The President earlier today has signed The Health Care and Education Affordability Reconciliation Act of 2010, a historic health care reform that’s been 14 months in the making.  This is after Sunday’s Congressional passage by the slim margins of 219-212.

The Bill for the most part follows the President’s version of the Reform Health Bill which tweaked measures such as elimination of Nebraska’s politically wrangled special  Medicaid deal, delays on Cadillac Tax enactment and the establishment of a new Health Insurance Rate Authority to give guidance and oversight to states and monitor insurance market behavior. “If a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.”  The 21% Medicare cuts to providers were rescinded.

The $940 billion over 10 year bill wont see most significant provisions until 2014.
Here’s a quick rundown of some of the expected changes.

Changes This Year:

  • Children under 19 with certain pre-existing conditions could not be barred from coverage.
  • Dependent children will be allowed to continue coverage on their parents’ plans until age 26 as long as they are not eligible for coverage from an employer. Previously, this applied only to full-time students usually up to the age of 23. Dependents previously dropped because they no longer met the old coverage requirements can be picked up by parents’ plans. At least some insurers will be charging adult children the full rate for an individual rather than including them in the family or employee and child rate. This may or may not be beneficial depending on the situation.
  • Subsidies for Medicare Advantage will be cut but the so called donut hole under the Medicare Drug Plan would be closed. Seniors getting a prescription drug benefit under Medicare will get $250 later this year under the reconciliation bill. And starting this year, Medicare beneficiaries can get some free preventive services like routine cancer screenings.
  • The bill creates a temporary pool for “high risk” uninsured. That is, individuals who currently have no coverage due to a pre-existing condition, and who have been uninsured for at least six months, would qualify for coverage under a government plan until the other provisions regulating coverage for pre-existing conditions kick in.
  • There will be no lifetime limits on coverage paid out under insurance plans.
  • Certain tax credits will also go into effect for small businesses.

Long Term Changes:

  • Some medical devices will be newly taxed. Same with drug makers.
  • Beginning in 2013, income over $200,000 for individuals and $250,000 a year for couples would be hit with a 2.35 percent Medicare payroll tax instead of the existing 1.45 percent rate. Those upper incomes would also see 3.8 percent more in taxes on unearned income such as stock dividends and interest income above the thresholds.
  • By 2013, employers will have to redesign their flexible spending accounts to impose a $2,500 annual limit on contributions. There is no limit now, though employers typically impose limits between $4,000 and $5,000.
  • In 2014, citizens will be required to have acceptable coverage or pay a penalty of $95, $325 in 2015, $695 (or up to 2.5 percent of income) in 2016. Families will pay half the amount for children, up to a cap of $2,250 per family. After 2016, penalties are indexed to Consumer Price Index.
  • in 2014, a new affordability test will kick in that could result in employers facing assessments unless they redesign their plans. If the premium paid by an employee exceeds 9.5% of their income and the employee uses federal health insurance premium subsidies to purchase coverage through new state health insurance exchanges, the employer would have to pay an assessment of $3,000 for that employee.
  • In 2014, employers with at least 50 employees that do not offer coverage will pay a tax of $2,000 for each employee without coverage. However, in determining the assessment, an employer’s first 30 employees would be excluded from the calculation. Taking the case of an employer with 100 employees that did not offer coverage, for example, its assessment would be 70 times $2,000.
  • So-called Cadillac health plans would also get dinged. Employer-sponsored plans worth $10,200 for individuals and $27,500 for families would be hit with a 40% excise tax starting in 2018.

Individual Mandate:

  • All individuals will be required to have health insurance, with some exceptions, beginning in 2014. Those who do not have coverage will be required to pay a yearly financial penalty of the greater of $695 per person (up to a maximum of $2,085 per family), or 2.5% of household income, which will be phased-in from 2014-2016. Exceptions will be given for financial hardship and religious objections; and to American Indians; people who have been uninsured for less than three months; if the lowest cost health plan exceeds 8% of income; and if the individual has income below the poverty level ($10,830 for an individual and $22,050 for a family of four in 2009).
  • Premium subsidies will be provided to families with incomes between 100-400% of the poverty level (or $22,050 to $88,200 for a family of four in 2009) to help them purchase insurance through the Exchanges. These subsidies will be offered on a sliding scale basis and will limit the cost of the premium to between 2% of income for those between 100-133% of the poverty level to 9.8% of income for those between 300- 400% of the poverty level.

Employer Requirements:
There is no employer mandate but employers with more than 50 employees will be assessed a fee of $2000 per full-time employee (excluding the first 30 employees from the assessment)

  • Employers that offer coverage will be required to provide a free choice voucher to employees with incomes below 400% of the poverty level if their share of the premium cost is between 8-9.8% of income and who choose to enroll in a plan in an Exchange. Employers that offer a free choice voucher will not be subject to the above penalty.
  • Large employers (more than 200 employees) that offer coverage will be required to automatically enroll employees into the employer’s lowest cost premium plan if the employee does not sign up for employer coverage or does not opt out of coverage.
  • No employer may impose a waiting period that exceeds 90 days

Small Business Tax Credit

  • Provides a two year tax credit to small businesses (less than 25 employees) with aver annual wages of less than $40,000 that purchase health insurance with the tax credit.
  • For tax years 2010 to 2013, the tax credit would be up to 35% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost.
  • For tax years 2014 and later, for eligible businesses that purchase through the Exchanges, the tax credit would be up to 50% of the employer’s contribution toward the employee’s premium if the employer contributes at least 50% of the employee’s total premium cost.
  • The full credit will be available to employers with 10 or few employees and average annual wages of $25,000 and less, the credit phases out as firm size and wages increase.

American Health Benefit Exchanges

  • States will create the American Health Benefits Exchanges where individuals can purchase insurance and separate exchanges for small employers to purchase insurance. These new marketplaces will provide consumers with information to enable them to choose among plans. Premium and cost-sharing subsidies will be available to make coverage more affordable.
  • subsidies will only be available to those without other coverage or whose share of the premium for coverage offered by an employer exceeds 9.8% of their income. Small businesses with up to 100 employees can purchase coverage through the Exchange.
  • the Office of Personnel Management, which administers the Federal Employees Health Benefit Program, will contract with private insurers to offer at least two multi-state plans in each Exchange, including at least one offered by a non-profit entity. In addition, funds will be made available to establish non-profit, member-run health insurance CO-OPs in each state
  • Plans in the Exchanges will be required to offer benefits that meet a minimum set of standards. Insurers will offer four levels of coverage that vary based on premiums, out-of-pocket costs, and benefits beyond the minimum required plus a catastrophic coverage plan.
  • Premium subsidies will be provided to families with incomes between 100-400% of the poverty level (or $22,050 to $88,200 for a family of four in 2009) to help them purchase insurance through the Exchanges. These subsidies will be offered on a sliding scale basis and will limit the cost of the premium to between 2% of income for those between 100-133% of the poverty level to 9.8% of income for those between 300- 400% of the poverty level.
  • Cost-sharing subsidies will also be available to people with incomes between 100-200% of the poverty level to limit out-of-pocket spending.
  • Broker Role – HHS Secretary is required to “establish procedures under which a State may allow agents and brokers to enroll individuals” in Exchanges.
  • Beginning in 2014, the legislation allows states the option of merging the individual and small group markets within the Exchanges.

A more comprehensive chart is available through NAHU (National Association of health Underwriters).

Several states have already challenged this law as an over extension of Federal powers.  Additionally, the requirement of mandating an individual to buy insurance is not so clear.

Many additional questions will arise such as:

-How will plans with Federal minimum standards reconcile with progressive states like NY that have numerous state mandates already?
-Afterall, a Healthy NY plan can operate commercially without mandates that an ordinary group plan must comply with?
-What happens to community rated states like NY?
-Will they drop this rating methodology altogether?
-Since there will be no longer pre-existing conditions is it just cheaper for an individual to just withdraw pay the penalty and then hop in when in need of coverage?

Lastly and importantly, the bending of the cost curve is weak. There is language, however, on attacking fraud & billing abuses as well successful Pharmaceutical concession for Medicare Part D.  But Rome was not built in a day and this lays the foundation for a path of extending coverage to as many people as possible. Heavy topics such as Tort Reform, exorbitant malpractice insurance, federal medical reimbursements cuts must wait for another day.

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