New Initiatives under the Patient Protection & Affordable Care Act
After a contentious battle in Congress, President Obama signed the Patient Protection and Affordable Care Act (“PPACA”) into law on March 23, 2010. Pub.L. 111-148, 124 Stat. 119. The Act aims to improve the private health insurance market and provide Americans with greater access to medical care. Since its enactment, the federal government has distributed substantial amounts of PPACA funds to various federal and state government entities in order to begin implementing the Act’s provisions. Although many more changes will be implemented in 2014, below is a summary of changes currently in effect or being implemented in 2011 of which health care attorneys should be aware.
National Prevention, Health Promotion and Public Health Council
Pursuant to Section 4001 of the PPACA, the National Prevention, Health Promotion and Public Health Council was established within the Department of Health and Human Services. With the Surgeon General serving as Chairperson, this Council was created to help develop a National Prevention and Health Promotion Strategy. The Council will provide summary and analysis to the President and Congress on federal health care policy. It will also recommend any changes that are necessary in order to achieve national wellness, health promotion, and public health goals. Executive Order 13544 (June 10, 2010).
Lifetime and Annual Dollar Limits
Insurance companies are prohibited from placing lifetime dollar limits on the individuals’ benefits. The PPACA also restricts and phases out annual dollar limits and completely bans annual dollar limits by 2014. Lifetime dollar limits on most benefits are prohibited in any insurance policies issued after September 23, 2010. Annual dollar limits on insurance plans issued after March 23, 2010 are restricted by the PPACA provisions.
Employer Tax Credits
Pursuant to PPACA provisions, some employers are entitled to business tax credits to help offset the cost of their employees’ health insurance coverage. To become a qualified employer, the employer must have less than 25 full-time employees, paying average annual wages of less than $50,000. Additionally, the employer must cover at least 50% of its employees’ health care coverage. If an employer does qualify for this tax credit, the tax credit could be worth up to 35% of a business’ premium costs and up to 25% for tax-exempt employers. In 2014, the tax credit rate will increase to 50% for small businesses and 35% for tax-exempt organizations.
Flexible Spending Accounts and Health Reimbursement Accounts
Section 9003 of the PPACA established a new uniform standard for medical expenses as of January 1, 2011. Under this provision, individuals cannot use their flexible spending accounts, health reimbursement accounts and health savings accounts to pay for over-the-counter drugs that are purchased without a prescription. However, insulin purchases are exempt from this new mandate.
Coverage for Adult Children
Under the PPACA, individuals who maintain health insurance plans that include coverage for children are now able to include their adult children on these plans as well. Adult children may remain on their parents’ plan until the children reach the age of 26. Adult children can join their parents’ insurance plan regardless of whether they are married, living with their parents, a student, financially dependent, or eligible to enroll in their employer’s plan.
The PPACA mandates that health plans cannot limit benefits or deny coverage for a child based on the child’s “pre-existing condition.” The PPACA also created the Pre-Existing Condition Insurance Plan, a plan that provides health insurance to those who have been denied coverage due to a pre-existing condition. Eligibility to this plan is not based on income. To qualify, an individual must have been uninsured for at least six months, have a pre-existing condition, and be a U.S. citizen or legal resident. This program will be available until 2014, when a new insurance system becomes effective. In 2014, individuals may purchase health insurance plans that offer certain benefits at varying cost standards in a new insurance “marketplace.” This system will be known as “the Exchange.”
“Donut Hole” Rebate Checks
Prior to the PPACA, many Medicare drug plans had a coverage gap after a certain amount of money was spent on covered brand-name drugs. Any drugs purchased after that point dollar limit were out-of-pocket costs to the Medicare beneficiaries. This is known as the “Donut Hole” in drug coverage. Under the PPACA, individuals affected by the “Donut Hole” gap will receive a $250 rebate for the 2010 year. In 2011, “Donut Hole” brand-name prescription drug costs will receive a 50% discount.
The PPACA in California
Since the enactment of the PPACA, California has received over $436 million in funding to provide employers and individuals with the new coverage options offered under the Act. This funding has helped implement the following initiatives:
“Donut Hole” Rebate Checks to Medicare Beneficiaries
In 2010, California Medicare beneficiaries received a tax-free $250 rebate, totaling $349,255, to help pay for prescriptions in the Medicare D coverage gap. This year, beneficiaries will receive a 50% discount for covered prescriptions.
Pre-Existing Condition Insurance Plan
Over 1,500 uninsured California residents enrolled in the Pre-Existing Condition Insurance Plan, which provides health coverage for those uninsured for at least six months, who have a pre-existing condition or have been denied coverage because of their health condition, and are a U.S. citizen or legal resident.
Consumer Assistance Program
The Consumer Assistance Program has helped individuals enroll in health coverage, file complaints and appeals against health plans and track consumer complaints to help identify problems and strengthen enforcement. The Office of the Patient Advocate in California received $4.2 million to develop and promote this program by creating a consumer-friendly website and toll-free number for those with questions about health care coverage. These funds have also been used to conduct a statewide media campaign and evaluate the effectiveness of the new health care initiatives.
Early Retiree Reinsurance Program
Since the enactment of the PPACA, hundreds of California employers have enrolled in the Early Retiree Reinsurance Program, which provides financial relief to employers so that they may provide retirees who do not yet qualify for Medicare affordable health insurance coverage.
Prevention and Public Health Fund Grants
The PPACA’s Prevention and Public Health Fund, created to help prevent illness and promote health, awarded California $42 million in grants to help support California programs, such as community and prevention clinics and training in improvements to primary care.
The Center for Consumer Information and Insurance Oversight (CCIIO), part of the Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services, has created an “Implementation Center” website to provide the public with a better understanding of the new health care reform bill and what it means for individuals and employers. The website also publishes materials regarding the implementation of the PPACA and provides information on the Act’s provisions and regulations. For more information, please visit http://www.healthcare.gov/center/.
– Katie Burch is an Associate at ArcherNorris in Walnut Creek, California. She is a 2010 graduate of the University of Maryland School of Law. She focuses her practice on healthcare law and litigation.
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