The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010
Revised April 13, 2010
After a year of debate, Congress passed comprehensive health care reform legislation. On March 21, 2010, the House of Representatives passed the Senate-version legislation, the Patient Protection and Affordable Care Act (H.R. 3590) (the “Affordable Care Act”) and a separate budget reconciliation bill, The Health Care and Education Reconciliation Act of 2010 (H.R. 4872) (the “Reconciliation Act”), which addresses the House Democrat’s desired modifications to the Affordable Care Act. The president signed the Affordable Care Act into law on March 23, 2010 and signed the Reconciliation Act into law on March 30, 2010.
Numerous state legislators are already passing laws to exempt their citizens from elements of the health care reform package, specifically the individual and employer mandates. Whether these laws are preempted by federal legislation will be an issue for the courts to address.
“As the health reform legislation stands today, the issues can be found here in order of implementation deadline.”:
The Patient Protection and Affordable Care Act
Frequently Asked Questions
How is the Cadillac Plan Tax calculated?
The 40 percent excise tax will be imposed, starting in 2018, on fully-insured and self-funded plans based on the value of coverage that exceeds annual thresholds of $10,200 for individuals and $27,500 for families. The thresholds will be indexed for inflation (CPI-U) plus 1 percent in 2019, and by CPI alone in 2020 and thereafter.
The thresholds for retirees and workers in “high-risk” industries are higher, $11,850 for individuals and $30,950 for family coverage. Coverage under multiemployer plans is deemed, for purposes of the threshold, to be family coverage. Plans that have higher costs than the national average due to the age and/or gender of their employees may also qualify for higher thresholds.
The threshold amount will be increased starting in the first year (2018) if premiums for the Federal Employees Health Benefits Plan’s (FEHBP) Blue Cross Blue Shield standard option increases by more than 55 percent for the period 2010 to 2018.
The tax will be applied to the aggregate cost of health plans, FSAs and HRAs, and employer contributions toward HSAs (employee contributions are not counted). Self-funded plans will use their COBRA calculations to determine the cost of the plans. Dental, vision and disability insurance are excluded from the tax.
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How will Health Reform Impact Employers in 2010?
President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “Act”). The Act will transform the current model for employer-sponsored health coverage, with certain provisions having an impact on employers this year and/or the next plan year.
Insurance Reforms Applies to plans years beginning on Sept. 23, 2010 and thereafter:
Lifetime limits: All fully insured, self-insured or grandfathered plans will need to remove the dollar value of lifetime limits for any participant or beneficiary.
Annual limits: All fully-insured, self-insured and grandfathered group plans will be restricted as to the limit that can be placed on the dollar value of benefits with respect to benefits that are essential health benefits. Regulations will clarify what the limitation will be for 2010 – 2013. Annual limits will be completely prohibited in 2014.
Ban on Rescissions of Coverage: All fully-insured, self-insured and grandfathered plans are prohibited from rescinding coverage, except in the case of fraud or an intentional misrepresentation of a material fact.
Adult Dependent Coverage to age 26: All fully-insured, self-insured and grandfathered plans must provide coverage for adult dependents until the age of 26 years old. The dependent may be married or unmarried and there is no requirement that the dependent be a student or live with the parents. The coverage requirement does not apply to spouses of adult dependents or their children (i.e.,
grandchildren of employee). For grandfathered plans only until 2014, the coverage requirement applies to dependents who do not have another source of employer-sponsored coverage.
Pre-Existing Condition Coverage for Children Under 19 Years of Age: The pre-existing condition coverage requirement applies to all fully-insured, self-insured and grandfathered plans and applies to children under 19 years of age. However, the Act does not require guarantee-issue coverage until the year 2014. Thus, for markets where health insurance coverage is not required to be guarantee-issued
by federal or state law (i.e., individual market and technically, large-group market), insurers could choose to not offer coverage to a child with a pre-existing condition. This will likely be changed by regulation to ensure children have both access to a plan and coverage for benefits once the child is in the plan.
Emergency Service: Fully-insured and self-insured plans (other than grandfathered plans) must cover Emergency Services at in-network rates regardless of the provider and without prior authorization.
Primary Care Physician: Fully-insured and self-insured plans (other than grandfathered plans) must permit enrollees to designate any in-network doctor as their primary care physician.
New Coverage Appeal Process: Fully-insured and self-insured plans (other than grandfathered plans) must provide an appeal process for appeals of coverage determinations that includes an internal claims appeal process, certain notice requirements, evidentiary requirements, and an external review process.
Preventive Services Mandates: Fully-insured and self-insured plans (other than grandfathered plans) must provide coverage for, and may not apply cost-sharing requirements for, certain preventive services, including: preventive items or services with an “A” or “B” rating in the current recommendations of the U.S. Preventive Services Task Force; immunizations; infant, children and adolescent screenings; and certain preventive women screenings and care.
Small Business Tax Credit: For tax years 2010 through 2013, small employers will receive a tax credit of up to 35 percent of the employer’s contribution toward
the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost or 50 percent of a benchmark premium. If the small business is a non-profit, the tax credit equals 25 percent instead of 35 percent.
Health Reform: Temporary Retiree Reinsurance Program
The early retiree reinsurance program provides $5 billion for temporary financial help for employer plans to continue to provide coverage to certain retirees.
Effective date: The program becomes effective June 23, 2010. Payments are retroactive for a plan year, so employers and early retirees will be able to take advantage of them for costs incurred from the date the program is established. The program ends on the earlier of when the funds run out or January 1, 2014, when early retirees will be able to choose from the additional coverage options that will be available in the health insurance exchanges.
Who qualifies: Payments will be made to employer-sponsored health plans on behalf of an early retiree (and his or her spouse, surviving spouse, and dependents). An “early retiree” is defined as an individual age 55 and older who is neither an active employee nor eligible for Medicare.
Eligible firms: Payments will be made to employer-sponsored health plans on behalf of early retirees. To receive assistance, plans must apply, document claims, and implement programs and procedures to generate cost savings for participants with chronic and high-cost conditions. Plans will be subject to audits to assure fiscal integrity.
Amount of assistance: For each such early retiree (and his or her spouse, surviving spouse, and dependents), the employer plan will receive up to 80% of costs, minus negotiated price concessions, for health benefits between $15,000 and $90,000. This reinsurance corridor shall be adjusted in subsequent fiscal years by the medical component of the consumer price index.
Savings for enrollees: Plans must use these proceeds to lower health costs for enrollees (e.g., premium contributions, copayments, deductibles, etc.).
Who applies and when? Employer and union-based plans will submit an application to HHS to participate in the program. Many of them will already be familiar with the process for submitting applications for the Retiree Drug Subsidy program; we expect the process will be similar. The application will be available in June.
How will payments be made? Plans with approved applications will submit paid claims to the Department of Health and Human Services.
What types of employer-sponsored plans are eligible? Both self-funded and insured plans can participate, including plans sponsored by private entities, state and local governments, nonprofits, religious entities, unions, etc.
What types of services qualify for reimbursable services under the program? Plans can get program payments for medical, surgical, hospital, and prescription drug costs.
How should employers treat reinsurance payments when it comes to taxes? Proceeds are excluded from gross income.
For more information visit www.whitehouse.gov
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