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The Hidden Costs of the Affordable Care for America Act

On November 7, 2009 by a vote of 220 – 215, the House of Representatives passed the Affordable Care for America Act (H.R. 3962). While this debate is far from over, you should be aware of what effects this Bill could have on you as a business owner. Of course, the Senate still needs to vote on their own version of the health care legislation. If passed, both Bills need to be reconciled and one final bill needs to be passed. As we said, this process if far from over.

Among other key provisions, this Bill includes a public option that would provide a choice between governments provided healthcare and private healthcare to individuals and employers. All individuals under the Act will be required to obtain healthcare coverage whether through their employer or through the government programs. Individuals who do not set up healthcare coverage through either option will be subject to a penalty of 2.5% of their income. Employers can continue offering coverage to workers as they always have. However, those who do not start offering coverage or those who choose to continue not offering coverage will be required to contribute a fee of 8% of payroll towards the government funded healthcare coverage.

The House of Representatives Affordable Care for America Act is extensive approximately 2000 pages long. The following are some of its key provisions outlined by The Library of Congress.

A) It amends the current Public Health Service Act, the Employee Retirement Income Security Act of 1974 (ERISA), and the Internal Revenue Code by:

1. Providing for rebates to enrollees based on a plan’s medical loss ratio;

2. Prohibits rescission of health insurance coverage without clear and convincing evidence of fraud;

3. Requires the option of extending coverage for children under 27 years of age;

4. Limits preexisting condition exclusions; and

5. Prohibits aggregate dollar lifetime limits on benefits.

B) Requires the Secretary of Health and Human Services (HHS) to establish:

1. a temporary national high-risk pool program to provide health benefits to certain uninsured individuals who have a medical condition; and

2. a temporary reinsurance program to assist participating employment-based plans with the cost of providing health benefits to retirees and their beneficiaries.

C) Extends COBRA coverage (health insurance continuation benefits) until an individual becomes eligible for health insurance coverage through the Health Insurance Exchange under this Act.

D) Provides for grandfathered health insurance coverage.

E) Establishes standards for qualified health benefits plans, including standards to:

1. prohibit any preexisting condition exclusions;

2. require guaranteed availability and renewability of health insurance coverage;

3. limit premium variances, except for reasons of age, area, or family enrollment;

4. prohibit discrimination based on health status factors; and

5. require parity for mental health benefits.

F) Requires qualified health benefits plans to provide coverage that meets the standards for the essential benefits package. Prohibits an essential benefits package from imposing any annual or lifetime limits on coverage. Lists required covered services, including hospitalization, prescription drugs, mental health services, maternity care, and children’s oral health, vision, and hearing services. Prohibits cost-sharing for preventive items and services. Limits annual cost-sharing to $5,000 for an individual and $10,000 for a family. Prohibits abortion services from being required under an essential benefits package or under a qualified health benefits plan.

G) Establishes the Health Choices Administration as an independent agency to be headed by a Health Choices Commissioner. Establishes the Health Insurance Exchange within the Administration to facilitate access of individuals and employers to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option. Requires the Commissioner to:

1. contract with entities to offer health benefit plans through the Exchange to eligible individuals;

2. coordinate the distribution of affordability premium and cost-sharing credits; and

3. establish a risk-pooling mechanism for Exchange-participating health plans.

H) Authorizes state-based Health Insurance Exchanges to operate in a state or group of states instead of the Health Insurance Exchange, with approval of the Commissioner.

I) Requires the Commissioner to establish a Consumer Operated and Oriented Plan program (CO-OP program) under which the Commissioner may make grants and loans for the establishment and initial operation of not-for-profit, member-run, health insurance cooperatives that provide insurance through the Health Insurance Exchange or a state-based Health Insurance Exchange.

J) Requires the HHS Secretary to offer an Exchange-participating health benefits plan. Sets forth provisions regarding the operation of the Public Health Insurance Option.

K) Provides for an affordability premium credit and an affordability cost-sharing credit for low-income individuals participating in the Exchange.

L) Requires employers to offer health benefits coverage to employees and make specified contributions towards such coverage or make contributions to the Exchange for employees obtaining coverage through the Exchange. Exempts businesses with payrolls below $500,000 from such requirement.

M) Amends the Internal Revenue Code to:

1. impose a surtax on the income of individuals who do not obtain health care coverage and on employers (other than small business employers) who fail to satisfy health coverage participation requirements;

2. allow a new tax credit for small business employers who provide health care coverage to their employees;

3. increase the penalty for distributions from health savings accounts not used for qualified medical expenses;

4. modify rules and contribution limits for certain employee benefit plans;

5. allow an exclusion from gross income for the value of certain medical care provided to members of Indian tribes;

6. impose a 5.4% surtax on individuals whose adjusted gross income exceeds $500,000 ($1 million for married couples filing joint returns);

7. impose a 2.5% excise tax on medical devices;

8. delay until 2020 tax rules applicable to the foreign tax credit for the worldwide allocation of interest;

9. set forth rules for the application of the economic substance doctrine and impose penalties for underpayments of tax due to transactions lacking economic substance; and

10. extend the tax exemption for employer-provided health care benefits to certain eligible beneficiaries of the taxpayer.

N) Amends Title XVIII (Medicare) of the Social Security Act (SSA) to revise provisions relating to payment, coverage, and access, including to:

1. permit physician assistants to order post-hospital extended care services, and to provide for recognition of attending physician assistants as attending physicians to serve hospice patients;

2. provide adjustment to Medicare payment localities for physician services;

3. modify the Medicare payment systems to address geographic inequities;

4. limit cost-sharing for individual health services under the Medicare Advantage program;

5. eliminate the coverage gap under Medicare Part D (Voluntary Prescription Drug Benefit Program);

6. eliminate Medicare part D cost-sharing for certain non-institutionalized full dual eligible individuals;

7. cover marriage and family therapist services and mental health counselor services; and

8. expand access to vaccines.

O) Requires the HHS Secretary to establish within the Agency for Healthcare Research and Quality a Center for Comparative Effective Research.

P) Establishes accountability requirements for long-term care facilities and provides for transparency with respect to them.

Q) Provides enhanced penalties for fraud and abuse.

R) Amends Title XIX (Medicaid) of the SSA to:

1. expand Medicaid eligibility for low-income individuals and families;

2. require coverage of additional preventive services; and

3. increase payments for primary care services.

S) Sets forth provisions to prevent health care fraud.

T) Sets forth miscellaneous provisions relating to:

1. extension of the qualifying individual (QI) program;

2. the Medicaid and CHIP Payment and Access Commission;

3. prohibitions against federal Medicaid and CHIP payments for undocumented aliens;

4. the repeal of the comparative cost adjustment program;

5. grants to states for quality home visitation programs for families with young children and families expecting children;

6. establishment of the Center for Medicare and Medicaid Innovation; and

7. application of emergency services laws.

U) Amends the Public Health Service Act to set forth provisions related to:

1. community health centers;

2. health care provider scholarship and loan repayment programs;

3. training programs;

4. health care workforce diversity and data collection; and

5. the 340B drug discount program (a program limiting the cost of covered drugs to certain federal grantees).

V) Requires the HHS Secretary to establish:

1. the Advisory Committee on Health Workforce Evaluation and Assessment;

2. a community-based overweight and obesity prevention program;

3. a demonstration project for medical-legal partnerships to assist patients navigating health-related programs and activities;

4. the Emergency Care Coordination Center;

5. the Council of Emergency Care;

6. the Interagency Pain Research Coordinating Committee;

7. a national pain care education outreach and awareness campaign; and

8. a national medical device registry.

W) Establishes:

1. a Prevention and Wellness Trust for carrying out prevention and wellness activities;

2. the Center for Quality Improvement to focus on quality improvement activities in the delivery of health care services; and

3. the position of Assistant Secretary for Health Information.

X) Provides grants for:

1. school-based health clinics;

2. nurse-managed health centers;

3. federally qualified behavioral health centers;

4. influenza vaccinations to children in elementary and secondary schools;

5. evidence-based education programs to reduce teen pregnancy or sexually transmitted diseases;

6. services to children and adults with autism and their families;

7. University Centers for Excellence in Developmental Disabilities Education, Research, and Service;

8. medication management services;

9. infant mortality pilot programs;

10. community-based collaborative care networks; and

11. trauma centers and emergency medical care systems.

Y) Requires the HHS Secretary to make an incentive payment to each state that has an alternative medical liability law.

Z) Provides for:

1. nutrition labeling of standard menu items offered for sale in chain restaurants and vending machines; and

2. standards to make medical diagnostic equipment accessible to, and usable by, individuals with disabilities.

AA) Prohibits certain practices related to patent infringement claims against generic drugs.

BB) Allows a person to submit an application for licensure of a biological product based on its similarity to a licensed biological product (the reference product).

CC) Establishes a national, voluntary disability insurance program to purchase community living assistance services and supports (CLASS program) under which:

1. all employees are automatically enrolled, but are allowed to waive enrollment;

2. payroll deductions pay monthly premiums; and

3. benefits are provided, based on the level of disability, to purchase nonmedical services and supports that the beneficiary needs to maintain independence.

DD) Makes states eligible for federal funds under the Public Health Service Act only if they agree to be subject as an employer to the obligations under this Act.

EE) Establishes Offices of Women’s Health within the Department of Health and Human Services and its agencies.

FF) Indian Health Care Improvement Act Amendments of 2009 – Amends the Indian Health Care Improvement Act to revise requirements for health care programs and services for Indians, Indian tribes, tribal organizations, and urban Indian organizations.

GG) Establishes the Indian Catastrophic Health Emergency Fund.

HH) Replaces the Urban Health Programs Branch with a Division of Urban Indian Health.

II) Authorizes grants to urban Indian organizations for health information technology, telemedicine services development, and related infrastructure.

JJ) Directs the HHS Secretary, acting through the Indian Health Service, to provide programs of comprehensive behavioral health, prevention, and treatment.

KK) Reauthorizes the Indian Health Care Improvement Act.

LL) Amends the Indian Self-Determination and Education Assistance Act to direct the HHS Secretary to establish the Native American Health and Wellness Foundation.

MM) Expands coverage for qualified Indians in the State Children’s Health Insurance Program (CHIP, formerly known as SCHIP) under title XXI of the SSA, as well as under Medicare (SSA title XVIII) and Medicaid (SSA title XIX). Authorizes related payments to Indian Health Programs Operating in the State.

A few final observations. , There was on amendment which passed that prohibits federal funds for abortion services in the public option. It also prohibits individuals who receive affordability credits from purchasing a plan that provides elective abortions. However, it allows individuals, both who receive affordability credits and who do not, to separately purchase with their own funds plans that cover elective abortions. It also clarifies that private plans may still offer elective abortions. This prohibition, however, excludes cases of rape, incest or if the mother’s life is in danger.

By understanding what obligations or changes this may place on your business, you can begin to assess what the current healthcare situation is with your company, what needs you may have and what effect these changes will have on your company and your employees. We will keep you informed of the Senate bill when and if it passes.

Brody and Associates regularly advises management on complying and remaining up to date with state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.