US Health Reform - Improving Affordability & Accountability

The Patient Protection and Affordable Care Act that President Obama signed into law in March 2010 seeks to expand health insurance coverage, control health care costs, and improve the health care delivery system. It is projected that the $940 billion healthcare reform package will extend insurance coverage to roughly 32 million additional Americans.

While subsidies will help the middle classes to buy policies on new competitive exchanges, small business owners will be eligible for billions in tax credits to help offer insurance coverage to employees. The reforms require most Americans to obtain health insurance by 2014 or pay a fine.

2010 – 2020: Key Elements

Medicare and Medicaid Reforms

Medicare members who reach the ‘donut hole’ will get a $250 rebate in 2010. Medicare beneficiaries who reach the donut hole will get a 50% discount on brand-name drugs in 2011. Medicare will provide additional discounts on the cost of both brand name and generic drugs.
Medicare reforms will change the way that hospitals are being paid. Medicare Advantage plans will begin restructure of payments and freeze 2011 payments at the 2010 level.
Starting 2011, primary care doctors and general surgeons practicing in health professional shortage areas like rural communities will receive a 10% Medicare bonus
In 2012, hospitals with high rates of preventable readmissions will get lower Medicare payments. Providers, organized as ‘accountable care organizations’, will share in the cost savings they achieve for the Medicare program and have a greater responsibility to work together to ensure quality patient care.
In 2013, employers who maintain prescription drug plans for their Medicare Part D-eligible retirees will not face any deduction for expenses allocable to Medicare Part D.
Individuals with an annual income of $200,000 or couples making $250,000 have a higher Medicare payroll tax in 2013.
Starting 2014, Medicaid will broaden coverage and include low-income individuals under age 65 up to 133% of the federal poverty level (about $28,300 for a family of four).
A minimum MLR of 85% is required for Medicare Advantage plans in 2014
The donut hole coverage gap in Medicare prescription benefit will be completely phased out. Seniors continue to pay the standard 25% of their drug costs until they reach the catastrophic spending limit in 2020.

Insurance Reforms

Starting 2010, health plans are no longer allowed to impose lifetime dollar limits on essential benefits. The ban on lifetime or annual dollar limits on essential health benefits will be phased in over three years with a full ban taking effect in 2014. For the plan years before January 1, 2014, insurers offering group or individual health insurance coverage may impose restricted yearly limits on the dollar value of certain “essential health benefits”.
No coverage rescissions/cancellations are allowed except in the case of fraud or intentional misrepresentation from 2010 on.
For plan years beginning on or after September 23, 2010, there are no cost-sharing obligations for preventive services in network. The preventive care coverage requirement applies to both fully insured and self-funded plans, but not grandfathered plans.
New plans and certain existing plans that offer dependent coverage will have to cover an enrollee’s dependent children until age 26; if an adult child is covered under another employer-sponsored health plan, insurers can generally refuse coverage, but only until 2014.
Starting 2010, all medical plans will have to cover children under the age of 19 regardless of pre-existing conditions (a pre-existing condition is a health condition that existed prior to the application for a health insurance plan).
Enhanced internal and external appeal processes are in place from 2010 onwards.
Beginning in January 2011, health plans will be required to report their medical loss ratio (MLR is the percentage of each premium dollar that an insurer spends on paying actual medical claims). In 2012, MLR is mandatory for all health plans.
From 2013, contributions to flexible spending accounts (FSAs) will be limited to $2,500 annually, and the threshold for deducting medical expenses on taxes will go up from 7.5% to 10% of income.
Insurance reforms in 2014: state individual and small group health insurance exchanges will become operational, health insurers will face new taxes, new health plan disclosure is necessary, and lifetime and annual dollar limits for essential benefits or pre-existing condition exclusions will be prohibited.

Other Changes

In 2010: temporary retiree reinsurance program with limited funding; national risk pool and small business tax credit program
In 2011: voluntary long-term care insurance program with cash benefit for to help the disabled stay in their homes or pay nursing home costs; more funding for community health centers to provide care for low-income and uninsured people; exclusion of costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a HSA or FSA; Employers may report the value of health care benefits on employees’ W2 tax statements. This is mandatory after 2011.
In 2012: hospitals, doctors and payers encouraged to join forces in 'accountable care organizations’; new annual fees are imposed on the pharmaceutical manufacturing sector.
In 2013: Medical device manufacturers will pay a 2.9% sales tax on medical devices; with exemptions for some.
2018 will see a ‘Cadillac tax’ on employer-sponsored plans that offer policies with generous coverage levels. Employers providing insurance costing more than $10,200 for individuals or $27,500 per family have to pay a 40% tax on the excess cost of the premium.

The new health reform measures aim to make insurance more affordable and put individuals, families and small business owners in control of their health care. It makes insurance cheaper by reducing premium costs for middle income families and small employers.