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What is The Patient Protection and Affordable Care Act?

August 08, 2011 | Leave a Comment

The Patient Protection and Affordable Care Act (PPACA) is a federal statute that was signed into law by President Barack Obama on March 23, 2010. This act along with the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010) make up the health care reform of 2010. Together the laws focus on reform of the private health insurance market, providing better coverage for those with pre-existing conditions, making healthcare more affordable for those that financially qualify, improving prescription drug coverage in Medicare and extending the life of the Medicare by approximately 12 years.

What is included in the law?

The law includes numerous health-related provisions that take effect over the next several years, beginning last year in 2010. Some of the major provisions include:

  • Guaranteed issue and community rating will be implemented nationally so that insurers must offer the same premium to all applicants of the same age, sex, and geographical location regardless of pre-existing conditions.
  • Health insurance exchanges will form in each state, offering a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance.
  • Firms employing 50 or more people but not offering health insurance will pay a “shared responsibility payment” if the government has had to subsidize an employee’s health care.
  • Non exempt persons not securing minimum essential health insurance coverage are also fined under the shared responsibility rules. This requirement to maintain insurance or pay a fine is often referred to as the individual mandate, though being insured is not actually mandated by law.
  • Improved benefits for Medicare prescription drug coverage are to be implemented.
  • Medicaid eligibility is expanded to include all individuals and families with incomes up to 133% of the poverty level.
  • Low income persons and families above the Medicaid level and up to 400% of the poverty level will receive subsidies on a sliding scale if they choose to purchase insurance via an exchange.
  • Very small businesses will be able to get subsidies if they purchase insurance through an exchange.
  • Establishment of a national voluntary insurance program for purchasing community living assistance services and support.
  • The law will introduce minimum standards for health insurance policies and remove all annual and lifetime coverage caps.
  • Policies issued before the law came into effect are “grandfathered” and are mostly not affected by the new rules.
    How will it be funded?

The Act’s provisions are designed to be funded by a variety of taxes and offsets. Major sources of new revenue include Medicare tax on incomes for individuals earning over $200,000 and joint filers over $250,000, an annual fee on insurance providers, and a 40% tax on “Cadillac” insurance policies. There are also taxes on pharmaceutical companies, high-cost diagnostic equipment makers, and a federal sales tax on indoor tanning services.

How are legal challenges impacting the law?

Organizations and lawmakers who opposed the passage of the bill have taken legal action against it and several court challenges are currently at various stages. The targets of the threatened lawsuits are several key provisions of the bill, but most focus on the “individual mandate”. A total of 28 states have filed joint or individual lawsuits (including 26 states engaged in a joint action) to overturn the individual mandate portions of the law, arguing that fining individuals for failing to buy insurance is not within the scope of Congress’s taxing powers. Members of several state legislatures are attempting to counteract and prevent elements of the bill within their states, and legislators in 29 states have introduced measures to amend their constitutions to nullify portions of the health care reform law. It is likely that the constitutionality of the bill will be challenged before the Supreme Court sometime within the next year or so.

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