Health Care and Education Reconciliation Act

On March 25, 2010 the House of Representatives in a 220-207 vote passed the Health Care and Education Reconciliation Act. This new law will make major changes in Health Care and Education over the next ten years. The changes include new consumer protection provisions, coverage of millions of uninsured Americans, tax savings for businesses, new taxes on individuals and businesses who don’t buy health insurance, and attempts to control rising costs. Here is a year-by-year review of what the new law should look like:

Adults who can’t get coverage because of a pre-existing medical condition can join a high-risk insurance pool (this is an interim step pending the launch in 2014 of the health insurance marketplace).

Children with pre-existing conditions will be covered immediately and dependent children will be covered until they turn 26.

Insurance policies cannot be revoked due to illness. For new policies, there will no longer be lifetime limits on coverage and annual limits will be restricted.

Certain preventive services will be fully covered, with no co-pays or deductibles.

People in the Medicare prescription drug program will receive a $250 rebate this year to help pay for expenses in the coverage gap, or “doughnut hole,” of Medicare Part D. The doughnut hole will be phased out entirely by 2020.

Certain small businesses will start getting tax credits to offset up to 35 percent of the cost of insuring their employees. That will rise to 50 percent in 2014.

Effective July 1, 2010, private lenders will no longer grant student loans. The loans will come directly from the U. S. Department of Education. The money saved will be put back into the Pell grant program. Prior to the new legislation, the Pell grant program had run out of money. Now, for the fall 2010 school year, the Pell grant program will remain in tact, and eligible students will see the maximum Pell grant rise from $5,550 this year to $5,975 in 2017.

The first tax increase kicks in: A 10 percent tax on indoor tanning services.

Medicare changes will include free annual wellness visits and a major reduction in cost sharing for preventive care; Preventive care includes immunizations and cancer screenings.

Some bonuses will be paid to primary care doctors and general surgeons; there will be discounts on certain prescriptions for those on Medicare who are in the “doughnut hole”.

Primary care physicians will receive additional funding. There will also be incentives to encourage doctors to join together in “accountable care organizations (ACO) .” An ACO would be a combination of one or more hospitals, primary care physicians and possibly specialists that would be accountable for total Medicare spending and quality of care for the Medicare patients served. Bonuses and penalties could be tied to overall Medicare spending and quality measures.

This is the year that there will be tax increases for high earning taxpayers. For married taxpayers who file jointly the tax will increase for couples with income above $250,000. For individuals there will be an increase for taxpayers with income above $200,000. The new tax will be in the form of a Medicare payroll tax. The tax on earnings above those amounts will rise from 1.45 percent to 2.35 percent. Unearned income above those amounts, such as dividends, will now be subject to a 3.8 percent tax.

In addition, maximum contributions to pre-tax Flexible Savings Account contributions will be limited to $2,500 a year (down from the current $3,050 for individuals).

Medical devices will pay a new 2.9 percent excise tax.

This is the year that additional consumer protection rules will kick in. Annual limits on coverage will be banned. Insurance companies will not be able to deny policies to anyone based on pre-existing conditions. Insurance companies will have limited ability to increase premiums on individuals as a result of age, family size or tobacco use.

Each state will open a health insurance exchange, or marketplace, for individuals and small businesses without coverage. People will be able to comparison shop for standardized health packages. There will be a multistate private plan available nationwide, supervised by the U.S. Office of Personnel Management.

Tax credits will be available to make insurance and care affordable for people who make too much to qualify for Medicaid, but have incomes below 400 percent of the poverty level.

Most people will be required to buy insurance coverage or pay penalties that start at $95 in 2014 and rise to $695 or 2.5 percent of income in 2016. Employers with 50 or more workers who do not offer coverage will have to pay annual fees.

Medicaid eligibility will increase to 133 percent of the poverty level ($14,404 for individuals) for everyone under 65 (when they qualify for Medicare).

A new Independent Payment Advisory Board will be formed to come up with ways to lower Medicare costs and promote better care. The recommendations will go to Congress and private insurers.

This is when the most controversial new tax begins, a 40 percent excise tax on insurance companies and plan administrators for any family plan that costs more than $27,500. The tax applies to the cost above that threshold. There are higher thresholds for retirees over 55 and plans that cover workers in high-risk jobs.

The new system will have reduced the number of uninsured people by 32 million, according to the nonpartisan Congressional Budget Office. That will leave an estimated 23 million uninsured, one-third of them illegal immigrants. Coverage of legal residents too young for Medicare (under age 65) will be 94 percent, up from 83 percent now.

Sources: Jill Lawrence, Columnist for Politics Daily March 26, 2010; Patricia Murphy, Columnist for Politics Daily March 23, 2010; House Energy and Commerce Committee,, White, Kaiser Health News, Congressional Budget Office.