The Patient Protection and Affordable Care Act is designed to increase the availability of health insurance coverage in the United States.
The Patient Protection and Affordable Care Act (P.L. 111-148) was designed to expand the reach of health insurance coverage in America. Broadly, the act will require U.S. citizens and legal alien residents to carry some form of health coverage. Individuals and families will be able to purchase coverage using planned Health Benefit Exchanges. The law will also require businesses over a certain size to provide health insurance benefits for employees, though the law exempts very small businesses from this requirement. The act expands Medicaid eligibility to 133 percent of the poverty line, as defined by the federal government.
Employer Requirements
The law requires any employer with more than 50 employees and with at least one full-time employee to provide coverage, or face a fee of $2,000 per full-time employee -- not counting the first 30 employees. Employers with more than 50 employees who sponsor health plans but who have at least one full-time employee qualifying for an individual tax credit because the employer's plan is not affordable for that employee will pay $3,000 for each employee receiving a premium credit, or $2,000 for every full-time worker, whichever is less. This provision becomes effective on January 1, 2014. Employers with fewer than 50 employees are exempt.
The law requires large employers with 200 or more workers to automatically enroll employees into health plans. Employees can opt-out if they so desire.
Employer Free Choice Vouchers
Employers who provide health insurance to workers must provide a free choice voucher equal to the employer's share of the health plan premium to workers who earn less than four times the federal poverty line, if their cost burden is higher than 8 percent but lower than 9.8 percent of their income and they choose to use the exchange to join a health plan.
Individual Requirements
All U.S. and resident aliens must obtain qualifying health insurance under the new law. Anyone without health insurance will pay a penalty of $695 per year up to $2,085 or 2.5 percent of their personal income. The penalty will phase in gradually, starting with a $95 fine or 1 percent of income in 2014, $325, or 2 percent of income in 2015 and $695 or 2.5 percent of income beginning in 2016. After that point, the penalty will be indexed to the cost of living. The law provides for exemptions for hardship, religious objections, temporary lapses in coverage of three months or less, people in prison, and illegal immigrants. The plan also exempts people who would have to pay 8 percent or more of their income to enroll in the lowest-cost option, as well as anyone with an income below the income tax filing threshold.
Small Business Tax Credits
The law provides certain smaller employers with fewer than 25 full-time equivalents and average annual wages lower than $50,000 a tax credit of up to 35 percent of the cost of the employer contribution toward health insurance premiums, provided the employer subsidizes at least 50 percent of the total cost, beginning in tax year 2010. In 2014 and later years, the credit increases to as much as 50 percent. The credit phases out gradually on firms with 10 employees or more and on employers with average annual wages of $25,000 or less. Lower credits apply for tax-exempt organizations.
Miscellaneous Provisions
The law requires large employers with 200 or more workers to automatically enroll employees into health plans. Employees can opt-out if they so desire. Penalties on non-qualified distributions from a health savings account are doubled from 10 percent to 20 percent (effective January 1, 2011). Flexible spending plan contributions are limited to $2,500 per year, increased each year by the cost of living (effective 2013). Non-prescription drug coverage under health savings accounts and Archer Medical Savings Accounts are discontinued. The threshold for itemized deduction for non-reimbursed medical expenses is increased from 7.5 percent of adjusted gross income to 10 percent.
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