Health Insurance

How Will I Be Impacted By 2010 Health Care Reform Legislation?

The Patient Protection and Affordable Care Act (PPACA) is a federal statute signed into law by President Obama on March 23, 2010. PPACA was revised by the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010).

Click here to see a timeline of the Health Care Reform Bill Insurance Market Provisions

Many of the provisions in the law don't take effect until 2014 or later, and some provisions will require the development of additional laws and regulations prior to the effective date. Key provisions of the health care reform bill are as follows:

• Prohibiting the denial of coverage/claims based on pre-existing conditions
• Requiring coverage for preventive care
• Incentives for small businesses to provide health care benefits
• New employer penalties and obligations
• Expanding Medicaid eligibility and subsidizing insurance premiums
• Establishment of state health insurance exchanges
• Formation of state health choice compacts
• Creation of a new voluntary long-term care insurance program (CLASS Act)
• Elimination of the Medicare Part D coverage gap ("donut hole") by 2020

The costs of these provisions are offset by a variety of taxes, fees, and cost-saving measures, such as new Medicare taxes for high-income brackets, taxes on indoor tanning, cuts to the Medicare Advantage program in favor of traditional Medicare, and fees on medical devices and pharmaceutical companies; there is also a tax penalty for citizens who do not obtain health insurance (unless they are exempt due to low income or other reasons).

Beginning in 2010, small businesses with fewer than 25 employees and average wages of less than $50,000 get a tax credit for their contributions to buying health insurance for employees. The tax credit starts at up to 35% and increases to 50% in 2014 when the health insurance exchange is operational. A full tax credit may be available to small businesses with fewer than 10 employees and average wages of less than $25,000.

It should be noted that under the new law, individuals and employers/employees have the right to keep the coverage they had on March 23, 2010 and are exempt from many reforms. These individual and group health plans are considered "grandfathered plans".

The bill contains provisions that go into effect immediately, 90 days after enactment, six months after enactment, and then at later points in time. For simplicity, the amendments made by the House Reconciliation Bill are integrated into this timeline:

Effective immediately:

• The Department of Health and Human Services (HHS) is authorized to establish a process for federal review of fully insured premium rate increases.

Effective in 90 days:

• A temporary high-risk insurance pool will be created to help adults with pre-existing conditions get coverage if they have been uninsured for six months (program to be superseded by the health care exchange in 2014).
• By July 1, an Internet portal will be created for consumers and small businesses to shop for health insurance.
• A temporary reinsurance program will be established for employers providing coverage to early retirees over age 55 who are not eligible for Medicare. Participating employers or insurers will be reimbursed 80% of retiree claims between $15,000 and $90,000. The program will be effective through 2013.

Effective in six months for new plans and plans renewed six months after the law's enactment date (unless otherwise noted includes "grandfathered plans"):

• Dependent children (regardless of marital and/or student status) may stay on their parents' insurance plan until age 26 if coverage isn't available through their work.
• No rescissions are permitted, except in cases of fraud or intentional misrepresentation.
• Insurers are prohibited from discriminating against any individuals under age 19 based on pre-existing medical conditions (does not apply to grandfathered individual plans).
• Plans may not impose lifetime limits on the dollar value of essential benefits (restricted annual limits do not apply to grandfathered individual plans).

Effective in six months for new plans and plans renewed six months after the law's enactment date (does not include "grandfathered plans"):

• New policies must cover the full cost of preventive care as recommended by the U.S. Preventive Services Task Force, recommended immunizations, preventive care for infants, children and adolescents, and additional preventive care for women.
• Insurers are required to comply with new minimum requirements for internal and external claims appeals processes.
• Plans that require or provide for a primary care provider (PCP) designation must allow each member to designate any in-network PCP, or pediatrician for children, accepting new patients. Plans may not longer require an authorization or referral to an Ob-Gyn. Prior authorization or increased cost-sharing for emergency services also is prohibited.
• Nondiscrimination rules that apply to self-funded health plans are expanded to group fully insured health plans. Plans cannot base an employee's eligibility or continued eligibility on hourly or annual salary.

Effective in 2011:

• Insurers will be required to spend 85% of large-group and 80% of small-group plan premiums (with certain adjustments) on health care or to improve health-care quality, or return the difference to the customer as a rebate.
• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) may no longer be used to purchase over-the-counter drugs unless prescribed by a doctor. Increases tax for nonqualified HSA withdrawals from 10% to 20%, and for Archer MSA withdrawals from 15% to 20%.
• HHS is required to study the group health plan markets to compare employer characteristics and determine whether the new insurance market reforms are likely to cause adverse selection in the large group market or to encourage small and midsize employers to self-insure. HHS and the Department of Labor also must collect information on self-funded plans.
• Within 12 months of the law's enactment, HHS, in consultation with the National Association of Insurance Commissioners, will develop uniform standard and definitions for summaries of benefits and coverage explanations.
• Within 24 months of enactment, group health plans must provide enrollees and applicants with coverage documents that meet these standards.

Effective in 2012:

• A comparative effectiveness fee is imposed on individual and group health plans to fund comparative effectiveness research ($1 per participant through 2013, then $2 per participant through 2019).
• The private sector may purchase standardized data extracts of Medicare Parts A, B and D claims data to combine with their own claims data to evaluate provider performance measures on quality, efficiency, and the effectiveness of care.

Effective in 2013:

• FSA contributions are limited to $2,500 per year.

Effective in 2014:

• Individual and group health plans can no longer impose pre-existing condition exclusions for any person of any age (does not apply to grandfathered individual plans).
• Insurers are prohibited from establishing annual spending caps (does not apply to grandfathered individual plans).
• Health insurers must accept every individual and employer who applies for coverage.
• Rating restrictions go into effect for new individual and fully insured small gropu plans. Insurance companies cannot base premiums on health status, claims experience or gender. Premiums can vary only by Age (no more than 3:1), Geography, Family Size, and Tobacco Use (no more than 1.5:1).
• States are allowed to merge the individual and small group markets.
• Coverage of routine patient care costs is mandated for participation in approved clinical trials (does not apply to grandfathered plans).
• Under the CLASS Act provision, creates a new voluntary long-term care insurance program; enrollees who have paid premiums into the program and become eligible (due to disability or chronic illnesses) would receive benefits that help pay for assistance in the home or in a facility.
• State health insurance exchanges are up and running for small businesses and individuals to buy health insurance. States can allow large employers to participate beginning in 2017.
• HHS will establish procedures, which may include rate schedules for broker commissions, for a state to allow brokers to enroll individuals in any qualified health plans in the individual or small group market as soon as the plan is offered through an exchange, and to assist individuals in applying for premium tax credits and cost-sharing assistance for plans sold through an exchange.
• Essential benefit plan is created, which mandates the level of benefits that must be included in plans offered in the exchange, as well as in the individual and small group markets outside the exchange. Deductibles are limited to $2,000 for individuals and $4,000 for families in the small group market (self-funded plans and grandfathered plans are exempt).
• Cost sharing imposed under health plans is limited to current health savings account amounts (does not apply to grandfathered plans).
• Waiting periods cannot exceed 90 days.
• Expands health plan wellness incentives up to 30% of total coverage costs (up to 50% with HHS approval).
• A temporary reinsurance program will be established for the individual market and funded by individual and group health plan assessments.

Effective in 2016:

• States can form health choice compacts to allow insurers to sell individual policies in any state participating in the compact.

Effective in 2018:

• A new excise tax goes into effect for high-value, "Cadillac" health plans: 40% for amounts over $10,200 for individuals and $27,500 for family plans, paid by insurance companies and plan administrators.

Medicare and Medicaid-related provisions:

• Provides a $250 rebate for Part D enrollees who enter the coverage gap ("donut hole") in 2010. Beginning in 2011, a 50% discount will apply to brand drugs in the gap. Members will pay less for generic drugs in the gap as well: 93% in 2011, which phases down to 25% by 2020. The donut hole is eliminated by 2020.
• Beginning in 2013, employers may no longer deduct the retiree drug subsidy when offering qualified coverage under Medicare Part D.
• Beginning in 2014, states are required to provide premium assistance and wrap-around benefits to any Medicaid beneficiary who is offered employer-sponsored coverage, if it cost effective to do so.
• For Medicare Supplement (Medigap) policies, the National Association of Insurance Commissioners will create new model plans for Plans C and F that include nominal cost sharing. The new models will be available in 2015.

Revenue-raising provisions:

• Starting July 1, 2010, imposes a 10% tax on tanning services.
• Beginning in 2011, the pharmaceutical industry will pay annual industry fees.
• Beginning in 2013, manufacturers of medical devices will pay a 2.3% excise tax on sales of medical devices.
• Beginning in 2013, the Medicare payroll tax rate will increase by 0.9% for individuals who make more than $200,000 and couples that make more than $250,000.
• A new 3.8% tax will be added on income from interest, dividends, annuities, royalties, and rents for those at the same income threshold.
• Beginning in 2014, a non-deductible premium tax will be imposed on insurers.

Back to Top | Back to Health Insurance Home

• What is Traditional vs. Managed Care?
• Types of Major Medical Health Insurance
• What is a Health Savings Account (HSA)?
• Guaranteed-Issue Health Plans Including "COBRA" and "Mini-COBRA"
• How Will I Be Impacted By 2010 Health Care Reform Legislation?