a sliding scale. 

Funding the plan. In 2012, the Medicare payroll tax will be expanded to include unearned income (ie, investment income). A 3.8% tax will be applied to all investment income for individuals making $200,000 per year and for families making more than $250,000. In 2018, insurance companies will pay a 40% excise tax on insurance plans worth more than $27,500 for families and $10,200 for individuals (so-called Cadillac plans). Dental and vision plans are exempt from this excise tax and will not count toward the total cost of an insurance plan. In addition, a 10% excise tax on indoor tanning services will be implemented in July 2010 (the tanning tax).

Effects on Medicare. The Medicare prescription drug gap will be closed by 2020. Seniors who will be affected by the gap in 2010 will receive a $250 rebate. In 2011, seniors in the gap will receive a 500% discount on brand-name medications. The law also mandates $500 billion in Medicare cuts over the next 10 years.

Effects on Medicaid. Families earning up to 133% of the FPL, or $29,327 for a family of 4, are now eligible for Medicaid benefits. Beginning in 2014, states are required to expand Medicaid to childless adults. Federal funding will cover 100% of states’ costs for covering newly eligible Medicaid beneficiaries through 2016. Illegal immigrants are not eligible for Medicaid.

Insurance reform. Beginning this year, insurance companies can no longer deny health care coverage to children because of a preexisting condition. In 2014, coverage cannot be denied to anyone because of a preexisting condition. Also, children may now remain on their parents’ insurance plans until age 26.

Abortion coverage. No health care plan is required to offer abortion coverage, including state-run insurance exchanges. For plans that do offer abortion coverage, private insurance premium funds must be segregated from taxpayer funds, because no federal funds can be used to pay for the procedure except in the case of rape, incest, or health of the mother.

Individual mandate. By 2014, everyone must purchase health insurance; those who don’t will be fined $695 annually. There will be some exceptions for low-income persons.

Employer mandate. Although technically there is no employer mandate, employers with more than 50 employees must offer health insurance or pay a fine of $2000 per worker each year if any worker receives federal subsidies to purchase health insurance. Fines will be applied to the entire number of employees receiving subsidies with some allowances (eg, 2 part-time employees would equal 1 full-time worker).

Immigration. Illegal immigrants will not be allowed to buy health insurance through the insurance exchanges, even if they pay completely with their own money.
 

 

ImpactsExplanationEffective date
Small businessesTax credits of up to 35% of premiums will be available to firms that offer coverage Immediately*
Medicare Part D Beneficiaries who fall into the coverage gap in 2010 will receive a $250 rebateImmediately
MedicareCopayments for preventive services will be eliminated and preventive services will be exempt from deductiblesJanuary 1, 2011
Early retirees/employersA temporary re-insurance program (until the exchanges are available) will be available to help offset the costs of expensive health claims for employers that provide health benefits for retirees aged 55 to 64 years90 days after enactment
RescissionsHealth plans will be banned from dropping coverage when an insured person becomes sick6 months after enactment
ChildrenHealth plans are prohibited from denying coverage to children with preexisting conditions6 months after enactment
Lifetime coverage limitsProhibits health plans from placing lifetime limits/caps on coverage6 months after enactment
Annual coverage limitsTightly restricts new plans’ use of annual limits to ensure access to needed care; these tight restrictions will be defined by HHS 6 months after enactment**
New private plansRequires new private plans to cover preventive services with no copayments and with preventive services being exempt from deductibles6 months after enactment***
Appeals processEnsures that consumers in new plans have access to an effective internal and external appeals process to appeal decisions by their health insurance plan6 months after enactment
Value for premium paymentsRequires plans in the individual and small group market to spend 80% of premium dollars on medical services, and plans in the large group market to spend 85%; insurers that do not meet these thresholds must provide rebates to policyholdersJanuary 1, 2011
Uninsured (interim high-risk pool)Provides immediate access to insurance for Americans who are uninsured because of a pre-existing condition through a temporary high-risk pool90 days after enactment
Young adultsRequires health plans to allow young people up to their 26th birthday to remain on their parents’ insurance policy, at the parents’ choice 6 months after enactment
Community health centersIncreases funding to allow for nearly a doubling of the number of patients seen by the centers over the next 5 yearsBeginning in fiscal year 2010
Primary care physiciansProvides new investment in training programs to increase the number of primary care physicians, nurses, and public health professionalsBeginning in fiscal year 2010
Salary discriminationProhibits new group health plans from establishing eligibility rules for coverage that have the effect of discriminating in favor of higher-wage employees6 months after enactment
Health insurance consumer information Provides aid to states in establishing offices of health insurance consumer assistance in order to help individuals with the filing of complaints and appealsBeginning in fiscal year 2010
Long-term care insurance programCreates a long-term care insurance program to be financed by voluntary payroll deductions to provide benefits to adults who become functionally disabledJanuary 1, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* In 2014, small business tax credits will cover 50% of premiums.
** Beginning in 2014, the use of any annual limits would be prohibited for all plans.
*** Beginning in 2018, this requirement applies to all plans.

Data from CBS News. Short-term benefits from health care reform. March 21, 2010.