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Patient Protection and Affordable Care Act (PPACA)

The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or “Obamacare,” is a United States federal statute signed into law by President Barack Obama on March 23, 2010.

Goals:

  • increasing the quality and affordability of health insurance,
  • lowering the uninsured rate by expanding public and private insurance coverage, and
  • reducing the costs of healthcare for individuals and the government.

Mechanisms:

  • mandates,
  • subsidies,
  • insurance exchanges—meant to increase coverage and affordability, and
  • reforms aimed to reduce costs and improve healthcare outcomes by shifting the system towards quality over quantity.

As of May 2014, approximately 20 million Americans had gained health insurance coverage under the ACA, and the percentage of uninsured Americans dropped from 18% in 2013 to 13.4% in May 2014.

Some of the Key Provisions:

  • Policies issued before 2010 are exempted by a grandfather clause from many of the changes to insurance standards, but they are affected by other provisions.
  • Guaranteed issue prohibits insurers from denying coverage to individuals due to pre-existing conditions, and a partial community rating requires insurers to offer the same premium price to all applicants of the same age and geographical location without regard to gender or most preexisting conditions.
  • Minimum standards for health insurance policies are established.
  • An individual mandate requires all individuals not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs to secure an approved private-insurance policy or pay a penalty, unless the applicable individual has a financial hardship or is a member of a recognized religious sect exempted by the Internal Revenue Service. The law includes subsidies to help people with low incomes comply with the mandate.
  • Health insurance exchanges – the new avenue by which individuals and small businesses in every state can compare policies and buy insurance. [Note: For plans starting in 2015, the proposed enrollment period is November 15, 2014–February 15, 2015.
  • Low-income individuals and families whose incomes are between 100% and 400% of the federal poverty level eligible for federal subsidies on a sliding scale if they purchase insurance via an exchange. Small businesses will be eligible for subsidies [Small Business Health Care Tax Credit for Small Employers via Form 990T].
  • Reforms to the Medicare payment system meant to promote greater efficiency in the healthcare delivery system. In addition, the Medicare Part D coverage gap (commonly called the “donut hole”) will shrink incrementally, closing completely by January 1, 2020.
  • Businesses which employ 50 or more people but do not offer health insurance to their full-time employees will pay a tax penalty if the government has subsidized a full-time employee’s healthcare through tax deductions or other means. This is commonly known as the employer mandate. Enforcement begins in calendar year 2015.
  • People who will remain uninsured:
    • Illegal immigrants, and they will also be exempt from the health insurance mandate but will remain eligible for emergency services under provisions in the 1986 Emergency Medical Treatment and Active Labor Act (EMTALA).
    • Citizens not enrolled in Medicaid despite being eligible.
    • Citizens not otherwise covered and opting to pay the annual penalty instead of purchasing insurance, mostly younger and single Americans.
    • Citizens whose insurance coverage would cost more than 8% of household income and are exempt from paying the annual penalty.
    • Citizens who live in states that opt out of the Medicaid expansion and who qualify for neither existing Medicaid coverage nor subsidized coverage through the states’ new insurance exchanges.
  • Workers whose employers offer “affordable coverage” are not eligible for subsidies in the exchanges. [To be eligible…the cost of employer-based health insurance must exceed 9.5% of the worker’s household income. (In January 2013 the Internal Revenue Service ruled that only the cost of covering the individual employee would be considered in determining whether the cost of coverage exceeded 9.5% of income. However, the cost of a family plan is often higher, but the ruling means that those higher costs will not be considered even if the extra premiums push the cost of coverage above the 9.5% income threshold)].

Employer Mandate:

The employer mandate is a penalty that will be incurred by employers with more than 50 employees that do not offer health insurance to their full-time workers.

Provision was included as a disincentive for employers considering dropping their current insurance plans once the insurance exchanges began operating as an alternative source of insurance. Proponents of the reform law wanted to address the parts of the healthcare system they believed to not be working well, while causing minimal disruption to those happy with the coverage they have. Lawmakers recognized that approximately 80% of Americans already have insurance, of whom 54% (or 44% of the total population) are covered directly or indirectly through an employer, and 29% (or 23% of the total population) are covered by the government – mainly though Medicare and Medicaid. The intent of the employer mandate (along with a grandfather clause in the ACA) was to help ensure that existing employer-sponsored insurance plans that people like will stay in place.

No company with fewer than 50 full-time employees will face this penalty and most employers with over 50 employees already offer insurance, so changes in employer plans from this provision are expected to be small. However, workers who do not receive insurance from an employer plan would be able to purchase insurance on the exchanges.

On July 2, 2013, the Obama Administration announced the Treasury Department would delay the implementation of the employer mandate for one year, until 2015. [Treasury Decision 9655].

Changes in existing individual insurance plans

The law only grandfathers those insurance plans that were in effect before the law was enacted and have not been significantly changed since then. Plans that do not satisfy these criteria must be cancelled if they do not comply with the law’s new requirements for insurance standards. Furthermore, the law does not prohibit insurers from cancelling older plans for other reasons, such as a determination that a plan is too expensive to maintain. [In the Fall of 2013 millions of Americans with individual policies received notices that their insurance plans were being terminated].

Legal challenges:

In National Federation of Independent Business v. Sebelius (decided on June 28, 2012), the Supreme Court ruled on a 5–4 vote that the individual mandate is constitutional under Congress’s taxation powers, although the law could not have been upheld under Congress’s regulatory power under the Commerce Clause. The Court also determined that states could not be forced to participate in the Medicaid expansion, effectively allowing states to opt out of this provision. As written, the ACA withheld all Medicaid funding from states declining to participate in the expansion. The Supreme Court ruled that this withdrawal of funding was unconstitutionally coercive and that individual states had the right to opt out of the Medicaid expansion without losing preexisting Medicaid funding from the federal government. All provisions of ACA will continue in effect or will take effect as scheduled subject to the states’ determination on Medicaid expansion.

The Roman Catholic Church, while supportive of the ACA’s objectives, has voiced concern through the USCCB that aspects of the mandate covering artificial contraception and sterilization and HHS’s narrow definition of a religious organization are violations of the First Amendment right to free exercise of religion and conscience. Numerous lawsuits are pending addressing these concerns.

Resources:

Affordable Care Act Tax Provisions
http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers

http://www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-
Questions-and-Answers

W-2 Reporting Requirements

http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

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