Healthcare Reform Timeline
On March 23, 2010, President Obama signed the health care reform bill, or Affordable Care Act (ACA), into law. ACA makes sweeping changes to the U.S. health care system. ACA’s health care reforms, which are primarily focused on reducing the uninsured population and decreasing health care costs, will be implemented over the next several years.
This Schroepfer Bauer Insurance Legislative Brief provides a timeline of the implementation of key ACA reforms that affect employers and individuals. Please read below for more information and contact Schroepfer Bauer Insurance with any questions about how you can prepare for any of the health care reform requirements.
EXPANDED INSURANCE COVERAGE
- Extended Coverage for Young Adults. Group health plans and health insurance issuers offering group or individual health insurance coverage that provide dependent coverage of children must make coverage available for adult children up to age 26. There is no requirement to cover the child or spouse of a dependent child. This requirement applies to grandfathered and non-grandfathered plans. However, grandfathered plans need not cover adult children who are eligible for other employer-sponsored coverage, such as coverage through their own employer, until 2014.ACA also added a new tax provision related to health insurance coverage for these adult children. Effective March 30, 2010, amounts spent on medical care for an eligible adult child can generally be excluded from taxable income.Note: A “grandfathered plan” is one in which an individual was enrolled on March 23, 2010. A plan will retain its grandfathered status even if covered individuals renew their coverage after March 23, 2010, family members are added to coverage or new employees (and their families) enroll for coverage. A health plan will lose its grandfathered status if there are significant cuts to benefits or increases in participants’ out-of-pocket spending. Grandfathered status is significant because many ACA reforms do not apply to grandfathered plans.
- Access to Insurance for Uninsured Individuals with Pre-existing Conditions. The health care reform law created a temporary high-risk health insurance pool program, called the Pre-existing Condition Insurance Plan (PCIP) to provide health insurance coverage to individuals who have been uninsured for at least six months because of a pre-existing condition. The program will end in 2014, when the health insurance exchanges are scheduled to be operational.
- Identifying Affordable Coverage. As required by ACA, the Department of Health and Human Services (HHS) established an Internet website – www.healthcare.gov – through which residents of any state may identify affordable health insurance coverage options in their state. The website also includes information for small businesses about available coverage options, reinsurance for early retirees, small business tax credits, and other information of interest to small businesses. So-called “mini-med” or limited-benefit plans are precluded from listing their policies on this website.
- Reinsurance for Covering Early Retirees. ACA established a temporary reinsurance program to reimburse participating employment-based plans for a portion of the cost of providing health insurance coverage to early retirees and their spouses, surviving spouses and dependents. This program was designed to end on Jan. 1, 2014, or earlier, if the $5 billion in funding was exhausted. Due to the program’s popularity, it closed to new applications effective May 5, 2011. In early December 2011, HHS announced that, because the program had already provided more than $4.5 billion in reimbursements, it would not accept reimbursement requests for claims incurred after Dec. 31, 2011.
Health Insurance Reform
- Eliminating Pre-existing Condition Exclusions for Children. Group health plans and health insurance issuers may not impose pre-existing condition exclusions on coverage for children under age 19. This provision applies to all employer plans and new plans in the individual market. This provision will also apply to adults in 2014.
- Coverage of Preventive Care Services. Group health plans and health insurance issuers offering group or individual health insurance coverage must provide coverage for certain preventive care services without cost-sharing (for example, deductibles, copayments or coinsurance). Grandfathered plans are exempt from this requirement.
- Prohibiting Rescissions. The health care reform law prohibits rescissions, or retroactive cancellations, of coverage, except in cases of fraud or intentional misrepresentation. Also, plans and issuers must provide at least 30 days’ advance notice to the enrollee before coverage may be rescinded. This provision applies to all grandfathered and non-grandfathered plans.
- Lifetime and Annual Limits. Group health plans and health insurance issuers offering group or individual health insurance coverage may not impose lifetime limits or unreasonable annual limits on the dollar value of essential health benefits. This requirement applies to all plans, although plans were allowed to request a waiver of the annual limit requirement through HHS. The annual limit waiver program closed to applications effective Sept. 22, 2011. All annual limits will also be prohibited beginning in 2014.
Health Plan Administration
- Nondiscrimination Rules for Fully Insured Plans. Fully insured group health plans will have to satisfy nondiscrimination rules regarding eligibility to participate in the plan and eligibility for benefits. These rules prohibit discrimination in favor of highly compensated individuals. This reform does not apply to grandfathered plans. This requirement was set to take effect for plan years beginning on or after Sept. 23, 2010. However, it has been delayed indefinitely pending the issuance of regulations. The regulations will specify the new effective date.
- Rebates for the Medicare Part D “Donut Hole.” Currently, there is a coverage gap, or “donut hole,” in most Medicare Part D plans. Once the plan and participant have paid $2,930 in total drug costs ($2,970 for 2013), the participant is in the coverage gap. The coverage gap ends when the participant has spent $4,700 ($4,750 for 2013) out of pocket for drug costs in a calendar year. For 2010, ACA provided a $250 rebate check for all Medicare Part D enrollees who entered the donut hole. Starting in 2011, the health care reform law provides discounts on brand-name drugs and generic drug coverage in the donut hole. The donut hole gap will be filled by 2020.
- Medicaid Flexibility for States. States are given an option under the health care reform law to cover additional individuals under Medicaid. States will be able to cover parents and childless adults up to 133 percent of the Federal Poverty Level (FPL).
Fees and Taxes
- Small Business Tax Credit. The first phase of the small business tax credit for qualified small employers began in 2010. Eligible employers can receive a credit for contributions to purchase health insurance for employees. The credit is up to 35 percent of the employer’s contribution to provide health insurance for employees. There is also up to a 25 percent credit for small tax-exempt organizations. When the health insurance exchanges are operational, the tax credits will increase, up to 50 percent of premiums.
- Indoor Tanning Services Tax. An additional tax imposed by the health care reform law is a 10 percent tax on amounts paid for indoor sun tanning services.
Expanded Insurance Coverage
- Community Living Assistance Services and Supports Program (CLASS Act). ACA created a voluntary, long-term care insurance program for disabled adults. Although the program was technically effective Jan. 1, 2011, significant portions were not required to be established until 2012. On Oct. 14, 2011,the CLASS Act’s implementation was suspended due to concerns about the program’s fiscal sustainability and affordability.
Health Plan Administration
- Improving Medical Loss Ratios. Health insurance issuers offering group or individual health insurance coverage (including grandfathered health plans) must annually report on the share of premium dollars spent on health care and provide consumer rebates for excessive medical loss ratios.
- Standardizing the Definition of Qualified Medical Expenses. ACA changed the definition of “qualified medical expenses” for health savings accounts (HSAs), health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) to the definition used for the itemized tax deduction. This means that expenses for over-the-counter (OTC) medicines and drugs may not be reimbursed by these plans unless they are accompanied by a prescription. There is an exception for insulin. Also, OTC medical supplies and devices may continue to be reimbursed without a prescription.
- Cafeteria Plan Changes. ACA created a simple cafeteria plan to provide a vehicle through which small businesses can provide tax free benefits to their employees. This plan is designed to ease the small employer’s administrative burden of sponsoring a cafeteria plan. The provision also exempts employers who make contributions for employees under a simple cafeteria plan from certain nondiscrimination requirements applicable to highly compensated and key employees.
- Medicare Part D Discounts. In order to make prescription drug coverage more affordable for Medicare enrollees, ACA provided a 50 percent discount on all brand-name drugs and biologics in the “donut hole.” It also began phasing in additional discounts on brand-name and generic drugs to completely fill the donut hole by 2020 for all Part D enrollees.
- Additional Preventive Care Services. ACA provided a free, annual wellness visit and personalized prevention plan services for Medicare beneficiaries and eliminated cost-sharing for preventive care services beginning in 2011.
Fees and Taxes
- Increased Tax on Withdrawals from HSAs and Archer MSAs. The health care reform law increased the additional tax on HSA withdrawals prior to age 65 that are not used for qualified medical expenses from 10 to 20 percent. The additional tax for Archer MSA withdrawals not used for qualified medical expenses also increased from 15 to 20 percent.
Health Insurance Reform
- Additional Preventive Care Services for Women. Beginning in 2010, non-grandfathered group health plans and health insurance issuers offering group or individual non-grandfathered health insurance coverage were required to provide coverage for preventive care services without cost-sharing requirements. Effective for plan years beginning on or after Aug. 1, 2012, the required preventive care services include specific services for women, including contraceptives and contraceptive counseling. Exceptions to the contraceptive coverage requirement apply to religious employers.
Expanded Insurance Coverage
- Community Living Assistance Services and Supports Program (CLASS Act). As noted above, the CLASS Act, which would have created a voluntary long-term care insurance program for disabled adults, was technically effective Jan. 1, 2011. However, significant aspects of the program, such as enrollment and premium payment rules, were to be established in 2012. Implementation of the CLASS Act was suspended on Oct. 14, 2011 due to concerns on fiscal sustainability and affordability.
Health Plan Administration
- Uniform Summary of Benefits and Coverage. All non-grandfathered and grandfathered health plans must provide a uniform summary of the plan’s benefits and coverage to participants. The summary must be written in easily understood language and is limited to four double-sided pages. Any mid-year changes to the information contained in the summary must be provided to participants 60 days in advance. ACA indicated that plans would be required to start providing the summary by March 23, 2012, but this deadline was pushed back.
Plans and issuers must start providing the summary by the following deadlines:
- Issuers must provide the summary to health plans effective Sept. 23, 2012;