Healthcare: What the Affordable Care Act Does and Doesn't Do

The following is an analysis of the Affordable Care Act (ACA) - "Obamacare" - written by UE's Political Action Director Chris Townsend soon after Congress passed the bill, and published in the Spring 2010 issue of the UE News. Now that the Supreme Court has upheld this law over Republican challenges, it's important to take a look at its provisions again. We'll be presenting further analysis of the ACA soon.

The new law will take effect over the next decade, with some of the earliest changes beginning later this year. The phase in of some major parts of the legislation begins in 2014.

Many Congressional Democrats who supported the bill are trumpeting it as a great breakthrough for social justice, equal to the passage of Social Security and Medicare. It is far from that. At the same time, Congressional Republicans are making wild claims that the bill is a radical government takeover of healthcare. It is not that, either. The final bill is a mixed bag that contains many good aspects, provisions whose impact is unclear, and some very troubling elements. Because of its shortcomings, UE did not endorse the bill.

Our union recognized the need for sweeping healthcare reform, but has been critical of the way Congressional Democrats and the White House went about it. Rather than take on the necessary fight with the insurance companies, big hospital chains and pharmaceutical industry - as well as the obstructionist Republican leadership - they instead wasted 15 months seeking compromise and "bi-partisanship." The many flaws in final health reform bill are the results of this weak strategy. A more forceful approach would probably have produced a better bill, and prevented the Democrats' loss of political momentum that nearly prevented the passage of any bill at all.

Among the positive provisions lost in the Democrats' pursuit of bipartisanship was the "public option" - which could have provided real competition to the insurance profiteers. The final bill contains no controls on premium increases by insurance companies. Also lost in the final bill were provisions which could have reined in their flagrant price fixing and market share rigging.

WHAT WILL EMPLOYERS DO?

Still unknown is just how employers will respond to the new legislation. Will they work positively to improve the healthcare of their employees and their families? Or, as we've seen so many times in the past, will they look for every loophole to game the system for their own benefit, and at the earliest opportunity dump onto each the responsibility for obtaining health coverage? Sky-high premiums are not going away - and the bill imposes only small fines on employers who don't provide insurance to workers. Will this be an incentive that causes a stampede of employers who stop providing health insurance to their employees?

Another huge concern: The final legislation imposes, in 2018, the misnamed "Cadillac tax" - a 40 percent excise tax on high-cost employer-sponsored health plans. Will this tax hasten the end of employer-provided insurance?

The health reform law does contain positive aspects, the first being access to insurance for as many as 30 million people currently uninsured. Several of the worst insurance company abuses will be banned or restricted. Senior citizens will see some tangible improvements in prescription drug coverage, and children up to age 26 who lack other coverage options will be able to stay on their parents' plans. The legislation creates a new long-term care program to enable workers to purchase insurance to cover future costs of nursing home or home care.

UE members and families will be shielded from most changes, at least until our next contract expirations. That gives UE locals time to learn more about how the new law will affect our future bargaining over health coverage.

UE will follow and analyze the implementation of the healthcare reform law in the weeks and months ahead. There is more political action to be done, to strengthen what has been passed and ensure that its positive features are not undermined or blocked by the corporate and political forces who still oppose health reform.

It is a complicated bill, and its provisions go into effect in a staggered schedule over the next 11 years. To help you begin to understand what is in the new law, when it goes into effect, and how it might affect you, your family, and your local union, here is a timeline summary of the law's implementation.

TIMELINE OF IMPLEMENTATION

First year - 2010

• "High-risk" health insurance pool established, to insure those with existing health conditions.
• Beginning in October, individual health insurance plans (as opposed to employer group plans) must allow children up to age 26 to remain covered as dependents.
• Lifetime dollar maximums for insurance coverage banned on individual insurance policies.
• Insurance companies can't cancel coverge unless obtained through consumer fraud.
• The Medicare Part D prescription drug coverage gap is reduced by payment of $250 to those reaching $2,830 out-of-pocket for the year. The so-called Medicare "doughnut hole" will be completely eliminated by 2020.
• Employers who receive the federal subsidy for providing retiree drug coverage under Medicare Part D must report a tax liability for the amount of the subsidy.
• Projected payments to Medicare providers, hospitals, nursing homes, etc. will be reduced.
• Starting June 21, plan sponsors (mostly employers) will be eligible for reimbursement of 80 percent of certain claims from $15,000 to $90,000 for pre-Medicare retirees ages 55 to 64. This temporary program expires at the end of 2013 or when the $5 billion fund is exhausted, whichever comes first.
• Small business tax credits begin for companies with fewer than 25 workers to offset insurance coverage costs.
• Coverage for certain childhood illnesses and conditions may no longer be excluded from group plans.
• A 10 percent sales tax on tanning salon services begins.

Second year - 2011

• Long-term care insurance program starts; it will reimburse some costs of home and nursing home care. Premiums must be paid for five full years before eligibility for benefits begins, and employers may enroll workers unless they opt out.
• Medicare recipients in the prescription drug "doughnut hole" will get a 50 percent discount on brand-name drugs, with additional discounts beginning to close the gap by 2020.
• Employers with fewer than 25 employees and average annual wage less than $50,000 will be eligible for sliding scale tax credit, if they provide health insurance and pay at least 50 percent of cost.
• Primary care doctors and certain surgeons serving under-served areas (some cities and many rural areas) to receive 10 percent incentive payment from Medicare for their services.
• Medicare Advantage private insurer plans will see reduced reimbursements phased in over three to seven years.
• Funding for community health centers expanded, to benefit mainly low-income and uninsured people.
• Claimed dollar value of healthcare benefits to be included on employees' annual W-2 wage and tax statement. (This is supposedly part of an education program to make us all better consumers once we know how expensive health insurance is.)
• A $2.3 billion annual fee on pharmaceutical manufacturers begins, gradually increasing in the following years.
• Lifetime maximum benefit payment limits begin to be eliminated from group health plans, but certain annual limits still allowed.
• Children up to age 26 not eligible for their own employer-sponsored plan must be allowed to participate on parent's group plan.

Third year - 2012

• Not-for-profit insurance cooperatives will be initiated to compete with commercial insurers, hopefully with lower premiums.
• Medicare payments begin to new "accountable care organizations" will be established to experiment with various cost-reduction measures.
• Reduction of Medicare reimbursements to hospitals with high rates of patient re-admissions that are deemed "preventable."

Fourth year - 2013

• Standardized insurance forms introduced to reduce paperwork, duplication and administrative costs.
• Contributions to tax-sheltered flexible spending accounts (FSAs) will be limited to $2,500 year, indexed for inflation. Threshold for claiming itemized tax deduction for medical expenses increased from 7.5 percent of income to 10 percent. Those over 65 can still deduct medical expenses above 7.5 percent of income through 2016.
• Medicare payroll tax increased on couples earning more than $250,000 year and on individuals making more than $200,000. The tax rate on wages above those thresholds would rise to 2.35 percent from the current 1.45 percent.
• New tax of 3.8 percent on income from investments. This tax is intended to help fund the health reform program.
• Employers sponsoring insurance plans receiving Medicare Part D subsidy will no longer be able to deduct the subsidy from their taxes.
• A 2.3 percent sales tax on medical devices goes into effect, except eyeglasses, contact lenses, hearing aids and many everyday items.

Fifth year - 2014

• Insurance companies will be prohibited from denying coverage to people with medical conditions and may not refuse to renew policy because claims were submitted.
• Insurance plans may not limit coverage based on pre-existing conditions, or charge higher rates to those in poor health.
• Insurance premiums may only vary by age and three other condition. Limits places on charging higher rates to older people. Higher rates will be allowed on basis of place of residence, family size and tobacco use.
• New health insurance "exchanges" created for individuals and small businesses to buy coverage.
• Tax credits for most consumers purchasing insurance through the exchanges will be provided, based on household income. Subsidies end when household income exceeds 400 percent of the poverty rate, or currently $88,000 for a family of four.
• Insurance sold through the exchanges will be offered in four tiers, covering 60, 70, 80, and 90 percent of the health service costs respectively. Employer-sponsored plans must meet the same "qualified coverage" standard as plans sold on the exchange.
• All group health plans will have to be certified as "qualified health plans" and a minimum table of required benefits will be established. This is to prevent employers offering low-benefit "sham plans."
• "Qualified health plans" must eliminate annual coverage limits and preexisting condition exclusions, extend coverage to children up to age 26, and set premium rates in "rating bands" after consultation with the federal government.
• Medicaid expanded to cover low-income people up to 133 percent of the federal poverty line, or $29,300 for a family of four.
• Childless adults meeting low-income test will be covered for the first time by Medicaid.
• U.S. citizens and legal residents will be required to have and maintain health insurance, or pay a fine starting at $95 per person in 2014, increasing to $695 in 2016. Family penalty capped at $2,250. Penalties indexed for inflation after 2016. Penalties enforced and collected by the IRS.
• Employers with more than 50 workers penalized if any of their full-time workers buy coverage through the exchange, as opposed to through employer-sponsored coverage. Penalty is $2,000 per worker per year, exempting the first 30 employees. "Full-time" defined as 30 hours per week.
• Penalty on employer is increased to $3,000 per year per worker, if employee receives subsidy or tax credit when buying through the exchange.
• Employers will be required to disclose detailed information about their employee health plans.

Ninth year - 2018

• Initiation of controversial tax on employer-sponsored health insurance worth more than $10,200 for individual coverage, $27,500 for a family plan - the mislabeled "Cadillac tax." The tax will be 40 percent of the value of the plan above the thresholds, indexed for inflation, and will be paid by insurance companies and self-insured employers.

Eleventh year - 2020

• "Doughnut hole" Medicare prescription drug benefit gap is ended. Seniors continue to pay the standard 25 percent of drug costs until they reach the threshold for Medicare catastrophic coverage, when their copayments drop to 5 percent.