The newly-enacted Patient Protection and Affordable Care Act (H.R. 3590), brings with it sweeping health care reforms which will undoubtedly alter the way every employer does business. The changes brought by this legislation, designed to expand health care coverage to 32 million Americans who are currently uninsured, supposedly will cost $940 billion dollars over the next 10 years, and most certainly will bring massive changes to the health care insurance industry. The legislation has varying effective dates, with some provisions taking immediate effect, while many others have staggered effective dates between 2011 and 2016.
Below is a summary of 10 of the most significant provisions of the bill.
1. State Insurance Exchanges – The legislation provides that uninsured individuals, self-employed individuals and some employers may purchase insurance through state-based exchanges. These exchanges will be subsidized by the federal government and will essentially be a marketplace for insurance in each state. Individuals may also be eligible for a federal subsidy so long as the individual (or family) earns between 100 and 400 percent of the poverty level (the current poverty level is $22,050 for a family of four).
2. Changes Regarding Pre-Existing Conditions – Beginning six months after the bill's passage, insurance companies may no longer deny children coverage based on a pre-existing condition, and starting in 2014, insurance companies may not deny coverage to anyone based on a pre-existing condition.
3. Changes Regarding Covered Dependants – Another massive change for insurance policies will affect how long children may remain as dependants on their parents' insurance plans. Insurance companies must allow dependent children covered by their parents' insurance plans to remain covered until the age of 26, specifically on plans that have a year beginning at least six months after the enactment of the Act.
4. Individual Insurance Mandate – By 2014, nearly every individual (with a few minor exceptions based on income) must purchase health insurance, or face a fine of the greater of $695 per person (max of $2,085 per family), or 2.5 percent of the household income. The fine will first be enforced in 2014, but will begin at $95 per person (or 1 percent of the household income) before increasing to the $695/2.5 percent level in 2016.
5. Employer Insurance "Mandate" – Beginning in 2014, most employers with 50 or more employees must provide them insurance coverage, or face a fine of $2,000 for some employees. If an employee earns four times or less of the national poverty level (about $40,000 or less), and the employer's plan costs more than 8 percent of their income level, the employee can opt out of their employer's plan, and the employer must provide the employee with a voucher paying them the equivalent of the amount the employer pays for coverage. Another employer insurance mandate requires that employers with 200 or more full time employees must automatically enroll new employees in one of their plans, giving the employee the option to opt out.
6. Small Employer Tax Credits – Another provision of importance provides that small businesses may receive a tax credit of up to 35 percent of their paid premiums if they offer health care coverage to their employees. This provision will apply to companies with less than 25 employees and whose average yearly wages are less than $50,000. This tax credit is currently scheduled to exist only from 2010 through 2013.
7. Breastfeeding Time Covered by FLSA – A little known provision of the legislation amends the Fair Labor Standards Act, requiring that employers provide "reasonable" unpaid breaks for employees to express breast milk for a period of one year after the child's birth. This bill provides that such "reasonable" breaks must be provided every time the employee needs to express milk. The Act also requires that employers provide female employees with a private location for these breaks, and this location may not be a bathroom. For employers with less than 50 employees, this provision will not apply if the employer can show that these requirements will cause an undue hardship, such as significant difficulty or expense to the company due to its size or financial resources.
8. Expansion of Medicaid – Beginning in 2014, states will expand Medicaid to most individuals who earn up to 133 percent (about $29,000) of the federal poverty level. The federal government will provide 100 percent of the cost of covering the new individuals for the years 2014-2016. Illegal immigrants will not be eligible for Medicaid.
9. No Restrictive Annual Limits – For plans that begin six months after the date of the bill's enactment, they are prohibited from having a lifetime limit on coverage, or a restrictive annual limit, to be determined at a later time.
10. Higher Taxes for High Income Families and Individuals – Beginning in 2013, the Medicare Payroll Tax will expand from 2.9 to 3.8 percent. In addition, for families earning over $250,000, and individuals earning over $200,000 per year, the Act includes a 3.8 percent tax on investment income attributable to interest, capital gains, dividends, annuities and royalties. Another provision is effective in 2018, when a 40 percent excise tax is imposed on high-end "Cadillac" insurance plans.
There are currently several states challenging the constitutionality of the Patient Protection and Affordable Care Act. We will keep you updated as those lawsuits continue to filter their way into federal court.