ABC's of Health Care Reform and You

Cost

The cost of the Affordable Care Act is estimated at $940 billion when fully implemented in 2019. It is financed through a variety of taxes, Medicare/Medicaid payment cuts, and new fees. The pharmaceutical industry, the insurance industry, the hospital industry, and the medical device industry will all fund the law. Further, businesses and individuals will pay penalties for insurance non-compliance. More funding will come by way of the recovery of proceeds from fraud and abuse efforts under the Medicare and Medicaid programs.

January 1, 2013, a 2.3 percent sales tax on medical devices used by hospitals and doctors went into effect. Some common items are exempt. Also effective that day is a 0.9 percent Medicare payroll tax on wage income above $200,000 for an individual and $250,000 for couples. There is also a 3.8 percent levy on investment income that applies to individuals making more than $200,000 or $250,000 for married couples. Gains on home sales are excluded, in most cases. (Update added 1/4/13)

In 2015, a two-year moratorium was imposed on the medical device tax. (Upated 8/5/16)

In addition, new ways in which care will be delivered and reimbursed will result in savings. This is where the coordination of care, across all provider settings, comes into play. You may have heard terms like Accountable Care Organizations and Medical Homes. These are settings in which all types of health care providers work together to provide and monitor a patient’s care. Electronic medical records will help providers better communicate with one another and keep track of a patient’s medications, test results, and other crucial personal health information. The result will be less duplication of tests, fewer medication errors – all contributing to savings for the health care system and its patients. Other changes in how hospitals and health care providers get paid for caring for Medicare patients include penalties for preventable hospital readmissions and payment based on performance, known as value-based purchasing. This means doctors and hospitals have to meet pre- determined quality care criteria in order to receive payment. Other Medicare payment reforms being tested and/or aready in place include bundled payments – one provider receives payment and disburses payment to other providers involved for an entire episode of care beginning three days before an admission, during the admission, and 30 days after the admission.

With more people carrying insurance and the availability of insurance exchanges selling insurance to individuals and small businessess, the competitive forces of a free market should control costs and make insurance more affordable for everyone.

The law requires hospitals to make available annually a list of their standard charges for services. This helps consumers budget appropriately and make informed choices. However, the regulations guiding this section of the law have not yet been written. (Update added 12/20/13)

In June 2013, the healthcare.gov website was re-vamped and is now more consumer-focused and offers a 24/7 consumer call center 1-800-318-2596/TTY: 1-855-889-4325. Also offers online CHAT feature.

(Updated 7/3/13)

In July 2013, New York State notified the Nassau-Suffolk Hospital Council (NSHC) that it was selected as a Navigator Agency for the exchange for the Long Island region - Nassau and Suffolk counties. The NSHC has state trained and certified enrollers ready to assist individuals, families, and businesses in understanding the insurance options offered on the exchange and in purchasing insurance. The navigators screen individuals via their income for eligibility for subsidies that will help them afford insurance or whether their income places them in the Medicaid insurance program. The navigators also help small business owners determine if they are eligible for any tax credits. Seniors and disabled in the Medicare program will continue to be covered under the Medicare insurance program. (Update added 11/22/13)

Building on the announcement from 2013 that the administration will allow individual insurance policies cancelled because of their inability to meet federal minimum coverage requirements an extension for one year, a subsequent rule change allows these cancelled policies to be renewed for coverage through 2017. This two-year extension applies to both individual and small group policies that began on or before October 1, 2016. Granting of the extension is at the discretion of each state’s insurance commissioner and then private insurers have the option to renew or not renew these policies for a one-year time period. New York State has not granted extensions. However, on December 19, 2013, the Department of Health and Human Services said consumers whose coverage is cancelled because it does not meet minimum ACA requirements can buy catastrophic coverage if all other coverage on marketplace is too expensive. (Update added 3/13/14)

Uninsured/Young Adults/Adults Under 65

  • Everyone is required to maintain minimum essential health coverage beginning in 2014 or pay a penalty. The penalties phased in starting in 2014 when they were set at $95 per individual or 1% of taxable income. This increases to $325 or 2% of income in 2015 and then $695 or 2.5% of income in 2016. Penalties for families are capped at three times the individual penalty.
  • Exemptions are available if coverage is deemed unaffordable – defined as a required premium cost in excess of 9.5% of household income (based on the cost of an individual plan).
  • For low-income individuals not eligible for Medicaid, refundable tax credits are provided to subsidize premium costs on a sliding scale. This applies to those whose incomes fall between 138% and 400% of the federal poverty level.
  • A March 2012 federal rule establishes throughout the nation a federal minimum Medicaid income eligibility level of 138% of the federal poverty level, beginning 2014. New York had already expanded coverage for childless adults to 133% of the federal poverty level. The federal government will help states pay for this expansion. (Update added 3/23/12)
  • Effective January 1, 2014, the federal government will pay 100 percent of the cost of certain newly eligible adult Medicaid beneficiaries. These payments will be in effect through 2016, phasing down to a 90 percent matching rate by 2020, and remains there permanently. New York prior to the ACA expanded Medicaid eligibility to 133% of the federal poverty level (FPL) for childless adults. Beginning 2014, the federal eligibility standard is 138% of the FPL. (Update added 4/9/13)
  • Effective 1/1/13, the amount of salary contributions that can be made to health flexible spending accounts (FSA) is capped at $2,500. This will help fund the law, because the amount of tax-deferred income will lessen, thus increasing taxes the government can collect.
  • A tax on high-cost health plans will be imposed beginning 2018. This will help fund the cost of the law. However, in 2015 Congress delayed the start of the Cadillac tax for two years. (Update 8/5/16).
  • Beginning in 2013 and through 2019, medical device manufacturers will pay additional taxes for each device sold. Some common items are exempt. Effective January 1, 2013, a 2.3 percent sales tax on medical devices used by hospitals and doctors went into effect. (Update added 1/4/13)
  • In November 2015, Congress imposed a two-year moratorium on the medical device tax. (Update 8/5/16).
  • A 3.8 percent levy on investment income that applies to individuals making more than $200,000 or $250,000 for married couples is effective 1/1/13. Gains on home sales are excluded, in most cases. (Update added 1/4/13)
  • The New York State Department of Financial Services approves health insurance rates for insurers seeking to offer coverage through New York’s Health insurance marketplace. For more information go to http://www.healthcarereform.ny.gov/health_insurance_exchange. (Update added 11/5/14)
  • In December 2013, the U.S. Department of Health and Human Services said consumers whose coverage cancelled because it did not meet minimum federal requirements could buy catastrophic level coverage if all other coverage on the marketplace is determined to be too expensive. This level coverage had been available only to those aged 30 and under. (Update added 2/26/14)
  • The IRS issued a ruling clarifying that the practice of large employers providing full-time employees with a tax-free contribution of cash to help pay premiums does not meet requirements of the law. Some employers had seen this practice, known as an employer payment plan, as a way to steer employees to plans sold inside or outside the exchanges and thereby fulfill the large employers’ requirement to provide insurance to employees. Employers that engage in this practice could be subject to a tax penalty of $100 a day – or $36,500 a year – for each employee who goes to the individual marketplace. The IRS says these employer payment plans do not satisfy requirements of the ACA. That is because under the ACA, these arrangements do not guarantee that the preventive services and no cap on the annual dollar amount of benefits required under the ACA can be met. (Updated 6/18/14)

Seniors/Disabled

  • In 2010, some Medicare beneficiaries who hit the donut hole for prescription drug coverage received a $250 rebate. A gradual phase-out of the gap is achieved between 2011 and 2019.
  • Beginning in 2011, brand name drugs for Medicare beneficiaries became cheaper through a combination of manufactuer discounts and federal subsidies.
  • A tax on brand-name pharmaceuticals began in 2011. This will help fund the cost of the law.
  • High-income earners pay a higher Part A hospital insurance tax. A 0.9 percent Medicare payroll tax on wage income above $200,000 for an individual and $250,000 for couples became effective 1/1/13. (Update added 1/4/13)

Chronic Disease Sufferers

  • Better coordinated care will greatly help chronic disease sufferers manage their conditions. This in turn will result in better outcomes for the patient and cost savings throughout the health care delivery system.
  • The government will fund test programs aimed at improving the health of those at-risk for chronic disease. These programs would provide wellness and prevention plans and would be carried out at selected community health centers.
  • In December 2013, the U.S. Department of Health and Human Services said consumers whose coverage cancelled because it did not meet minimum federal requirements could buy catastrophic level coverage if all other coverage on the marketplace is determined to be too expensive. This level coverage had been available only to those aged 30 and under. (Update added 2/26/14)

Children

  • The law calls for a test project (worth $25 million 2010-2014) aimed at reducing childhood obesity in the United States.

Businesses

  • Tax credits for small businesses that purchase employee health insurance became available in 2010.
  • Credits apply to employers with 25 or fewer employees, who purchase coverage for their employees and have annual wages of less than $50,000. The employer must make a premium contribution of at least 50% to be eligible.
  • For employers with fewer than 10 employees, a tax credit of 35% of their premium costs will be available for years 2010 – 2013. For 2014 and 2015, tax credits up to 50% are available, with employers of 10 or fewer employees and salaries of less than $25,000 eligible for the full credit.
  • Large employers (200 or more employees) will be required to auto-enroll all full-time employees in coverage. This was repealed in November 2015. (Update 8/5/16)
  • Employers of more than 50 full-time employees that do not offer coverage will pay a penalty of $2,000 for each full-time employee. The assessment is not applied to the first 30 employees. Further, the annual fee for employers (50+ FTEs) who offer coverage deemed unaffordable or that does not meet the minimum standard benefit requirements is the lesser of $3,000 for each of those employees receiving assistance from the individual marketplace or $750 per full time employee in total. If the employer has at least one employee getting help paying for their insurance premium from the individual marketplace this penalty kicks in. An employer-sponsored plan is deemed unaffordable to an employee if the employee’s premium cost (based on the premium cost for an available individual plan) exceeds 9.5% of that employee’s total household income. (Updated 11/5/14)
  • Effective January 1, 2013, a 2.3 percent sales tax on medical devices used by hospitals and doctors went into effect. (Update added 1/4/13)
  • In November 2015, Congress imposed a two-year moratorium on the medical device tax. (Update 8/5/16).
  • On July 2, 2013, the Department of the Treasury announced that it would delay for one year, until January 2015, the Affordable Care Act mandate that employers (50+ employees) provide coverage for their workers or pay penalties. (Update added 7/23/13)
  • A tax, known as the reinsurance fee, requires self-insured organizations, such as unions and some large companies, to pay a fee covered life on a health plan. The fee for 2014 was $63 per covered life; $44 per covered life in 2015; and $27 per covered life in 2016. The fee is expected to raise $25 billion over three years, with the funds going to insurance companies to offset the cost of covering pre-existing conditions and other mandatory benefits. (Update added 8/5/16)
  • Delay of employer mandate for businesses with between 50 and 100 employees tok effect in 2016. This follows on initial change announced in 2013 that delayed the employer mandate for all employers until 2015. The administration essentially allowed for a phase in of the employer mandate over a two-year period, based on the size of the firm. The administration says it made these changes to help businesses adjust to the law. (Update added 2/26/14)
  • In December 2013, the U.S. Department of Health and Human Services said consumers whose coverage cancelled because it did not meet minimum federal requirements could buy catastrophic level coverage if all other coverage on the marketplace is determined to be too expensive. This level coverage had been available only to those aged 30 and under. (Update added 2/26/14)
  • The IRS recently issued a ruling clarifying that the practice of large employers providing full-time employees with a tax-free contribution of cash to help pay premiums does not meet requirements of the law. Some employers had seen this practice, known as an employer payment plan, as a way to steer employees to plans sold inside or outside the exchanges and thereby fulfill the large employers’ requirement to provide insurance to employees. Employers that engage in this practice could be subject to a tax penalty of $100 a day – or $36,500 a year – for each employee who goes to the individual marketplace. The IRS says these employer payment plans do not satisfy requirements of the ACA. That is because under the ACA, these arrangements do not guarantee that the preventive services and no cap on the annual dollar amount of benefits required under the ACA can be met. (Updated 6/18/14)

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