President Signs the “Patient Protection and Affordable Care Act”
On Sunday March 21st, the U.S. House of Representatives passed the “Patient Protection and Affordable Care Act” by a vote of 219 to 212. This is the same bill that the Senate passed on December 24, 2009. The bill was signed into law by the President on March 23rd. The House also passed the “Health Care and Education Affordability Reconciliation Act” by a vote of 220 to 211 that makes changes to the Senate “Patient Protection and Affordable Care Act” passed by the House and signed into law by the President. Changes in the reconciliation bill increase the cost of health reform from $875 billion to $938 billion over ten years and reduce the number of people uninsured by 32 million instead of 31 million as under the Senate bill. The reconciliation bill will now be considered by the Senate under the budget reconciliation process that requires a 51 vote majority to pass a bill. Senate leadership has stated that their goal is to pass the reconciliation bill and get it to President Obama before a two week Congressional recess starts on March 26th. The reconciliation bill makes the following changes to the “Patient Protection and Affordable Care Act” signed by the President:
· Financing of Health Reform: The 40% excise tax on “high value” employer-based health plans is delayed from 2013 to 2018 and the definition of a “high value” plan is increased to $10,200 for single coverage and $27,500 for family coverage, with higher levels and adjustments for the age and gender of workers and for high risk occupations. The reconciliation bill includes the Senate increase in the Medicare FICA tax of 0.9% on income over $200,000 for singles and $250,000 for couples and adds a new 2.9% assessment on unearned income for these income earners. The annual fee on health insurers is delayed from 2011 to 2014 when the insurance market reforms become effective and exemptions from the fee for not-for-profit health plans are replaced with an exemption only for certain non-profit Medicaid and Medicare plans. The reconciliation bill increases the annual fee on pharmaceutical manufacturers and delays the fee by one year to 2011. The annual fee on medical device manufacturers is changed to a sales tax of 2.2% on the price of a device, excluding eyeglasses, hearing aids, and other “general goods” purchased over-the-counter. The reconciliation bill also delays the effective date of a new $2,500 limit on FSA contributions from 2011 to 2013.
· Insurance Market: within six months of enactment, all health plans are prohibited from rescinding coverage except for acts of fraud or intentional misrepresentation, required to provide dependent coverage until the age of 26, and prohibited from imposing lifetime benefit limits under the reconciliation bill. Annual benefit limits are prohibited starting in 2014, but restrictions are placed on the use of annual limits by all group plans within six months of enactment. The reconciliation bill clarifies that all plans, including grandfathered plans, are prohibited from applying pre-existing condition exclusions starting in 2014.
· Coverage Mandates, Penalties, and Subsidies: Individuals are required to have coverage or pay a penalty starting in 2014. The penalty is the greater of a flat dollar amount ($95 in 2014 phased-in to $695 by 2016) or a percent of income (1.0% in 2014 phased-in to 2.5% by 2016). Individuals up to 400% of the federal poverty level ($88,000 for a family of four) are eligible for premium and cost-sharing subsidies. The subsidies under the reconciliation bill are slightly higher than the Senate bill. Employers are not required to offer coverage, but those with 50 or more employees must pay $2,000 per employee obtaining a subsidized plan through an Exchange (employers may exempt 30 employees from this payment calculation). Employers are no longer assessed a fee for imposing a waiting period exceeding 60 days, but waiting periods exceeding 90 days are prohibited.
· Medicaid: Medicaid eligibility is expanded to 133% of the federal poverty level for all individuals in 2014 with full federal funding of the expansion until 2017 for states that have not expanded Medicaid eligibility to this population (95% federal funding in 2018 and 2019, and 90% federal funding thereafter). For states that have already implemented a Medicaid expansion for childless adults and parents, the reconciliation bill reduces state spending on the adult expansion population by 50% in 2013 and over time phases in cost-sharing for these states to equal that of non-expansion states in 2019, so that all states receive the same federal funding match after 2019 for childless adults. The reconciliation bill also sets a minimum Medicaid payment level for primary care that increases payment rates for a two year period
· Medicare: The payment structure for Medicare Advantage is changed by freezing 2011 Medicare Advantage payments at 2010 levels and phasing-in new payment benchmarks ranging from 95% of fee-for-service Medicare payments in high-cost areas and 115% of fee-for-service Medicare payments in low-cost areas starting in 2012. Medicare Advantage plans with high quality or an improvement in quality are eligible for payment bonuses. By 2014, Medicare Advantage plans are required have an 85% medical loss ratio. The Part D “donut hole” or coverage gap is closed by 2020 by reducing the gap by $250 in 2010 and reducing coinsurance to 25%. The proposal also delays the elimination of the income subsidy exclusion for employers who maintain prescription drug plans for Part D eligible retirees until 2013.