A Complete Overview Of The Healthcare Reform

Regardless of what you think about the new healthcare legislation, there are things in it that will likely affect you, your business, and your family. You can find a great deal of information on the benefits of Healthcare Reform on the http://www.healthcare.gov website. Digging through the details is a little more challenging. For that reason, we’ve included the information here in the form of a timeline.


Small business tax credits – To help small businesses provide insurance benefits to their workers. The first phase of this provision provides a credit worth up to 35% of the employer’s contribution to the employees’ health insurance. Small non-profit organizations may receive up to a 25% credit.


Relief for seniors who hit the Medicare prescription drug “donut hole” – An estimated 4 million seniors will reach the gap in Medicare prescription drug coverage known as the “donut hole” in 2010. Each senior who reaches the gap will receive a $250 rebate.

Early Retiree Reinsurance Program – Americans who retire without employer-sponsored insurance and before they are eligible for Medicare may see their life savings disappear because of high rates in the individual market. The new law creates a $5 billion program to provide needed financial help for employment-based plans to continue to provide valuable coverage to people who retire between the ages of 55 and 65, as well as their spouses and dependents. This program ends 1/1/2014 when insurance exchanges become available.


Pre-Existing Condition Insurance Plan – This plan will provide new coverage options to individuals who have been uninsured for at least six months because of a pre-existing condition. States have the option of running this new program in their state. If a state chooses not to do so, a plan will be established by the Department of Health and Human Services in that state. This program serves as a bridge to 2014, when all discrimination against pre-existing conditions will be prohibited.


Extending coverage for young adults – Young adults will be allowed to stay on their parents’ plan until they turn 26 years old. The law includes new rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition.

Free preventative care – All new plans must cover certain preventative services such as mammograms and colonoscopies without charging a deductible, co-pay, or coinsurance.

Prohibit insurance companies from rescinding coverage – In the past, insurance companies could search for an error, or other technical mistake, on a customer’s application and use this error to deny payment for services when he or she became ill. The new law makes this illegal. After media reports cited incidents of breast cancer patients losing coverage, insurance companies agreed to end this practice immediately.

Appealing Insurance company decisions – The law provides consumers with a way to appeal coverage determinations or claims to their insurance company, and establishes an external review process.

Eliminate lifetime and annual limits on insurance coverage – Insurance companies will be prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays. Use of annual dollar limits on the amount of insurance coverage a patient may receive will be restricted for new plans in the individual market and all group plans.


Prescription drug discounts – Seniors who reach the coverage gap will receive a 50% discount when buying Medicare Part D covered brand-name prescription drugs. Over the next ten years, seniors will receive additional savings on brand-name and generic drugs until the coverage gap is closed in 2020.

Free preventative care for seniors on Medicare – The law provides certain free preventive services, such as annual wellness visits and personalized prevention plans, for seniors on Medicare.

Health care premium rebate program – To ensure premium dollars are spent primarily on health care, the new law generally requires that at least 85% of all premium dollars collected by insurance companies for large employer plans are spent on health care services and health care quality improvement. For plans sold to individuals and small employers, at least 80% of the premium must be spent on benefits and quality improvement. If insurance companies do not meet these goals because their administrative costs or profits are too high, they must provide rebates to consumers.

Over-the-counter medications – Only prescribed medications will be considered a qualified medical expense for health Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), and Medical Savings Accounts (MSAs). Related plan debit cards will also be prohibited from being used for non-prescription drugs.


Long-term care insurance – the law creates a voluntary long-term care insurance program – called CLASS — to provide cash benefits to adults who become disabled.


Increasing Medicaid payments for primary care doctors – As Medicaid programs and providers prepare to cover more patients in 2014, the Act requires states to pay primary care physicians no less than 100% of Medicare payment rates in 2013 and 2014 for primary care services.

Medicare payroll tax – Medicare payroll tax for high-income taxpayers is schedule to rise. There will be an additional 0.9% tax on earned income in excess of $200,000 for individuals ($250,000 for married filing jointly) and a 3.8% tax on unearned income. The 3.8% tax will be assessed on the lesser of 1) the excess of the taxpayer’s modified adjusted gross income (AGI) that is over the same threshold amounts as the 0.9% tax, or 2) their total net investment income.

Itemized medical expenses – The threshold for itemized medical expense deductions is being raised to 10% of AGI (up from the current 7.5%). There will be a temporary exemption for individuals age 65 and older, terminating December 31, 2016.

Maximum FSA contributions – This provision caps annual FSA contributions at $2,500 per year. In the past, there was no maximum contribution amount for medical FSAs, although many employers limited contributions to $4,000 or $5,000 per year.


Health insurance exchanges – If your employer doesn’t offer insurance, you will be able to buy insurance directly from an Exchange — a new transparent and competitive insurance marketplace where individuals and small businesses can buy affordable and qualified health benefit plans. Exchanges will offer you a choice of health plans that meet certain benefits and cost standards. Members of Congress will also be getting their health care insurance through Exchanges.

Mandatory insurance – Under the new law, most individuals who can afford it will be required to obtain basic health insurance coverage or pay a penalty to help offset the costs of caring for uninsured Americans. Anyone enrolled in Medicaid, Medicare, or some type of government insurance will be exempt. If affordable coverage is not available to an individual, he or she will be eligible for an exemption.

Large employer coverage – Those employing at least 50 full time employees will be required to provide a minimum amount of health insurance to their employees or face paying a penalty.

Increased access to Medicaid – Americans who earn less than 133% of the poverty level (approximately $14,000 for an individual or $29,000 for a family of four) will be eligible to enroll in Medicaid.

Tax Credits – In order to make it easier for the middle class to buy insurance, a new refundable tax credit will become available in 2014. It will apply to people with incomes above 100% and below 400% of the Federal poverty level ($43,320 for an individual or $88,200 for a family of four in 2010) who are not eligible for or offered other affordable coverage.

Full elimination of annual limits on coverage – The law prohibits new plans and existing group plans from imposing annual dollar limits on the amount of coverage an individual may receive.

No discrimination due to pre-existing conditions or gender – The law implements strong reforms that prohibit insurance companies from refusing to sell coverage or renew policies because of an individual’s pre-existing conditions. Also, in the individual and small group market, it eliminates the ability of insurance companies to charge higher rates due to gender or health status.

Increasing small business health insurance tax credit – The law implements the second phase of the small business tax credit for qualified small businesses and small non-profit organizations. In this phase, the credit is up to 50% of the employer’s contribution to provide health insurance for employees. There is also up to a 35% credit for small non-profit organizations.


Pay physicians based on value not volume – A new provision will tie physician payments to the quality of care they provide. Physicians will see their payments modified so that those who provide higher value care will receive higher payments than those who provide lower quality care.


The “donut hole” is closed – Medicare beneficiaries will pay only 25% of the cost of their drugs

About the author

Russell D. Francis, CPA, CFP®

Russell D. Francis, CPA/PFS, CFP® started Portland Fixed Income Specialists, LLC in 2012. Portland Fixed Income Specialists is an Oregon fee-only Registered Investment Advisor. We do not accept commissions for financial products or referral fees. Every decision we make is based on the best interests of our clients.

We simplify the financial planning process for you by carefully considering how it applies to your unique situation. We then provide you with the information, advice and alternatives necessary to align your financial decisions with your values, needs, and goals in life. The benefits of this approach are many – you enjoy a greater understanding of the choices you make and are confident when implementing those choices.

And, because we’re a Certified Public Accounting (CPA) firm as well as a Registered Investment Advisor, you benefit from our knowledge of the complex relationship between investments and taxes.

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