Patient Protection and Affordable Care Act (PPACA)

A Timeline of PPACA Provisions That Could Affect You

2010 Insurance plans prohibited from imposing lifetime benefit limits and restricted annual limits. Insurance plans required to carry dependents up to the age of 26. Insurance plans required to cover preventive services without cost sharing. Insurance plans prohibited from denying coverage to individuals under the age of 19 based on pre-existing conditions. Temporary (until 2014) high risk pools established for individuals (older than 19) who are denied coverage based on pre-existing conditions. Insurance plans prohibited from rescinding coverage except in cases of fraud.

2010 Cont’d States begin reviewing premium trends and companies must justify increases over certain thresholds. There is no new power to block rate increases but plans may be excluded from exchanges. First Phase of Small Business Tax Credit: Small businesses with less than 25 employees and average annual wages of less than $50,000 are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium. Employers must subsidize at least 50% of their employees’ premiums in order to be eligible for the tax credit. Credit only available through Create the Consumer Operated and Oriented Plan (Co-Op) program to foster the creation of non-profit, member-run health insurance companies in all 50 states. $6 billion is appropriated to finance the program and award loans and grants to establish Co-Ops by July 1, Establish an internet website ( to help residents identify health coverage options (effective July 1) and develop a standard format for presenting information on coverage options.

2011 Insurance plans required to comply with new medical loss ratios (MLR): 80% for individual and small group plans and 85% for large group plans. Companies required to provide rebates to consumers if they fail to comply with the MLRs. Funding available for states to begin establishing Exchanges until January 1, Medicare Part D beneficiaries that fall into the “donut hole” will receive a 50% discount on covered brand-name prescriptions. This will grow to a 75% discount by Over-the-counter drugs not prescribed by a doctor may not be reimbursed through an FSA or HRA nor on a tax free basis through an Archer MSA or HSA.

2013 Increase Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers ($250,000 for joint filers). 3.8% tax increase on investment income for taxpayers making $200,000 per year ($250,000 for joint filers); however in real estate transactions there is an exemption in current law for $250,000 on the sale of a principal residence ($500,000 for joint filers). Contributions to FSAs limited to $2,500 per year. (IMPLEMENTATION OF THIS PROGRAM HALTED INDEFINITELY BY HHS) CLASS Act: A national long term care assistance/disability insurance plan is established. The benefit is tied to one’s inability to perform two or three Activities of Daily Living (ADLs) and the benefit amount is varied based on the “scale of functional ability” with a $50-7/day cash benefit. All working adults will be automatically enrolled in the program unless they choose to opt-out.

2014 Exchanges are created and open to individuals and small businesses (2-100 employees). Exchanges will include four tiers of private plans(Bronze- 60% actuarial value, Silver-70%, Gold-80%, Platinum- 90%, and Catastrophic coverage). Premium tax credits (subsidies for purchase of health insurance) available via exchanges for individuals/families with incomes between 100% and 400% of federal poverty level who do not receive employer based coverage. Insurance plans required to abide by guaranteed issue, minimum benefit standards, revised rate bands for individual and small group market (2-100 employees). Employers with more than 200 employees would be required to automatically enroll employees into health insurance plans offered by employer (employees may opt- out).

2014 Cont’d Phase II of Small Business Tax Credit: Small businesses with less than 25 employees and average annual wages of less than $50,000 are eligible for tax credits of up to 50% of the employer’s contribution toward the employee’s health insurance premium. Employers must subsidize at least 50% of their employees’ premiums in order to be eligible for the tax credit. Credit only available for two years. Employer Mandate: Employers with more than 50 employees who do not offer their employees health insurance will be subject to a $2,000 tax penalty/per full-time employee (per year) if one of their employees is eligible for a tax credit subsidy (first 30 employees exempted from calculation). Individual Mandate: Individuals required to purchase health insurance or face a tax penalty of up to $95 per year (or 1.0% of income, whichever is greater). In 2015 the penalty is $325 per adult (or 2.0% of income) and in 2016 the penalty is $695/year (or of 2.5% of income). After 2016, penalty amounts are indexed to inflation. New tax is levied on insurance companies based on net premiums written. This tax will raise an estimated $8 billion in 2014, reaching $14.3 billion by The tax does not sunset and is indexed thereafter.

2014 Cont’d States must expand Medicaid to 133% of federal poverty level. States will receive 100% federal financing from , 95% financing in 2017, 94% financing in 2018, 93% financing in 2019, and 90% financing in 2020 and beyond. However, the Supreme Court struck down the ability of the federal government to withhold their portion of current Medicaid funds to force states to comply with the expansion. Allow states the option of merging the individual and small group markets in Exchanges. Waiting periods for coverage cannot exceed 90 days.

2017 States are permitted to allow businesses with more than 100 employees to purchase coverage in SHOP Exchanges.

2018 “Cadillac Tax” takes effect. A 40% excise tax is levied on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual and $27,500 for family. The tax is applied to the amounts that exceed the threshold and it will be indexed for inflation.

Closer Look at Medical Loss Ratios “Other non-claims costs,” such as administrative costs, cannot be more than 15% of the premium in the large group market or 20% in the small group/individual markets. In January 2011, HHS deemed that agent commissions must fit within that 15%/20%, leading to a squeeze on agent compensation. The Big “I” is focused on congressional legislation that would statutorily exclude agent compensation from the MLR formula. In the House Mike Rogers (R-MI) and John Barrow (D-GA) introduced H.R. 1206, which has over 200 bipartisan cosponsors. Senators Mary Landrieu (D-LA) and Johnny Isakson (R-GA) have introduced S.2288, the “Access to Professional Health Insurance Advisors Act of 2012”, which is a companion to the House bill.

Closer Look at Individual Mandate Beginning in 2014, virtually every U.S. citizen and legal resident will be required to purchase health insurance or face a tax penalty. There are certain exemptions from the individual mandate including: those who choose not to buy a policy for religious reasons, undocumented immigrants, incarcerated citizens, members of Native American tribes, those with family income below the threshold requiring a tax return. To satisfy the mandate, individuals must obtain health insurance for the entire year through one of the following sources: Medicare, Medicaid, CHIP, veteran’s health programs, a plan offered by an employer, insurance purchased on your own that is at least at the Bronze level (60% actuarial value). The penalty for non-compliance will be phased-in according to the following schedule: $95 (or 1% of income, whichever is higher) in 2014, $325 (or 2% of income) in 2015, and $695 (or 2.5% of income) in After 2016, the penalty will be increased annually by the cost-of-living adjustment.

Closer Look at Employer Mandate Beginning in 2014, employers with 50 or more full-time employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be assessed a fee of $2,000 per full- time employee, excluding the first 30 employees from the assessment. Employers with 50 or more full-time employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees from the assessment. (Effective January 1, 2014). Employers with 200-plus full-time employees must automatically enroll their employees into health insurance plans.

Closer Look at Exchanges Exchanges are a government created platform for the sale of health insurance, intended to bring all “qualified” plans into one forum by establishing common rules regarding the offering and pricing of insurance, and providing information on these plans to consumers. Also through the exchanges, consumers may sign up for government programs such as Medicaid and Children’s Health Insurance Program (CHIP). In addition, through the exchanges qualified consumers (up to 400% of the poverty level) will receive government assistance to purchase private insurance through the use of premium tax credits. States face a Jan. 1, 2013 deadline for certification of their exchanges by HHS, initial enrollment on Oct. 1, 2013 and a “go live” date of Jan. 1, If they do not meet these deadlines, the federal government will step in. At this point, with the lack of progress in the majority of states, some level of federal involvement in the majority of exchanges is likely.