The massive overhaul of the nation’s health care system signed into law on March 23, 2010, the Patient Protection and Affordable Care Act (HR 3590), is still subject to further revision as the Senate continues to debate significant modifications to the bill in the proposed Health Care and Education Affordability Reconciliation Act (HR 4872) (Reconciliation Bill). After the Senate passes a series of changes to the Reconciliation Bill, it will have to go back to the House of Representatives for a final vote. No matter the outcome of the Reconciliation Bill, the new health care law will affect employers, health care providers, beneficiaries and taxpayers as it rolls into gradual effect over the next eight years.
By October of 2010, small businesses that provide coverage for employees will be eligible for subsidies, and insurers will be: (1) required to permit older children to continue on their parent’s policy until the age of 26; and (2) forbidden from denying coverage to children with pre-existing conditions. Certain other provisions affecting providers under Medicare begin this year as well, such as a ban on new hospital investments by referring physicians.
In 2013, new Medicare taxes are imposed on individuals earning more than $250,000 a year on wages (an increase of .9 percent). The Reconciliation Bill would add a tax on unearned income (new taxes of 3.8 percent). Importantly, in 2013 Medicare will launch a pilot program to test paying doctors and hospitals a lump sum amount for all physician and hospital services related to a hospitalization as a way of controlling costs and fostering more integrated care. This project is seen as an important step in moving away from traditional fee for service payment systems and toward more integrated and cooperative care and will create the opportunity for new methods of integration within the healthcare industry.
In 2014, some of the most significant and heavily publicized programs take effect. Most Americans will be required to enroll in or purchase health insurance. Significant subsidies kick in for those with low and middle income, while Medicaid eligibility expands to cover those at 133 percent of the federal poverty level. Insurers will be barred from denying coverage to anyone with pre-existing conditions, and states will be permitted to set up insurance exchanges to enable which individuals and employers to shop for what is hoped to be competitive health care coverage. Citizens and purchasers will be permitted to form co-ops with an eye toward creating greater competition, while an independent Medicare board will report to Congress in the event that Medicare spending rises faster than inflation.
In 2014, penalties begin for those individuals who do not purchase insurance. A fine for individuals will be phased in, eventually reaching the greater of $750 per year or 2 percent of taxable income, while employers with more than 50 employees that do not provide coverage consistent with a defined set of criteria will have to pay a fine as well, but only for those employees in an income bracket that affords them tax credits for purchasing insurance, and only after excluding the first 30 employees.
By 2018, an excise tax of 40 percent will be imposed on what have been termed “Cadillac Plans,” which provide coverage with annual premiums of $23,000 for families and $8,500 for individuals. The tax on these plans is one of the subjects of the Reconciliation Act.
Debate ongoing in the Senate on the Reconciliation Bill is expected to focus on a variety of changes to the newly-enacted law that House Democrats would have preferred to pass immediately as amendments to the bill that became law. Because the Reconciliation Bill is now unable to be passed in the Senate as is, it will be subject to another vote in the House.
The subjects considered in the Reconciliation Bill include, in addition to changes to the tax on “Cadillac Plans”: clarifications to employer responsibilities and fines; changes to the fine paid by individuals for failure to purchase insurance; certain limitations on health care reimbursement accounts; and new taxes to help fund the public programs. Given the potential for these substantial changes, it is difficult to determine precisely how the various fines, taxes and benefits associated with health care reform will ultimately be resolved, which makes it difficult for individuals and employers to plan for the future.
Attorneys General in several states filed suit on March 23, 2010, several hours after seeking to have the new law declared unconstitutional. No matter the fate of that litigation, much of the new law dealing with expansions to Medicare and Medicaid, funds to fight fraud and abuse, and government demonstration projects and exchanges, are likely to be unaffected, as they deal with federal funds or traditional federal matters.