After a year of debates and stalls, it’s finally here: the Patient Protection and Affordable Care Act. On March 23, President Barack Obama signed into law more than 1,000 pages of new mandates, taxes, regulations, credits and requirements for employers, insurance companies, and individuals to phase in over the next eight years. In Vice President Joe Biden’s words, this is “a big [expletive] deal.”
Although there are bound to be changes to the law as it is currently written, health insurance as we know it is in for drastic overhaul. The following are just a few of the major effects on business owners and their employees set to take place in the near future.
Beginning this year, insurance companies will need to adhere to new mandates. They can no longer deny insurance coverage to children because of pre-existing medical conditions and must provide dependent coverage for children up to age 26. They are prohibited from placing lifetime limits on coverage and from rescinding coverage on individuals. Insurance companies also must cover preventive services, such as breast cancer screenings for women and immunizations for children.
Individuals will begin to see advantageous effects of the bill this year with the creation of high-risk pools to provide coverage to those who have been uninsured due to pre-existing conditions. In addition, businesses with no more than 25 employees may benefit from a tax credit to pay for health insurance premiums.
In 2011, 85 percent of your premiums must be spent on claim payments, or insurance companies will be required to provide rebates to their enrollees. The goal of this provision is to limit excess profit by insurance companies.
Health savings accounts will be affected in 2011, when individuals who withdraw money from these accounts before age 65 for non-medical expenses will be penalized. These accounts will be further impacted in 2013, when the amount of money you can set aside tax-free for health costs will be limited to $2,500.
In 2014, individuals will begin feeling some of the major provisions of the law. Most Americans will be required to have health insurance, with those refusing to buy insurance facing fines starting at $95 per individual and increasing in 2015 and again in 2016.
Also in 2014 is the institution of the state-based health care exchange. Basically, this exchange is a marketplace where individuals and small businesses can shop for insurance policies. Some low-income individuals will qualify for subsidies to help buy coverage from this new marketplace.
In 2014, employers of 50 people or more will be required to provide coverage to employees. If coverage is not provided, employers will have to pay a fine of $2,000 per employee after the first 30. Even if employers do offer coverage, they may still be fined if any employee receives federal health care subsidies to shop in the state-based exchange. This fine is designed to deter employers from forcing qualified employees to purchase insurance using the federal subsidy program.
Another major impact on employer-sponsored plans will be the annual fee imposed on insurance companies. In 2014, these fees will total $8 billion. In 2015, the total will increase to $11.3 billion. Employers will then face the threat that the cost will simply be passed on to them in the form of increased premiums.
Within a bill designed to provide insurance to all Americans is an ironic penalty for high-cost plans providing superior benefits. This odd provision of the law will take effect in 2018 with a 40 percent excise tax on “Cadillac Plans,” which are plans with premiums that exceed a government-determined limit. Basically, Americans will be required to have health insurance, as long as the benefits aren’t too good.
We still don’t know what revisions will be made, what new legislation may take place, or how these policies and mandates will be enforced. Already, states are lining up to file suit on the grounds of constitutional violation. Here in our own state, Gov. Bobby Jindal has started working with Attorney General Buddy Caldwell to join the other states in fighting the new law.
Republican U.S. Sen. David Vitter plans to file legislation to repeal the bill.
In addition to government action, unions will most likely challenge the “Cadillac Plan” portion of the law. Various unions have fought successfully over the years to acquire some of the best benefit packages in the nation, and they now face the threat of losing those benefits. With so many provisions impacting so many people and entities, the only thing certain, as President Obama campaigned, is change.
Jimmy S. Mallia is president of the Employee Benefits Division at Dwight Andrus Insurance and has been with the agency for the past 16 years. In addition to individual health policies, his division specializes in self-funded and employer group plans. Prior to his employment at Dwight Andrus, Mallia worked as a group representative/underwriter at GreatWest/Cigna.
2011 insurance companies must spend 85% of premiums on claims or issue rebates
2014 most Americans must have health insurance or face minimum $95 penalty
2015 fee on insurance companies for employer-sponsored plans increases to $11.3 billion (a cost that may be passed onto employers)
2018 a 40% excise tax imposed on “Cadillac Plans”