Health Care Reform Act

By Isabel Fitzgerald, CPA

 The Patient and Patient Protection and Affordable Care Act along with the Health Care and Education Reconciliation Act of 2010 completed an overhaul the nation’s health insurance and health delivery systems. Some provisions will take effect this year and others will be phased in over the next 10 years.

Small Business

Small businesses make up approximately 96% of all U.S. businesses. These businesses with fewer than 25 employees and average annual wages of less than $50,000 will be eligible for a credit for the purchase of health insurance for employees. The credit will be 35% and will increase to 50% by 2014. About 4 million businesses will be eligible for this credit and the Congressional Budget Office estimates that the savings for these businesses will be $40 billion by 2019. Another incentive to become effective January 1, 2011 provides small businesses with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits if minimum eligibility and participation requirements are met. In addition, small businesses will be exempt from the mandate that requires larger companies to provide health benefits by 2014 or pay a $2,000 penalty. The penalty will only affect businesses with 50 employees or more.

For the individual

Effective this year, coverage must extend to dependent children until the age of 26. This will affect approximately 2.4 million young adults according to government statistics.

By June, a temporary high-risk pool will be established so that uninsured people with medical conditions can buy insurance coverage at reduced rates. The creation of the internet portal through which small businesses and individuals can obtain information about the insurance coverage options available is already in the works and must be complete by the HHS by July 1st.

Individuals will not be mandated to maintain coverage until 2014. At this point, there will also be subsidies available to those who cannot afford minimum essential coverage based on their income to the federal poverty level (FPL). This is currently set at 100% FPL and climbs through 400% of FPL.

The Healthcare Industry

Starting this fall, there will be a ban on placing lifetime limits on coverage or rescind by insurance companies. By 2014, insurance companies will no longer be able to deny individuals coverage on the basis of having a pre-existing condition.

Physicians will also see a direct effect in the upcoming years. For instance, there will be a 10 percent Medicare bonus for primary-care physicians for the next five years. General surgeons who perform major procedures in a health professional shortage area will also be eligible for a 10 percent bonus payment.

The Healthcare Delivery System

The Health and Human Services Department will be required to integrate reporting on quality measures for the meaningful use of electronic health records. Further, many of the requirements prescribed within the bill will benefit from further streamlining of the current system through the utilization of IT and the elimination of inefficient practices.

• 2010

• Small business credit (35% in 2010)

• Coverage must be extended to dependent children until they turn 26

• Community needs assessments must be conducted by tax-exempt hospitals

• Ban on lifetime limits by insurance companies

• High-risk insurance pools implemented

• Medicare part D drug discount

• 2011

• 10% Medicare bonus for primary care physicians

• 10% Medicare bonus for surgeons practicing in underserved areas

• 50% discount for Medicare recipients for brand-name drugs

• Employer requirement to report value of health plan on W-2

• 2012

• Non-profit insurance co-ops established

• Penalty on hospitals with high rates of preventable readmissions

• 2013

• $2,500 cap on FSAs

• 10% AGI Floor on Itemized Medical Expenses

• 3.8% Tax on Net Investment Income of High Income Taxpayers

• Medicare 0.9% increase for wages over $200,000-$250,000

• Disclosure of financial relationship between providers and drug suppliers and manufacturers

• 2014

• Individual and employer mandates (those employing over 50 employees only)

• State-based exchanges for health insurance

• Insurance companies cannot deny coverage on the basis of pre-existing conditions

• Medicaid expanded to 133% FPL

• 2015

• Reduction of Medicare payments for hospital-acquired conditions

• 2018

• 40% Excise tax “Cadillac tax” on employer-sponsored insurance

• 2020

• Closure of the Medicare “doughnut hole”