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Timeline of Taxes and Penalties in the Affordable Care Act

July 20, 2012 Leave a comment

Below is a timeline and  listing of when the taxes and penalty provisions of the Affordable Care Act will be implemented.

Starting in 2009

(Sec. 9007) Establishes new requirements applicable to nonprofit hospitals. The requirements would include a periodic community needs assessment and certain limitations on charges.

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(Sec. 9021) Provides an exclusion from gross income for the value of specified Indian tribal health benefits.

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Starting in 2010

Imposes a ten percent tax on amounts paid for indoor tanning services in lieu of the tax on cosmetic surgery. Indoor tanning services are services that use an electronic product with one or more ultraviolet lamps to induce skin tanning. The tax would be effective for services on or after July 1, 2010.

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Starting in 2011

(Sec. 9004) Increases the additional tax for HSA withdrawals prior to age 65 that are used for purposes other than qualified medical expenses from 10 percent to 20 percent. The additional tax for Archer MSA withdrawals not used for qualified medical expenses would increase from 15 percent to 20 percent

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(Sec. 9008) Imposes an annual flat fee of $2.3 billion on the pharmaceutical manufacturing sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies with sales of branded pharmaceuticals of $5 million or less.
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(Sec. 10108) Requires employers that offer coverage and make a contribution to provide free choice vouchers to qualified employees for the purchase of qualified health plans through Exchanges. The free choice voucher must be equal to the contribution that the employer would have made to its own plan.

Employees qualify if their required contribution under the employer’s plan would be between 8 and 9.8 percent of their income. Excludes free choice vouchers from taxation and voucher recipients are not eligible for tax credits.

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Starting in 2012

(Sec. 9006) Requires businesses that pay any amount greater than $600 during the year to corporate and non‐corporate providers of property and services to file an information report with each provider and with the IRS. Information reporting is already required on payments for services to non‐corporate providers.

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(Sec. 9022) Establishes Simple Cafeteria Plans that ease participation restrictions so that small businesses can provide tax‐free benefits to their employees. Under this provision, self‐employed individuals are included as qualified employees. The provision also exempts employers who make contributions for employees under a simple cafeteria plan from pension plan nondiscrimination requirements applicable to highly compensated and key employees.

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Starting in 2013

(Sec. 4375) Imposes a fee on each specified health insurance policies and self‐ insured health plans for each policy year ending after September 30, 2012, a fee equal to the product of $2 ($1 in the case of policy years ending during fiscal year 2013) multiplied by the average number of lives covered under the policy or plan. (Termination September 30, 2019).

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(Sec. 9009) Imposes an annual flat fee of $2 billion on the medical device manufacturing sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies with sales of medical devices in the U.S. of $5 million or less. The fee does not apply to any sale of a Class I product or any sale of a Class II product that is primarily sold to consumers at retail for not more than $100 per unit (under the FDA product classification system).

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(Sec. 9012) Eliminates the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees.

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(Sec. 9013) Increases the adjusted gross income threshold for claiming the itemized deduction for medical expenses from 7.5 percent to 10 percent. Individuals age 65 and older would be able to claim the itemized deduction for medical expenses at 7.5 percent of adjusted gross income through 2016.

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(Sec. 9014) Limits the deductibility of executive compensation under Section 162(m) for insurance providers if at least 25 percent of the insurance provider’s gross premium income from health business is derived from health insurance plans that meet the minimum essential coverage requirements in the bill (“covered health insurance provider”). The deduction is limited to $500,000 per taxable year and applies to all officers, employees, directors, and other workers or service providers performing services for or on behalf of a covered health insurance provider.

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(Sec. 10902) Indexes the $2,500 limit on contributions to a flexible spending arrangement by CPI‐U for years after December 31, 2011.

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(Sec. 10906) Modifies the increased HI tax rate for single taxpayers with income in excess of $200,000 and couples filing jointly with incomes in excess of $250,000 from 0.5 percentage points to 0.9 percentage points.

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Starting in 2014

(Sec. 36B) The premium assistance credit amount is calculated on sliding scale starting at two percent of income for those at or above 100 percent of poverty and phasing out to 9.8 percent of income for those at 400 percent of poverty. The reference premium is the second lowest cost silver plan available in the individual market in the rating area in which the taxpayer resides. The premium assistance credits do not take into account benefits mandated by States. Employees offered coverage by an employer under which the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs or the premium exceeds 9.8 percent of the employee’s income are eligible for the premium assistance credit. This section also provides for reconciliation of the premium assistance credit amount at the end of the taxable year and for a study on the affordability of health insurance coverage by the Comptroller General.

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(Sec. 125 (f)(3)) Plans provided through the exchange will not be an eligible benefit under an employer‐sponsored cafeteria plan, except in the case of qualified employers (i.e., small employers, and, after 2017, large employers in electing states) offering a choice of plans to their employees through the exchange.

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(Sec. 1514) Requires large employers to report to the Secretary whether it offers to its full‐time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer‐sponsored plan, the length of any applicable waiting period, the lowest cost option in each of the enrollment categories under the plan, and the employer’s share of the total allowed costs of benefits provided under the plan. The employer must also report the number and names of full‐time employees receiving coverage.

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(Sec. 9010) Imposes an annual flat fee of $6.7 billion on the health insurance sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies whose net premiums written are $25 million or less and whose fees from administration of employer self‐insured plans are $5 million or less. The public option, as well coops and the national plan, will be subject to the insurance provider fee.

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Starting in 2018

(Sec. 1401)  Reduces the revenue collected by the tax by 80 percent. This is achieved by: delaying the application of the tax until 2018, which gives the plans time to implement and realize the cost savings of reform; increasing the dollar thresholds to $10,200 for single coverage and $2 for family coverage ($11,850 and $30,950 for retirees and employees in high risk professions); excluding stand‐alone dental and vision plans from the tax; and permitting an employer to reduce the cost of the coverage when applying the tax if the employer’s age and gender demographics are not representative age and gender demographics of a national risk pool. Under the modified provision, the dollar thresholds are indexed to inflation and the dollar thresholds are automatically increased in 2018 if CBO is wrong in its forecast of the premium inflation rate between now and 2018.

Health Insurance Companies to Pay $1.3 Billion in Rebates for Violating Medical Loss Ratio Rule

July 5, 2012 Leave a comment

There is finally some good news coming out of the ACA in regards to the fact that the Medical Loss Ratio is in full effect. Under this rule, large plan insurers (Humana, United, BCBS, etc) must PAY 85% of premiums towards providing actual medical care(not profits). In addition, small plans must PAY 80% of premiums towards providing actual medical care as well. These money-loving insurers should thank God that this rule was not in place back in 2010 because if it had been, they would have had to cough up $2,000,000,000 for violating the rule (Source 1). According to a report done by the Commonwealth Fund, Individual market insurance companies in Texas and Florida would have had to pay rebates back to consumers totaling $281,000,000. Large group Insurers in Maryland and Florida would have had to pay $40,000,000 in rebates back to consumers (Source 1).

Insurers are already off to a brilliant start this year at violating the MLR. The National Journal reports that Insurers could cough up $1,300,000,000 in rebates by the end of the year. This will account for $426,000,000 in rebates to the individual plan market and $541,000,000 to the large group plan market (Source 2).  An estimated 4,900,000 in the individual market  will be getting rebates this year totaling $377,000,000. Alaska, Alabama, Oregon, Louisiana, and Massachusetts are expected to receive an average of $256.50 per enrollee. An estimated 7,500,000 in the large group market will be getting rebates this year totaling $541,000,000. Vermont, Nebraska, Minnesota, New York, and North Carolina are expected to receive an average of $208.60 per enrollee (Source 3). If the MLR had been in effect in 2010, the total amount in rebates that could have been paid out by the end of this year could have totaled $3,300,000,000.
The following insurers (so far) have had to pay out rebates back to consumers for violating the MLR rule.
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Aetna
$11,495,614     – November 2011 (Source 6)
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Blue Cross Blue Shield
$82,507,470       – November 2011       (Source 6)
$283,000,000  – October 2011            (Source 5)
$167,000,000  – September 2011        (Source 4)
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CD PHP
$487,768    – November 2011 (Source 6)
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ConnectiCare
$15,462      – November 2011 (Source 6)
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Group Health
$4,168,935   – November 2011  (Source 6)
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Health Net
$5,052,467    – November 2011 (Source 6)
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Health Now
$4,492,327   – November 2011 (Source 6)
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HIP Health Plan
$182,194    – November 2011  (Source 6)
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Humana
$5,144,676  – November 2011
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MVP
$1,319,640
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United Healthcare
$4,838,675  – November 2011 (Source 6)
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Keywords: health care, affordable health insurance, medical loss ratio, insurance rebate, blue cross blue shield, united healthcare, health care reform

Breaking News: Health Insurance Companies to Uphold Health Reform Provisions

June 14, 2012 Leave a comment

Breaking News…………………………………….

The for-profit health insurance companies of UnitedHealthcare, Aetna, and Humana have come out saying that they will uphold provisions in the Affordable Care Act regardless of how the U.S. Supreme Court rules later this month. Key provisions they especially will uphold include: keeping kids on parents insurance until age 26, covering preventive services,  maintaining independent process of claim denials, and no lifetime limits on coverage. The not-for-profit insurers are already planning to uphold provisions as well. The for-profit companies have decided to take this position only because they see the way this can greatly enhance profit for their shareholders and that they definitely do not want to miss out on anything that will  maximize profit.

Press Releases of the for-profits announcing their position on this matter can be read here:

http://press.humana.com/news/humana/20120611006392/en/Humana-Voluntarily-Preserve-Key-Health-Care-Reform

Health Insurance Companies to Give Rebates to Consumers

May 2, 2012 Leave a comment

Health insurance companies in USA will be giving over $1,000,000,000 in rebates back to the consumer this year for failing to meet the required 80/20 medical loss ratio rule. This is a rule established in the Affordable Care Act that requires insurers to actually pay 80% of premium dollars to a patient’s care and not let it be used for greedy shareholder and executive profits. Profits and revenue of insurers are down nearly 5% (according to CNBC) as a direct result of the 80/20 rule. The insurance lobby can try to repeal this part of the ACA but their efforts will be futile since Health and Human Services has already implemented and adopted it as one of their own rules. The 80/20 provision (now rule) was brilliantly written by the Congressional Healthcare Caucus, Congressional Physician Caucus, U.S. Senate Health Education Labor and Pensions Committee, U.S. Senate Finance Committee, and U.S. Senate Commerce Committee back when I was writing health care policy in Congress in 2008.

Source:  CNBC

Source: http://commerce.senate.gov/public/index.cfm?p=PressReleases&ContentRecord_id=79f6f00b-1db6-4f49-b9df-663f532f94da

Day 3 Supreme Court Health Care Reform Arguments (Transcript and Audio!)

March 28, 2012 Leave a comment

Here is the link to audio and transcript for Day 3. This is the final day of the arguments on P.L. 111-148. The justices today appear to be in favor of getting rid of the insurance mandate but upholding the rest of the law.

Transcript:  http://www.c-span.org/uploadedFiles/Content/The_Courts/11-393.pdf

Severability Audio:  http://www.c-span.org/Events/Supreme-Court-Determining-the-Constitutionality-of-Health-Care-Act/10737429098/

Medicaid expansion Audio: http://www.c-span.org/Events/Supreme-Court-Determining-the-Constitutionality-of-Health-Care-Act/10737429098/

Days 1 and 2 of Supreme Court Health Care Reform Oral Arguments Released (Listen Here)

March 27, 2012 2 comments

For those keeping up with the Supreme Court health care reform (affordable care act) oral arguments, you can hear them by clicking on the links below. C-SPAN has graciously placed the audio of the arguments on their website.

Day 1  – Taxes

http://www.c-span.org/Events/If-the-Health-Care-Law-Constitutes-a-Tax-Does-the-Court-Have-Jurisdiction/10737429093-5/

Day 2 – The Mandate

http://www.c-span.org/Events/Is-the-Individual-Mandate-to-Purchase-Health-Care-Coverage-Constitutional/10737429094-5/

–  CNN’s Jeffrey Toobin ” Mandate likely struck down. Train Wreck for Obama Administration.”

– Justice Kennedy represents swing vote and strongly opposes  mandate

Day 3 to be about the severability of the law. The question trying to be answered in this case is if the mandate is struck down (80% chance according to CNN and MSNBC commentators due to today’s poor arguments by Solicitor General), can the rest of the law be upheld?

Breaking News: If Healthcare Reform Repealed, Public Law 111-152 will Uphold It!

December 30, 2011 1 comment

If the healthcare reform law (P.L. 111-148 – Affordable Care Act) is overturned and repealed, P.L. 111-152 (The Health Care and Education Reconciliation Act of 2010) will uphold it. This particular piece of legislation is part healthcare and part education reform law and it is very heavy on financing. The legislation was passed and signed into law quietly by President Obama on March 30, 2010. Its sister law (P.L. 111-148 – Affordable Care Act) was signed into law by President Obama  on March 23, 2010. The Congressional Budget Office, U.S. Department of Health and Human Services, and U.S. Department of the Treasury have said the legislation will see a reduction in the federal deficit by $143 billion over 10 years (2010-2020). This figure comprises $124 billion in net reductions deriving from health care and revenue provisions and $19 billion from the education provisions. The provisions consist of new taxes, fees on health-related industries (medical device, IT, insurance) and cuts in government spending on healthcare programs such as Medicare, Medicaid, and Medicare Advantage.

Here is a summary of the provisions that are in P.L. 111-152.

Healthcare Provisions……………….

All U.S. citizens must purchase health insurance by 2014 or face a fine of $695 (reduced from $750) or imprisonment.

Senator Ben Nelson’s (D-Nebraska) special Cornhusker Kickback deal eliminated.

Closes Medicare Part D “donut hole” by 2020 and gives seniors a rebate of $250.

Tax on cadillac health-plans delayed until 2018.

Physicians who see Medicare payments required to be reimbursed at the full rate.

Medicare tax on unearned income of families that earn $250,000 a year.

Households below 150% of the federal poverty level would pay 2% to 4% of their income on premiums. Health plans would cover 94% of the cost of benefits. Households with incomes from 150% to 400% of the federal poverty level ($88,200 for a family of four) would pay on a sliding scale from 4% to 9.8% of their income on premiums, rest will be covered by government advanceable, refundable tax credit. Health plans would cover 70% of the cost of the benefits.

In 2014, if a company with more than 50 workers does not offer coverage, they will be obligated to pay $2,000 for each full time worker in the company, exempting the money due for the first 30 employees. For example, an employer with 53 workers will pay the penalty for 23 workers, or $46,000.

Would increase Medicaid payment rates to primary care doctors to match Medicare payment rates, which are higher, in 2013 and 2014.

The federal government would pay all of the costs of expanding Medicaid under the reform until 2016, 95% in 2017, 94% in 2018, 93% in 2019, and 90% thereafter. Some states that already insure childless adults under Medicaid would receive more federal money for covering that group through 2018.

The Medicare patients will receive 50% discount on brand-name drugs would begin in 2011. By 2020, the government would pay to provide up to 75% discount on brand-name and generic drugs, eventually closing the coverage gap.

Would extend the ban on lifetime limits and rescission of coverage to all existing health plans within six months after signing into Law.

Education Provisions……..

Ends the process of the federal government giving subsidies to private banks to give out federally insured loans. Instead loans will be administered directly by the Department of Education.

Increases the Pell Grant scholarship award.

For new borrowers of loans starting in 2014, those who qualify will be able to cap the amount they must spend on loan repayment each month to 10% of their discretionary income (current cap is 15%.).

After 2014, loans will be eligible to be forgiven to those who make timely payments after 20 years (the current time-frame being 25 years).

Will make it easier for parents to take out federal PLUS loans for students.

Several billion will be used to fund historically poor and minority schools, as well as increasing community college funding.

You can read the bill in its entirety here: http://www.gpo.gov/fdsys/pkg/PLAW-111publ152/html/PLAW-111publ152.htm

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