HEALTH CARE REFORM LEGISLATION BECOMES LAW
April 1, 2010
What’s at Issue
On March 23, 2010, President Obama signed into law legislation to overhaul our nation’s health care system. The U.S. House of Representatives approved the measure, H.R. 3590, the Patient Protection and Affordable Care Act, by a slim margin (219-212) on March 21, 2010. Click here to view the roll call vote on H.R. 3590. This is the same measure that was passed by the U.S. Senate on December 24, 2009, with a vote of 60 – 39. Please click here to view the roll call vote.
Additional legislation was passed by the House and Senate, H.R. 4752, the Health Care and Education Reconciliation Act of 2010, which makes a number of health-related financing and revenue changes to H.R. 3590. The House passed the bill with a vote of 220 – 211. To view the roll call vote, please click here. The Senate passed the measure with amendments by a vote of 56 – 43. To view the Senate roll call vote, please click here. This bill was signed into law by the president on March 26, 2010.
Both bills seek to make purchasing health insurance coverage more affordable and to cover over 30 million uninsured Americans.
Why It’s Important
The measures require most Americans to have health insurance coverage, add 16 million people to the Medicaid program, and subsidize private coverage for low- and middle-income people. The law regulates private insurers more closely, banning practices such as denial of care for pre-existing conditions. However, most of the health care coverage changes probably won’t take effect until 2014. Further, the law will cost the government about $938 billion over 10 years, according to the nonpartisan Congressional Budget Office, which has also estimated that it will reduce the federal deficit by $138 billion over a decade. These figures are based on number of assumptions, including limiting the cap on Medicaid payments to physicians, something that Congress has not permitted since the program’s inception.
Major Provisions
The 2,800-page bill is unclear in many parts, and only time will tell how many of the major provisions of the bill will impact the health care of Americans and small businesses. This legislative report is intended to provide members with a general overview of the major provisions within the new law that could affect their company and a timeline for small business established by the National Federation of Independent Businesses.
Title I: Quality, Affordable Health Care for All Americans:
- Creates an insurance exchange program that is intended to increase buying power and offer new affordable choices of private insurance plans based on cost and quality
- Small business owners will have the option to purchase insurance coverage through this exchange, and will receive a new tax credit intended to help offset the cost for the requirement that all employees (full- and part-time) have health insurance.
- Requires all Americans to purchase health insurance.
- Provides tax credits to families who qualify to help offset the cost of purchasing health insurance in the exchange program.
- Creates a hardship waiver for individuals and families from the requirement to purchase health insurance if coverage is unaffordable or if premiums exceed 8% of income. Exceptions are made for religious objectors, taxpayers with incomes below the tax-filing threshold ($9,350 single/$18,700 for married couples in 2009) and Indian tribe members.
- Americans under age 30 and others who are exempt from the requirement to purchase insurance are eligible for a low-cost catastrophic plan that covers serious illness and injury.
- Provides financial assistance for out-of-pocket costs for moderate and low-income eligible Americans.
- Bans insurance companies from denying insurance coverage due to pre-existing medical conditions, including children.
- Allows consumers to appeal insurance company decisions denying doctor-ordered treatments covered by insurance.
- Requires new insurance plans to offer preventative care and immunizations without additional cost.
- Requires new insurance plans and certain existing plans to offer dependent care coverage until age 26.
- Establishes a Web site for consumers to compare insurance coverage options along with state-by-state health care consumer assistance and creates an ombudsman for any health insurance questions.
- Establishes an independent appeals process for consumers and patients to appeal insurance company decisions.
- Prohibits insurance companies from selling insurance on the insurance exchange if they exhibit a pattern of excessive rate increases.
- Removes lifetime limits on insurance coverage and removes annual limits on benefits to prevent insurance companies from dropping insurance coverage when a person gets sick or develops a long-term illness.
- Prohibits insurance companies from denying coverage or setting premiums based on health status, medical history or genetic information.
- Prohibits insurance companies from discriminating against older Americans by requiring companies to limit the amount they can charge based on age.
- Sets limit for out-of-pocket expenses individuals and families have to pay for certain treatments.
- Mandates that large companies automatically enroll new eligible employees in health care plans. Companies with 50 or more employees that do not offer health care coverage and whose employees access taxpayer supported health programs will be required to help offset the cost to the taxpayers.
Title II: Role of Public Programs:
- Immediately expands Medicaid eligibility to more individuals.
- Beginning January 1, 2014, all low-income, non-elderly and non-disabled individuals will be eligible for Medicaid. This also includes unemployed adults and working families with income below $29,000 for a family of four.
- The federal government will provide 100% of the cost of those newly eligible for Medicaid between 2014 and 2016, 95% of the costs by 2017, 94% of the cost in 2018, 93% of the cost in 2019 and 90% matching for subsequent years.
- Preserves the Children’s Health Insurance (CHIP) program and requires states to maintain income eligibility levels for CHIP through September 30, 2019, with funding extended until fiscal year 2015.
- Beginning in fiscal year 2016, states will receive a 23% increase to their CHIP matching rate from the federal government to help offset the cost.
- Creates state-by-state Web sites to streamline the enrollment process for Medicaid and CHIP programs.
- Creates state community-based services and support for persons with disabilities who are Medicaid eligible and require hospital, nursing facility or intermediate care. States that offer these community-based services will receive increased assistance from the federal government.
- Encourages states to provide home and community-based services and full Medicaid benefits to people with long-term care needs.
Title III: Improving the Quality and Efficiency of Health Care:
- Modifies the prescription drug plan for Medicare to reduce the cost of prescription drugs for seniors.
- Provides incentives for doctors and hospitals that improve quality of care while providing better coordination that helps to reduce harmful medical errors.
- Establishes payment reforms for providers to be rewarded for the quality of care rather than for additional treatment and tests.
- Creates an independent group of doctors and health care experts to develop improvements to the quality of Medicare while reducing costs.
Title IV: Prevention of Chronic Disease and Improving Public Health:
- Provides incentives for small businesses to compete for grants to develop their own workplace wellness programs that promote better health for their employees.
- Waives co-payments for most preventative services, covers annual wellness visits, and personalized prevention plans for Medicare beneficiaries.
Title V: Health Care Workforce:
- Establishes a grant program to support the training of primary care providers, including family medicine and pediatricians, general internal medicine, and physician assistantships.
- Provides bonus payments to primary care physicians.
- Creates a loan repayment program for pediatric, mental and behavioral health specialists who provide services to children and adolescents in underserved areas.
- Establishes a competitive grant program for nursing schools for nursing education and training programs and to improve nurse retention programs.
- Establishes a Ready Reserve Corps to respond to national emergencies, supports training in public health and provides grants to the community health workforce.
- Provides $11 billion in funding for the operation, expansion, and construction of community health centers throughout the nation.
Title VI: Transparency and Program Integrity:
- Requires physicians with financial interests in imaging technology, such as MRI, to inform patients in writing and provide a contract list of other sources of required procedures.
- Requires all drug companies and device and medical supply manufacturers to disclose and report any gifts or financial arrangements with doctors, or physicians groups.
- Creates a “nursing home compare” Web site for Medicare recipients that will provide information about staffing and links to state Internet Web sites regarding state nursing facility surveys and certification.
- Requires background checks for employees who have direct access to patients of long-term care facilities.
- Health care providers enrolling or re-enrolling in Medicare, Medicaid or CHIP programs will be subject to tougher standards and criminal background checks to help prevent waste, fraud and abuse.
- Requires the inspector general of the U.S. Department of Health and Human Services to oversee a comprehensive database of providers sanctioned under Medicare or Medicaid to help keep fraudulent providers out of these programs.
- Increases funding for the Health Care Fraud and Abuse Control Fund by $250 million over the next ten years.
- Establishes streamlined procedures to conduct Medicare prepayment reviews to facilitate reviews to reduce fraud and abuse.
- Creates a competitive grant program for states to develop, implement, and evaluate medical malpractice reforms to help resolve disputes over injuries allegedly caused by health care providers or organizations.
Title VII: Improving Access to Innovative Medical Therapies:
- Extends discounts on drugs to hospitals and communities that serve low-income patients.
Title VIII: Community Living Assistance Services and Supports Act (CLASS):
- Provides a self-funded and voluntary program to finance long-term services and care in the event of a disability.
- Employed Americans will pay in premiums in order to receive a daily cash benefit in the event that they develop a disability.
Title IX: Tax Revenue Provisions:
- Reduces taxes on families making less than $250,000.
- Expands enforcement of the tax code, including increasing corporate information reporting requirements.
- Increases taxes by 0.9% on salaried workers whose incomes exceed $200,000 and $250,000 for married couples filing jointly, to help support the Medicare Hospital Insurance (HI) trust fund.
- Increases the tax on health insurance companies that offer the highest-premium health care plans.
- Additional fees to the health care industry: a fee on branded prescription drugs of pharmaceutical companies related to their federal sales; excise taxes on medical devices; annual fees on health insurance companies; and a 10% excise tax on indoor tanning services, beginning July 1, 2010.
- Imposes an additional 10% penalty on non-health withdrawals from Health Savings Accounts (HSAs), and Medical Savings Accounts (MSAs).
- Limits Flexible Spending Accounts under cafeteria plans to $2,500.
- Eliminates the deduction for employer subsidies for retiree drug coverage under Part D, beginning in 2012.
Title X: Reauthorization of the Indian Health Care Improvement Act:
- Reauthorizes the Indian Health Care Improvement Act (ICHIA) that provides health care services to approximately 1.9 million American Indians and Alaskan Natives.
Timeline for Small Business 2010-2018:
The following information was published by the National Federation of Independent Business (NFIB.org)
Year 2010:
- A temporary small business tax credit is available for some companies that provide qualified health insurance. Small businesses are subject to a series of complicated tests to determine the actual amount of the credit. The credit will only be available for a maximum of six years.
- Very small companies (10 employees or less) will receive full credit.
- For companies with 11-25 employees, the credit is reduced per employee.
- Companies with 25 or more employees are not eligible for tax credit.
Year 2011:
- Employers are required to report employees’ health insurance benefits on W-2 forms.
- HSA and FSA limits – consumers are prohibited from using funds from these programs to purchase non-prescribed items, including over-the-counter medication (except insulin).
- HSA penalties for non-qualified purchases increase to 20%.
- Employers may voluntarily participate in the CLASS federally subsidized (another entitlement program that will cost millions over time) long-term care program. Participating company employees will be automatically enrolled and subject to payroll deductions unless they opt-out.
- Employers will be required to meet minimum contribution requirements to receive protection from non-discrimination requirements under cafeteria plans.
Year 2012:
- Businesses will be required to report every business-to-business transaction of $600 or more on 1099 forms – a tremendous paperwork burden for small businesses.
Year 2013:
- New limits on the deductibility of medical expenses on individual income tax returns. The provision raises the 7.5% adjusted gross income (AGI) on medical expense deductions to 10%. The AGI for people 65 or older will remain at 7.5% until 2016.
- Medicare payroll tax increases to 2.3% on wages and self-employment income in excess of $200,000 or $250,000 (married filing jointly), and is not indexed for inflation.
- These funds are designated to be used to pay for insurance policies of people not under Medicare.
- Medicare Investment Tax – an additional 3.8% tax on investment income for higher-income taxpayers.
- Like the payroll tax, these funds are officially designated for Medicare but will be used elsewhere.
- Cafeteria plans for FSA will be limited to a maximum of $2,500 (inflation adjusted after 2013).
Year 2014:
- An annual fee will be assessed on health insurance providers. The fee is $8 billion for 2014, $11.3 billion for 2015 and 2016, $13.9 billion for 2017, and $14.3 billion for 2018. This annual fee will be passed on to the consumer and on the majority of the health insurance plans that are purchased by small business.
- Health insurance exchange will go into effect for individuals and companies with less than 50 employees. (States may opt to increase the number of employees to 100).
- Income level for Medicaid eligibility rises, bringing in millions of new people to the program. This expansion will account for almost half of the total increase in insurance coverage and will place a significant financial burden on states.
- Federal officials will begin to define an essential benefits package with which all insurance policies must comply, including restrictions on cost-sharing.
- Individual mandate begins in 2014; all U.S. citizens and legal residents must have “qualifying” health insurance or pay penalties.
- The penalty in 2014 is $95 or 1% of household income; 2015, $325 or 2% of income; 2016, $695 or 2.5% or $2,085 for families. Cost-of-living adjustments will be considered after 2016.
- Employer mandate that requires companies to provide insurance, pay penalties or both.
- Penalties are based on the number of full-time or part-time employees, whether the company offers health care insurance, and whether one or more employees qualify for a subsidy if his or her household income is below 400% of the federal poverty line ($88,000 for a family of four today).
- An employer with more than 50 full-time employees that doesn’t offer health insurance but has one or more employees receiving a premium subsidy will pay a penalty of $2,000 per full-time employee (minus the first 30 employees).
- An employer with more than 50 employees that does offer health insurance, and has one or more employees who receive a premium subsidy, will pay a penalty of $3,000 per subsidized employee or $2,000 per full-time employee (minus the first 30 employees).
- An employer with more than 50 employees that offers health insurance and has no employees receiving a premium subsidy will pay no penalties.
- If an employee’s household income is below 400% of the federal poverty line, and the insurance premium falls between 8% and 9.8% of household income, the employer must offer the employee a voucher (equal to the amount the employer contributes to an employee’s premium) to purchase insurance in the exchange.
- Employers with more than 200 employees will be required to auto-enroll employees into the employer’s health plans; however, the employee may opt-out. A penalty will be assessed to the employer if there is a waiting period of more than 90 days before the employee is eligible for health insurance.
Year 2018:
- The federal government will begin to collect a “Cadillac tax,” a 40% excise tax on health care coverage in excess of $10,200 annual for an individual or $27,500 annually per family.
- The threshold is higher for certain retirees over 55 and for employees in high-risk professions.
NATA Position
NATA is very concerned about the significant increases contained within this new law and the impact the costs will have on America’s small aviation businesses. During a time when the general aviation and airline service communities have been hit hard due to the economic recession, assessing additional costs to these small businesses could cripple these important segments of the aviation industry.
Status
Many of the health care reforms don’t begin for another four years or more, delaying the impact this law will have on Americans, businesses and the uninsured. Some states have also filed lawsuits against the federal government stating that the mandates within the new law are unconstitutional.
Staff Contact: Kristen Moore
Director, Legislative Affairs
kmoore@nata.aero