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Patient Protection and Affordable Care Act of 2010

The bill, signed into law on March 23, 2010, contains provisions that will go into effect on various timelines, ranging from immediately upon signing of the bill to as far out as 2018.

Below are some of the key provisions of the bill. For simplicity, the amendments in the Health Care and Education Reconciliation Act of 2010 are integrated into this timeline.

Effective immediately

  • The Food and Drug Administration is now authorized to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed.
  • The Medicaid drug rebate for brand name drugs is increased to 23.1% (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1%), and the rebate is extended to Medicaid managed care plans; the Medicaid rebate for non-innovator, multiple source drugs is increased to 13% of average manufacturer price.
  • Support comparative effectiveness research by establishing a non-profit Patient-Centered Outcomes Research Institute.
  • Creation of task forces on Preventive Services and Community Preventive Services to develop, update, and disseminate evidenced-based recommendations on the use of clinical and community prevention services.
  • The Indian Health Care Improvement Act is reauthorized and amended.

Effective June 21, 2010

  • Adults with pre-existing conditions will be eligible to join a temporary high-risk pool, which will be superseded by the health care exchange in 2014. To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months. There is no age requirement. The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allow premiums to vary by age (4:1), geographic area, and family composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.

Effective July 1, 2010

  • The President will have established, within the Department of Health and Human Services, a council to be known as the National Prevention, Health Promotion and Public Health Council to help begin to develop a National Prevention and Health Promotion Strategy. The Surgeon General shall serve as the Chairperson of the new Council.

Effective September 23, 2010

  • Insurance companies will be prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays in new policies issued.
  • Dependents (children) will be permitted to remain on their parents’ insurance plan until their 26th birthday, and regulations implemented under the Act include dependents that no longer live with their parents, are not a dependent on a parent’s tax return, are no longer a student, or are married.
  • Insurers are prohibited from excluding pre-existing medical conditions (except in grandfathered individual health insurance plans) for children under the age of 19.
  • Insurers are prohibited from charging co-payments or deductibles for Level A or Level B preventive care and medical screenings on all new insurance plans.
  • Individuals affected by the Medicare Part D coverage gap will receive a $250 rebate, and 50% of the gap will be eliminated in 2011. The gap will be totally eliminated by 2020.
  • Insurers’ abilities to enforce annual spending caps will be restricted, and completely prohibited by 2014.
  • Insurers are prohibited from dropping policyholders when they get sick.
  • Insurers are required to reveal details about administrative and executive expenditures.
  • Insurers are required to implement an appeals process for coverage determination and claims on all new plans.
  • Indoor tanning services are subjected to a 10% service tax.
  • Enhanced methods of fraud detection are implemented.
  • Medicare is expanded to small, rural hospitals and facilities.
  • Medicare patients with chronic illnesses must be monitored/evaluated on a 3 month basis for coverage of the medications for treatment of such illnesses.
  • Non-profit Blue Cross insurers are required to maintain a loss ratio (money spent on procedures over money incoming) of 85% or higher to take advantage of IRS tax benefits.
  • Companies which provide early retiree benefits for individuals aged 55–64 are eligible to participate in a temporary program which reduces premium costs.
  • A new website installed by the Secretary of Health and Human Services will provide consumer insurance information for individuals and small businesses in all states.
  • A temporary credit program is established to encourage private investment in new therapies for disease treatment and prevention.

Effective by January 1, 2011

  • Employers must disclose the value of the benefits they provided beginning in 2011 for each employee’s health insurance coverage on the employees’ annual Form W-2′s
  • Insurers will be required to spend 85% of large-group and 80% of small-group and individual plan premiums (with certain adjustments) on health care or to improve health-care quality, or return the difference to the customer as a rebate.
  • The Centers for Medicare and Medicaid Services is responsible for developing the Center for Medicare and Medicaid Innovation and overseeing the testing of innovative payment and delivery models.
  • Flexible spending accounts, healthcare reimbursement arrangements and health savings accounts cannot be used to pay for over the counter drugs, purchased without a prescription, except for insulin.

Effective by January 1, 2012

  • New tax reporting changes come into effect which aims to prevent tax evasion by corporations. The provision is expected to raise $17 billion over 10 years. Under the existing law, businesses have to notify the IRS of certain payments to individuals for certain services or property over a reporting threshold: from this date the law is changed so that payments to corporations must also be reported.

Effective by January 1, 2013

  • Self-employment and wages of individuals above $200,000 annually (or of families above $250,000 annually) will be subject to an additional tax of 0.5%.

Effective by January 1, 2014

  • Insurers are prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions.
  • Insurers are prohibited from establishing annual spending caps.
  • Expand Medicaid eligibility; individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children.
  • Two years of tax credits will be offered to qualified small businesses. In order to receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full time equivalent (“FTE”) employee, excluding the owner of the business, of less than $25,000 and have fewer than 11 FTEs. The subsidy is reduced by 6.7% per additional employee and 4% per additional $1,000 of average compensation. A 16 FTE firm with a $35,000 average salary would be entitled to a 10% premium subsidy.
  • Impose a $2000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill).
  • Set a maximum of $2000 annual deductible for a plan covering a single individual or $4000 annual deductible for any other plan. These limits can be increased under rules set in section 1302.
  • Impose an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance; this will rise to $695, or 2.5% of income, by 2016. This is an individual limit; families have a limit of $2,085. Exemptions to the fine in cases of financial hardship or religious beliefs are permitted.
  • Under the CLASS Act provision, creates a new voluntary long-term care insurance program; enrollees who have paid premiums into the program and become eligible (due to disability or chronic illnesses) would receive benefits that help pay for assistance in the home or in a facility.
  • Employed individuals who pay more than 9.5% of their income on health insurance premiums will be permitted to purchase insurance policies from a state-controlled health insurance option.
  • Pay for new spending, in part, through spending and coverage cuts in Medicare Advantage, slowing the growth of Medicare provider payments (in part through the creation of a new Independent Payment Advisory Board), reducing Medicare and Medicaid drug reimbursement rate, cutting other Medicare and Medicaid spending.
  • Revenue increases from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs.
  • Chain restaurants and food vendors with 20 or more locations are required to display the caloric content of their foods on menus, drive-through menus, and vending machines. Additional information, such as saturated fat, carbohydrate, and sodium content, must also be made available upon request.
  • Establish health insurance exchanges, and subsidization of insurance premiums for individuals with income up to 400% of the poverty line, as well as single adults. Section 1401(36B) of PPACA explains that the subsidy will be provided as a advanceable, refundable tax credit and gives a formula for its calculation. Refundable tax credit is a way to provide government benefit to people even with no tax liability (example: Child Tax Credit). According to White House and Congressional Budget Office estimates, in 2016 the income-based premium caps for a “silver” healthcare plan for family of four would be the following:
Income as a percentage of the federal poverty level Premium Cap as a Share of Income Middle of Income Range (family of 4) Avg Annual Enrollee Premium Premium Subsidy (share of premium) Avg Cost-Sharing Subsidy
100-150% 2.1-4.7% $30,000 $600 96% $3,300
150-200% 4.7-6.5% $42,000 $2,400 83% $1,800
200-250% 6.5-8.4% $54,000 $4,000 72% $0
250-300% 8.4-10.2% $66,000 $6,100 57% $0
300-350% 10.2% $78,000 $9,200 44% $0
350-400% 10.2% $90,100 $14,100 35% $0

Note: In 2016, the FPL is projected to equal about $11,800 for a single person and about $24,000 for family of four.

  • Members of Congress and their staff will only be offered health care plans through the exchange or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use).
  • A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue.
  • Most medical devices become subject to a 2.3% excise tax collected at the time of purchase. (Reduced by the reconciliation act to 2.3% from 2.6%)
  • Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue.
  • The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5% to 10% of earned income.

Effective by January 1, 2017

  • A state may apply to the Secretary of Health & Human Services for a waiver of certain sections in the law, with respect to that state, such as the individual mandate, provided that the state develops a detailed alternative that “will provide coverage that is at least as comprehensive” and “at least as affordable” for “at least a comparable number of its residents” as the waived provisions. The decision of whether to grant this waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period.

Effective by 2018

  • All existing health insurance plans must cover approved preventive care and checkups without co-payment.
  • A new 40% excise tax on high cost (“Cadillac”) insurance plans is introduced. The tax (as amended by the reconciliation bill) is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their employees may value their coverage using the age and gender demographics of a national risk pool.
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