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Health care bill: What it means to you

March 22, 2010 12:00:00 AM PDT
What will change under the new health care bill? When will it happen and how will it affect your health care? Consumer Specialist Ric Romero discusses some of the key highlights of the historic legislation, answers some of your questions, and explains what it means to you.First off, the new legislation will require most people in the U.S. to buy health insurance or you could be fined. However, that doesn't take effect until 2014.

When it does happen, you may qualify for some help in paying for the health coverage depending on your income. For example, if you're an individual who makes between $14,404 and $43,320 or if you have a family of four with an income between $29,327 and $88,200, you would qualify for a government subsidy.

A popular provision of the bill is the ban on the denial of health coverage due to pre-existing conditions, but unfortunately this doesn't go into effect until 2014.

Among changes happening this year, the new bill stops insurance companies from putting lifetime dollar limits on coverage and it bars insurance companies from canceling policies except for fraud. It provides tax credits to help small businesses with up to 25 employees get and keep coverage for their employees.

Medicare coverage will begin to get better this year as the prescription coverage gap will start to narrow beginning with a $250 rebate for seniors in the gap. The bill also reduces projected Medicare payments to hospitals, home health agencies, nursing homes, hospices and other providers.

How are they going to pay for this? To make up for lost tax revenue, the new bill will increase the Medicare payroll tax, but to only those individuals making more than $200,000 a year or married couples making over $250,000. That's expected to bring in over $200 billion in funding.

How does it benefit you and your family? Well the health care bill expands coverage for kids, adolescents and young adults. Starting six months after enactment, the bill requires all health insurance plans to maintain dependent coverage for children until they turn 26, instead of age 18, and it prohibits insurers from denying coverage to children because of pre-existing health problems.

States will create new health insurance exchanges or a marketplace where people not covered through their employers can shop for health insurance at competitive rates.

Despite some misconception, there is no government run insurance plan.

How will it affect your taxes? Besides the Medicare payroll tax, there are a couple of taxes you might not be aware of. If you have expensive health insurance now, there is a so-called Cadillac tax on those premiums. However, it doesn't kick in until 2018. Also, if go to the tanning salon, there will be a 10 percent sales tax for indoor tanning which starts this year.

Parts of the plan won't be fully phased in for a decade, but ultimately 94 percent of eligible Americans would have coverage. The major expansion of coverage for uninsured workers and their families won't come until 2014 - after the next presidential election.

Here is a timeline of some other changes:

2011

- Creates a voluntary long-term care insurance program to provide a modest cash benefit helping disabled people stay in their homes, or cover nursing home costs. Benefits can begin five years after people start paying a fee for the coverage.
- Provides Medicare recipients in the prescription coverage gap with a 50 percent discount on brand name drugs; begins phasing in additional drug discounts to close the gap by 2020.
- Provides 10 percent Medicare bonus to primary care doctors and general surgeons practicing in underserved areas, such as inner cities and rural communities; improves preventive coverage.
- Freezes payments to Medicare Advantage plans, the first step in reducing payments to the private insurers who serve about one-fourth of seniors. The reductions would be phased in over three to seven years.
- Boosts funding for community health centers, which provide basic care for many low-income and uninsured people.
- Requires employers to report the value of health care benefits on employees' W-2 tax statements.
- Imposes $2.3 billion annual fee on drugmakers, increasing over time.

2012

- Sets up program to create nonprofit insurance co-ops that would compete with commercial insurers.
- Initiates Medicare payment reforms by encouraging hospitals and doctors to band together in quality-driven "accountable care organizations" along the lines of the Mayo Clinic. Sets up a pilot program to test more efficient ways of paying hospitals, doctors, nursing homes and other providers who care for Medicare patients from admission through discharge. Successful experiments would be widely adopted.
- Penalizes hospitals with high rates of preventable readmissions by reducing Medicare payments.

2013

- Standardizes insurance company paperwork, first in a series of steps to reduce administrative costs.
- Limits medical expense contributions to tax-sheltered flexible spending accounts (FSAs) to $2,500 a year, indexed for inflation. Raises threshold for claiming itemized tax deduction for medical expenses from 7.5 percent of income to 10 percent. People over 65 can still deduct medical expenses above 7.5 percent of income through 2016.
- Increases Medicare payroll tax on couples making more than $250,000 and 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. Also adds a new tax of 3.8 percent on income from investments.
- Imposes a 2.3 percent sales tax on medical devices. Eyeglasses, contact lenses, hearing aids and many everyday items bought at the drug store are exempt.

2014

- Prohibits insurers from denying coverage to people with medical problems, or refusing to renew their policy. Health plans cannot limit coverage based on pre-existing conditions, or charge higher rates to those in poor health. Premiums can only vary by age (no more than 3-to-1), place of residence, family size and tobacco use.
- Coverage expansion goes into high gear as states create new health insurance exchanges - supermarkets for individuals and small businesses to buy coverage. People who already have employer coverage won't see any changes.
- Provides income-based tax credits for most consumers in the exchanges, substantially reducing costs for many. Sliding scale credits phase out completely for households above four times the federal poverty level, about $88,000 for a family of four.
- Medicaid expanded to cover low-income people up to 133 percent of the federal poverty line, about $29,300 for a family of four. Low-income childless adults covered for the first time.
- Requires citizens and legal residents to have health insurance, except in cases of financial hardship, or pay a fine to the IRS. Penalty starts at $95 per person in 2014, rising to $695 in 2016. Family penalty capped at $2,250. Penalties indexed for inflation after 2016.
- Penalizes employers with more than 50 workers if any of their workers get coverage through the exchange and receive a tax credit. The penalty is $2,000 times the total number of workers employed at the company. However, employers get to deduct the first 30 workers.

2018

- Imposes a tax on employer-sponsored health insurance worth more than $10,200 for individual coverage, $27,500 for a family plan. The tax is 40 percent of the value of the plan above the thresholds, indexed for inflation.

2020 - Doughnut hole coverage gap in Medicare prescription benefit is phased out. Seniors continue to pay the standard 25 percent of their drug costs until they reach the threshold for Medicare catastrophic coverage, when their copayments drop to 5 percent.

Sources: House Energy and Commerce Committee; Kaiser Family Foundation.

The Associated Press contributed to this report.


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