Health Care Reform Crosses the Finish Line
April 9, 2010
Following a rather tortuous legislative path, Congress finally passed health care reform using two pieces of legislation. The Patient Protection and Affordable Care Act (PPACA) runs to more than 2,000 pages and amends a number of existing laws. PPACA itself was amended within days of its passage by the Health Care and Education Reconciliation Act. Some provisions take effect in 2010, but most are phased in at various points over the next five years.
Colleges and universities will be affected by the newly-passed health-care reform legislation in a number of ways: as employers, as providers of student health insurance and health services, as educators of health professionals, and as owners of hospitals.
Employment-based health coverage provisions. The new law includes a number of changes that will require institutions to create updated health insurance plan documents, and may potentially lead them to modify the structure of the health insurance benefits they offer. For example, for new plan years beginning after next September, all group health plans and self-insured plans that offer dependent coverage must make coverage available to participants' children under age 26 who would be treated as dependents under the plan but for their age. Existing group health plans may continue to exclude adult children prior to Jan. 1, 2014, if the children are eligible to enroll in another employer-sponsored health plan. Other changes are scheduled to be phased in from 2011 through 2018:
- Limits. Beginning in 2011, plans cannot impose a lifetime dollar limit on "essential health benefits," a term that will be defined in future regulations from the Department of Health and Human Services (HHS). Similarly, beginning in 2014, plans cannot impose an annual limit on these benefits. Also beginning in 2014, group health and self-insured plans may not impose preexisting condition exclusions on a participant (starting in 2011, this rule applies to children under the age of 19), nor impose a waiting period in excess of 90 days. For employers with 200 or more full-time employees, health plans must provide for automatic enrollment of new full-time employees.
- Reporting. The new law will also impose reporting requirement on colleges and universities. Effective in 2014, institutions with more than 100 employees will be required to file an annual return with HHS disclosing an array of data, including the name and address of each employee covered under their health insurance plans. Beginning in 2011, employers will begin disclosing on each employee's W-2 form the aggregate cost of employer-sponsored health coverage.
- Penalties. While employers are not required to offer health-care insurance under the legislation, certain penalties will be imposed on employers who do not offer coverage at all, or only to limited numbers of employees. For example, a penalty tax is triggered when at least one full-time employee obtains federally-subsidized health insurance coverage through one of the new "insurance exchanges" created by the bill.
- Vouchers. Starting in 2014, employers that offer a group health plan must also provide "free choice vouchers" for the purchase of health coverage through an exchange to any employee who is eligible for a federal premium subsidy, and whose required contribution to the employer's plan would exceed 8 percent of his or her household income. The voucher must be for no less than the maximum amount that the employer would have contributed to provide group health insurance coverage to the employee.
Taxes. Several potential taxes are phased in starting in 2013. The single largest source of raiser ($210 billion over the next decade) included to fund the overall legislation is the change to Medicare taxes. Effective in 2013, employers will be responsible for collecting an additional hospital insurance tax equal to 0.9 percent on wages in excess of $200,000 for single filers or $250,000 for joint filers. The law also imposes on the same taxpayers a new 3.8 percent Medicare tax on net investment income, including capital gains, dividends, and interest, beginning in 2013. The income amounts for both of these provisions are not indexed for inflation.
Also effective in 2013, the legislation also imposes a new $2,500 limit on tax-free contributions to health care flexible spending accounts (FSAs), as well as a prohibition on using FSA funds for the purchase of nonprescription medications. The law establishes a higher threshold for claiming deductions for medical expenses-increasing the amount to 10 percent of adjusted gross income for individuals under 65, up from 7.5 percent.
Beginning in 2018, the new law imposes a 40 percent excise tax on the value of so-called "Cadillac" health insurance plans provided by employers. The tax would be assessed on the portion of the plan value that exceeds $10,200 for individuals and $27,500 for families. The thresholds will be indexed for inflation. The value of stand-alone dental and vision benefits is excluded from the thresholds. Employers may be able to reduce the cost of the coverage when applying the tax if the employer's age and gender demographics are not representative of those of a national risk pool.
Student health insurance. Several provisions may affect the availability and cost of health insurance for students. The legislation broadly allows colleges and universities to continue to offer student health insurance policies. However, it remains unclear whether these policies must meet any of the requirements that will be applicable to health insurance plans offered through state exchanges. It is expected that the treatment of student health insurance plans will need to be addressed either in subsequent legislation or in the development of regulations implementing the new law.
A student's decision to purchase health insurance through his or her college or university will also be determined by the availability-through the new insurance exchanges-of a high-deductible, catastrophic plan offered to individuals under 30. These publicly-available plans are designed to offer low-cost coverage, particularly if the student is eligible for the federal subsidies that will be provided under the bill.
Health professions workforce development. PPACA expands support for development of the health professions in a number of ways:
- § Provides $1.5 billion in mandatory spending for the National Health Service Corps on primary care physicians, physician's assistants, and dental care providers, including establishment of a public health workforce loan repayment program.
- § Changes the terms of the Primary Care Loan program to cap the term at the earlier of 10 years, or when the loan is paid in full, and lower the penalty interest rate for borrowers who fail to comply with the service agreement to an additional 2 percent over the normal 5 percent rate (currently the penalty rate is 18 percent).
- § Increases the loan limits for the Nursing Student Loan program to $3,300 a year generally, $5,200 for the last two years of study, and $17,000 cumulatively.
- § Authorizes $60 million in FY10 for scholarships for degree or professional training programs for midcareer professionals in public and allied health.
- § Provides $125 million in FY10 for five-year grants to nonprofit hospitals, medical schools, or other organizations to support primary care training programs.
- § Encourages public-private partnerships between institutions of higher education and (1) nursing homes, (2) entities providing home- and community-based services to individuals with disabilities, or (3) other long-term care providers, by providing grants to enable the institutions to offer new training opportunities for direct care workers.
- § Supports education and training of dentists and dental hygienists with grants to institutions, including funds for 15 demonstration projects to train alternative dental health-care providers.
- § Provides funds to support training in priority areas such as geriatrics, mental and behavioral health, and nursing faculty.
Nonprofit hospitals. Recurring concerns by legislators about the charitable nature of nonprofit hospitals led to the inclusion of several requirements for tax-exempt hospitals. PPACA amends section 501 of the Internal Revenue Code, adding section 501 (r), which requires that, in order to maintain their nonprofit status, these hospitals will be required to:
- Conduct a community health needs assessment every three years and adopt an implementation plan to meet the needs identified through the assessment.
- Establish a written financial assistance policy.
- Adopt a written emergency medical care policy requiring the organization to provide care for emergency medical conditions regardless of the patients' eligibility under the financial assistance policy;
- Limit amounts charged for emergency or other medically necessary care, provided to individuals eligible for assistance under the financial assistance policy, to no more than the lowest amount charged to insured individuals, and prohibit the use of gross charges.
- Refrain from engaging in extraordinary collection actions before making reasonable efforts to determine whether the individual is eligible for assistance under the financial assistance policy.
Hospitals that fail to meet the requirements of section 501(r) are subject to a $50,000 excise tax. These requirements generally apply to taxable years beginning after March 22, 2010 (the date of the reconciliation bill's enactment), with a two-year delay for conducting the community needs assessment provision.
NACUBO will continue to provide more detailed information in the coming months, as agencies begin the process of developing regulations to implement the Health Care and Education Reconciliation Act of 2010-and potentially, as additional legislation is developed to make technical or policy changes to the initial law.
Senior Vice President, Advocacy & Issue Analysis