Patient Protection and Affordable Care Act (PPACA)
What it is:
Also known as “Obamacare” and even the more generic “health care reform,” the Patient Protection and Affordable Care Act (PPACA) is a bill signed into law on March 23, 2010, by President Barack Obama. PPACA works in conjunction with the Health Care and Education Reconciliation Act of 2010, which also reforms many aspects of the student loan industry.
How it works (Example):
Though PPACA (and its associated legislation) spans thousands of pages, the following are some of the most prominent features:
- Beginning in 2014, requires employers with more than 50 full-time employees to provide “affordable” coverage to those employees or pay a fine of at least $2,000 per employee per month.
- Requires individuals who can afford insurance to purchase a policy via a state insurance exchange or other method by January 1, 2014, or face a fine equal to the higher of $695 or 2% of their income.
- After September 23, 2010, prohibits insurers from establishing lifetime or “unreasonable” annual limits on the dollar value of “essential” benefits.
- Prohibits insurers from searching for errors or other technical mistakes on a customer’s application and using those errors to deny payment for services when the customer gets sick.
- Beginning January 1, 2014, requires insurers to provide coverage for non-dependent children up to age 26.
- As of September 23, 2010, prohibits insurers from denying coverage to children under age 19 based on pre-existing conditions.
- Beginning January 1, 2014, prohibits insurers from excluding people from group plans based on preexisting conditions. Provides $5 billion in subsidies for uninsured people with preexisting conditions (the Pre-Existing Condition Insurance Plan, or PCIP).
- Requires all health plans to cover preventive services and immunizations.
- Prohibits employers from limiting eligibility for their company coverage based on wages of full-time employees. Allows employers to vary premiums by up to 30% for participating in health or disease-prevention programs.
- Through December 31, 2013, requires insurers to refund portions of premiums if their “non-claims” costs exceed 20% (for group plans) or 25% (for individual plans).
- Provides $5 billion to reimburse employers for health benefits to retirees and their families.
- Expands eligibility for Medicaid coverage and extends certain Medicare payment and reimbursement programs.
- Starting January 1, 2011, requires drug manufacturers to give a 50% discount to Part D beneficiaries for brand-name drugs purchased during the coverage gap (also called the “donut hole”).
- Creates a nationwide program for background checks on employees of long-term care facilities and providers.
- Pays physicians bonuses for providing quality-of-care data to the federal government.
The reform legislation faces a mountain of controversy, but one the most prominent centers around the purchase mandates. More than 30 states have challenged the federal government’s attempt to require citizens to purchase insurance products, and the challenge has gone all the way to the Supreme Court. Additionally, critics argue, the requirements that more people purchase insurance and insurers pay for more services translates to a massive increase in demand for insurance and health care and, accordingly, a massive increase in the price of insurance and health care.
Why it Matters:
PPACA is perhaps the most well-known piece of legislation from the Obama administration, and its future remains to be seen. Its influence, however, will likely persist indefinitely.