2010-04-08

President Barack Obama signed a landmark health-care bill into law on March 23, enacting a sweeping overhaul of the nation's $2.5 trillion health system after a year-long effort.

Opponents bitterly denounced the legislation, and more than a dozen Republican state attorneys general promptly filed lawsuits challenging it as unconstitutional within minutes of the President signing it into law.

The legislation would cost $940 billion over the next decade and extend health-insurance coverage to an estimated 32 million Americans who are currently uninsured. The package is aimed at stemming the soaring growth of the cost of health care and reducing the federal deficit by more than $1.3 trillion over the next 20 years.

Outlined below are highlights of key provisions of the new health reform law:

Insurance Exchanges – Creates state-based exchanges and co-ops to provide insurance in the individual and small business markets. There is no public option.

Individual Mandate – All individuals are required to have health insurance and will be penalized (fined) if they do not. Individuals below the tax filing income threshold are exempted. Federal subsidies are provided to individuals who do not qualify for Medicaid and have incomes below 400 percent of the Federal Poverty Level (FPL).

Employer Mandate – Employers with more than 50 full-time employees must provide insurance and pay penalties if any of their employees receive a federal subsidy.

Private Insurance Market Reforms – Immediately prohibits or restricts private insurers from rescinding policies, setting lifetime or annual limits, and setting excessive waiting periods and requires plans to cover dependents up to age 26. Additional requirements starting in 2014 include the elimination of pre-existing conditions exclusions; implementation of modified community rating and guaranteed issue and renewal; and institution of minimum benefit requirements to ensure that plans are adequate.

Taxes and Industry Fees – To raise revenues to cover the costs of expanding public insurance and providing subsidies for individuals to purchase private insurance, the bill expands the Medicare payroll tax for individuals earning more than $200,000 and couples earning more than $250,000. As of 2018, the bill establishes an excise tax on high-valued insurance plans. In addition, several industries – pharmaceutical manufacturers, medical device manufacturers, and health insurance companies – will have to pay annual fees/taxes.

Medicaid Expansions and Reforms – Requires states to cover individuals with incomes up to 133 percent of the FPL and provides for 100 percent federal funding for this expansion. Increases rebates for brand-name drugs and expands rebates to drugs provided by managed-care organizations.

Medicare Reforms:

• Medicare Advantage – Reduces payments to Medicare managed care plans, bringing payments more in line with the fee-for-service program.

• Part D: Drug Coverage – Eliminates the Part D "donut hole" by 2020 by requiring manufacturers to contribute 50 percent discounts while beneficiaries are in the gap and reducing co-insurance.

• Payments to Hospitals and Other Facilities – Reduces the annual update in fees for hospitals, skilled nursing facilities, long-term care and rehab facilities, hospices, and home health. Reduces disproportionate-share payments to hospitals.

• Delivery Reforms – Creates a Center for Medicare and Medicaid Innovation. The Center will research, develop, test, and expand innovative payment and delivery arrangements to improve quality and reduce the costs for patients in the two programs. Successful models can be expanded nationally. In particular, the Center will fund demonstration projects, create Accountable Care Organizations and other shared savings programs, and provide state grants for community-based delivery systems such as patient-centered medical homes. The Center will also include projects related to rural telehealth expansions and the development of a rapid learning network.

• Imaging Payment Reductions – Reduces payments for MR and CT diagnostic tests by setting the utilization rate assumption at 75 percent.

• Physician-Owned Hospitals – Prohibits the establishment or expansion of such hospitals as of December 31, 2010.

Independent Payment Advisory Board – Establishes an independent board that will make annual recommendations to Congress and the Administration to constrain the rate of growth in both Medicare and the private sector. Non-binding Medicare recommendations will be made to Congress in years in which Medicare growth is below the targeted growth rate. Beginning in 2020, the Board will make binding recommendations to Congress if health spending exceeds the growth in Medicare spending.

Prevention and Wellness – Provides coverage of annual wellness visits, waives co-insurance, and allows the Secretary of Health and Human Services to expand coverage of preventive services covered by Medicare and Medicaid. Provides funding to state and local health departments as well as funds for research and numerous prevention and wellness oriented programs.

Comparative Effectiveness Research – Creates an independent corporation to set priorities and assess comparative effectiveness research funded by the National Institutes of Health and the Agency for Healthcare Research and Quality.

Follow-on Biologics – Establishes a Food and Drug Administration approval process for follow-on (generic biologicals) and provides 12 years of market exclusivity.

This year many of the provisions will go into effect, including a provision barring insurance companies from excluding children with pre-existing conditions and another that allows children to remain on their parents' health-insurance policy until the children are 26 years old. A few of the less popular provisions will be phased in over several years, including the requirement that all Americans purchase health insurance. (See chart below for a time-line of when provisions go into effect.)

When Do The Provisions of the Health Reform Bill Go Into Effect?

90 days after enactment
Provides immediate access to high-risk pools for people who have no insurance because of pre-existing conditions.

Six months after enactment
Bars insurers from denying people coverage when they get sick.

Bars insurers from denying coverage to children who have preexisting conditions.

Bars insurers from imposing lifetime caps on coverage.

Requires insurers to allow young people to stay on their parents' policies until age 26.

Within a year
Provides a $250 rebate to Medicare prescription drug plan beneficiaries whose initial benefits run out.

2011
Requires individual and small group market insurance plans to spend 80 percent of premium dollars on medical services. Large group plans would have to spend at least 85 percent.

2013
Increases the Medicare payroll tax and expands it to dividend, interest, and other unearned income for singles earning more than $200,000 and joint filers making more than $250,000.

2014
Provides subsidies for families earning up to 400 percent of the poverty level - or, under current guidelines, about $88,000 a year - to purchase health insurance.

Requires most employers to provide coverage or face penalties.

Requires most people to obtain coverage or face penalties.

Requires health insurance plans to provide coverage for routine costs associated with participation in clinical trials.

2018
Imposes a 40 percent excise tax on high-end insurance policies.

By 2019
Expands health insurance coverage to 32 million people.

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