Tuesday, March 23, 2010

Patient Protection and Affordable Care Act (H.R. 3590)

On March 23, 210 President Obama signed into law sweeping and historical health care reform legislation, H.R. 3590, the Patient Protection and Affordable Care Act. Lawmakers are debating H.R. 4872, the Health Care and Education Reconciliation Act of 2010, a reconciliation bill that would amend H.R. 3590. The House passed H.R. 4872 on March 21, 2010 and the Senate must take up the measure.

H.R. 3590 as a stand alone measure provides the following:
  • For group health plans and individual health insurance coverage: prohibition from establishing unreasonable annual limits or lifetime limits; restricts rescissions; requires minimum coverage for preventive health services; continues dependent coverage until age 26.
  • Creates exchanges for purchasing health insurance coverage.
    Establishes a refundable tax credit to provide premium assistance for coverage under a qualified health plan.
  • Provides businesses with a tax credit for the premium cost of health insurance coverage.
  • Requires individuals to maintain minimum essential coverage or be subject to a penalty.
  • Requires automatic enrollment for employees of large employers.
  • Imposes a 40% excise tax on health coverage above certain dollar amounts.
  • Raises the HI tax on wages and self-employment income in excess of $200,000 ($250,000 for joint filers) by 0.9%.
  • Imposes annual fees on manufacturers and importers of branded drugs, manufacturers and importers of certain medical devices, and health insurance providers.
  • Raises the Adjusted Gross Income ("AGI") floor for deducting medical expenses from 7.5% to 10% (7.5% remains in effect for individuals over 65 and their spouses through 2016).
  • Implements a $500,000 deduction limitation on taxable year remuneration to officers, employees, directors, and service providers of covered health insurance providers.
  • Requires employer W-2 reporting of the value of health benefits.
  • Increases the penalty for nonqualified health savings account distributions from 10% to 20%.
  • Limits health flexible spending arrangements in cafeteria plans to $2,500 (indexed for inflation after 2011).
  • Requires information reporting on payments to corporations.
  • Imposes additional requirements for Sec. 501(c)(3) hospitals.
  • Conforms the definition of medical expenses for HSAs, Archer MSAs, health FSAs, and HRAs to the definition of the itemized deduction for medical expenses (excludes over-the-counter medications, except if prescribed by a physician).
  • Imposes a 10% excise tax on indoor tanning services.
  • Makes the adoption credit refundable; increases the qualifying expense threshold; and extends the credit through 2011.

Meanwhile 13 state attorneys general have filed a lawsuit challenging the constitutionality of the Act. A copy of the complaint is here. It appears the judicial branch will get a chance to weigh in on this legislation.

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