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2014-15 PPACA client compliance by Roger d. Hargrave, MBA: Introduction

Actions that clients will potentially need to make in 2014 and 2015 to be in compliance with Patient Protection and Affordable Care Act.


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Ulysses Jaen
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With 2014 less than 6 months away, numerous false starts and delays have begun appearing in initial implementation of provisions of the Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act (commonly referred to as "Obamacare"), so much so that the executive branch has even announced a delay in the enforcement of a key provision.

A foundation-shaking piece of legislation as passed, multiple administrative agencies will participate in enactment. Additionally, many legal challenges cropped up even before enactment, not all of which has been adjudicated.  Dept. of Treasury, Internal Revenue Service, Dept. of Health & Human Services, and the Small Business Administration each have some participation. 

As of the summer of 2013, the main certainty of the law is that it is constitutional (see National Federation of Independent Business v. Sebelius). There are still constitutional challenges pending, but these are quite specific to components of the law and grounds for unconstitutionality. In NFIB v. Sibelius the Court did affirm the legality of the act as conforming with Congress's Taxing Power while also affirming it not within Congress's Commerce Power. The nature of the act and its reach over healthcare makes it, like patent, copyright, and securities regulation, within the realm of federal courts and outside of the state courts. Most legal cases and controversies are likely to litigate in the United States Tax Court system.

Introductory Timeline

Time line available from White House website:

Resource to browse key dates in PPACA, and to confirm implementation time line found in non-legal sites such as wikipedia (see box below with timeline listing)

Bulleted timeline

Effective June 21, 2010

•    Adults with existing conditions became eligible to join a temporary high-risk pool, which will be superseded by the health care exchange in 2014.[45][54] To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months.[55] There is no age requirement.[55] The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allows premiums to vary by age (3:1), geographic area, family composition and tobacco use (1.5:1). Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.[55][56][57]

Effective July 1, 2010

•    The President established, within the Department of Health and Human Services (HHS), a council to be known as the National Prevention, Health Promotion and Public Health Council to help begin to develop a National Prevention and Health Promotion Strategy. The Surgeon General shall serve as the Chairperson of the new Council.[58][59]

•    A 10% sales tax on indoor tanning took effect.[60]

Effective September 23, 2010

•    Insurers are prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays, in new policies issued.[61]

•    Dependents (children) will be permitted to remain on their parents' insurance plan until their 26th birthday,[62] and regulations implemented under the ACA include dependents that no longer live with their parents, are not a dependent on a parent's tax return, are no longer a student, or are married.[63][64]

•    Insurers are prohibited from excluding pre-existing medical conditions (except in grandfathered individual health insurance plans) for children under the age of 19.[65][66]

•    All new insurance plans must cover preventive care and medical screenings[67] rated Level A or B by the U.S. Preventive Services Task Force.[68] Insurers are prohibited from charging co-payments, co-insurance, or deductibles for these services.[69]

•    Individuals affected by the Medicare Part D coverage gap will receive a $250 rebate, and 50% of the gap will be eliminated in 2011.[70] The gap will be eliminated by 2020.

•    Insurers' abilities to enforce annual spending caps will be restricted, and completely prohibited by 2014.[45]

•    Insurers are prohibited from dropping policyholders when they get sick.[45]

•    Insurers are required to reveal details about administrative and executive expenditures.[45]

•    Insurers are required to implement an appeals process for coverage determination and claims on all new plans.[45]

•    Enhanced methods of fraud detection are implemented.[45]

•    Medicare is expanded to small, rural hospitals and facilities.[45]

•    Medicare patients with chronic illnesses must be monitored/evaluated on a 3-month basis for coverage of the medications for treatment of such illnesses.

•    Companies which provide early retiree benefits for individuals aged 55–64 are eligible to participate in a temporary program which reduces premium costs.[45]

•    A new website installed by the Secretary of Health and Human Services will provide consumer insurance information for individuals and small businesses in all states.[45]

•    A temporary credit program is established to encourage private investment in new therapies for disease treatment and prevention.[45]

•    All new insurance plans must cover childhood immunizations and adult vaccinations recommended by the Advisory Committee on Immunization Practices (ACIP) without charging co-payments, co-insurance, or deductibles when provided by an in-network provider.[71]

Effective January 1, 2011

•    Insurers must spend 80% (for individual or small group insurers) or 85% (for large group insurers) of premium dollars on health costs and claims, leaving only 20% or 15% respectively for administrative costs and profits, subject to various waivers and exemptions. If an insurer fails to meet this requirement, there is no penalty, but a rebate must be issued to the policy holder. This policy is known as the 'Medical Loss Ratio'.[72][73][74][75]

•    The Centers for Medicare and Medicaid Services is responsible for developing the Center for Medicare and Medicaid Innovation and overseeing the testing of innovative payment and delivery models.[76]

•    Flexible spending accounts, Health reimbursement accounts and health savings accounts cannot be used to pay for over-the-counter drugs, purchased without a prescription, except insulin.[77]

Effective September 1, 2011

•    All health insurance companies must inform the public when they want to increase health insurance rates for individual or small group policies by an average of 10% or more. This policy is known as 'Rate Review'. States are provided with Health Insurance Rate Review Grants to enhance their rate review programs and bring greater transparency to the process.[78][79]

Effective January 1, 2012

•    Employers must disclose the value of the benefits they provided beginning in 2012 for each employee's health insurance coverage on the employee's annual Form W-2's.[80] This requirement was originally to be effective January 1, 2011, but was postponed by IRS Notice 2010–69 on October 23, 2010.[81] Reporting is not required for any employer that was required to file fewer than 250 Forms W-2 in the preceding calendar year.[82]

•    New tax reporting changes were to come in effect. Lawmakers originally felt these changes would help prevent tax evasion by corporations. However, in April 2011, Congress passed and President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repealing this provision, because it was burdensome to small businesses.[83][84] Before the ACA, businesses were required to notify the IRS on form 1099 of certain payments to individuals for certain services or property over a reporting threshold of $600.[85][86] Under the repealed law, reporting of payments to corporations would also be required.[87][88] Originally it was expected to raise $17 billion over 10 years.[89] The amendments made by Section 9006 of the ACA were designed to apply to payments made by businesses after December 31, 2011, but will no longer apply because of the repeal of the section.[84][86]

Effective August 1, 2012

•    All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. Women's Preventive Services – including: well-woman visits; gestational diabetes screening; human papillomavirus (HPV) DNA testing for women age 30 and older; sexually transmitted infection counseling; human immunodeficiency virus (HIV) screening and counseling; FDA-approved contraceptive methods and contraceptive counseling; breastfeeding support, supplies and counseling; and domestic violence screening and counseling - will be covered without cost sharing.[90] This is also known as the contraceptive mandate.[67][91][92]

Effective October 1, 2012

•    The Centers for Medicare & Medicaid Services (CMS) will begin the Readmissions Reduction Program, which requires CMS to reduce payments to IPPS hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The regulations that implement this provision are in subpart I of 42 CFR part 412 (§412.150 through §412.154).[93] Starting in October, an estimated total of 2,217 hospitals across the nation will be penalized; however, only 307 of these hospitals will receive this year's maximum penalty, i.e., 1 percent off their base Medicare reimbursements. The penalty will be deducted from reimbursements each time a hospital submits a claim starting Oct. 1. The maximum penalty will increase after this year, to 2 percent of regular payments starting in October 2013 and then to 3 percent the following year. As an example, if a hospital received the maximum penalty of 1 percent and it submitted a claim for $20,000 for a stay, Medicare would reimburse it $19,800. Together, these 2,217 hospitals will forfeit more than $280 million in Medicare funds over the next year, i.e., until October 2013, as Medicare and Medicaid begin a wide-ranging push to start paying health care providers based on the quality of care they provide. The $280 million in penalties comprises about 0.3 percent of the total amount hospitals are paid by Medicare.[94]

Effective January 1, 2013

•    Income from self-employment and wages of single individuals in excess of $200,000 annually will be subject to an additional tax of 0.9%. The threshold amount is $250,000 for a married couple filing jointly (threshold applies to joint compensation of the two spouses), or $125,000 for a married person filing separately.[95] In addition, an additional Medicare tax of 3.8% will apply to unearned income, specifically the lesser of net investment income or the amount by which adjusted gross income exceeds $200,000 ($250,000 for a married couple filing jointly; $125,000 for a married person filing separately.)[96]

•    Beginning January 1, 2013, the limit on pre-tax contributions to healthcare flexible spending accounts will be capped at $2,500 per year.[97][98][99]

•    Most medical devices become subject to a 2.3% excise tax collected at the time of purchase. (Reduced by the reconciliation act from 2.6% to 2.3%.)[100] This tax will also apply to some medical devices, such as examination gloves and catheters, that are used in veterinary medicine.[101]

•    Insurance companies are required to use simpler, more standardized paperwork, with the intention of helping consumers make apples-to-apples comparisons between the prices and benefits of different health plans.[102]

Effective by August 1, 2013

•    Religious organizations that were given an extra year to implement the contraceptive mandate are no longer exempt. Certain non-exempt, non-grandfathered group health plans established and maintained by non-profit organizations with religious objections to covering contraceptive services may take advantage of a one-year enforcement safe harbor (i.e., until the first plan year beginning on or after August 1, 2013) by timely satisfying certain requirements set forth by the U.S. Department of Health & Human Services.[103]

Effective by October 1, 2013

•    Starting in October 2013, those looking to buy individual health insurance can enroll in subsidized plans offered through state-based exchanges (see below), with coverage beginning in January 2014.[104][105][106]

Effective by January 1, 2014

Maximum Out-of-Pocket Premium Payments Under PPACA by Family Size and federal poverty level.[13] (Source: CRS)

•    Insurers are prohibited from discriminating against or charging higher rates for any individual based on gender or pre-existing medical conditions.[107]

•    Insurers are prohibited from establishing annual spending caps.[45]

•    Individuals who are not covered by an acceptable insurance policy will be charged an annual penalty of $95, or up to 1% of income over the filing minimum,[108] whichever is greater; this will rise to a minimum of $695 ($2,085 for families),[109] or 2.5% of income over the filing minimum,[108] by 2016.[18][110] Exemptions to the mandatory coverage provision and penalty are permitted for religious reasons, members of health care sharing ministries, or for those for whom the least expensive policy would exceed 8% of their income.[111] In 2010, the Commissioner speculated that insurance providers would supply a form confirming essential coverage to both individuals and the IRS; individuals would attach this form to their Federal tax return. Those who aren't covered will be assessed the penalty on their Federal tax return. In the wording of the law, a taxpayer who fails to pay the penalty "shall not be subject to any criminal prosecution or penalty", and cannot have liens or levies placed on their property, but the IRS will be able to withhold future tax refunds from them.[112]

•    In participating states, Medicaid eligibility is expanded; all individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children (although states can set a higher threshold of eligibility, to include more people in their state[113]).[18][114] The law also provides for a 5% "income disregard", making the effective income eligibility limit 138% of the poverty line.[113] As written, the ACA withheld all Medicaid funding from states declining to participate in the expansion. However, the Supreme Court ruled, in National Federation of Independent Business v. Sebelius, that this withdrawal of funding was unconstitutionally coercive, and that individual states had the right to opt out of the Medicaid expansion without losing pre-existing Medicaid funding from the federal government. As of April 25, 2013, fifteen states—Alaska, Alabama, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, Wisconsin, and Virginia—were not participating in the Medicaid expansion, with ten more—Kansas, Maine, Michigan, Montana, Missouri, Ohio, Pennsylvania, South Dakota, Utah, and Wyoming—leaning towards not participating.[115]

•    Health insurance exchanges are established, and subsides for insurance premiums are given to individuals who buy a plan from an exchange and have a household income between 133% and 400% of the poverty line.[114][116][117][118] Section 1401(36B) of PPACA explains that each subsidy will be provided as an advanceable, refundable tax credit[119] and gives a formula for its calculation.[120] A refundable tax credit is a way to provide government benefits to individuals who may have no tax liability[121] (such as the Earned Income Tax Credit). The formula was changed in the amendments (HR 4872) passed March 23, 2010, in section 1001. To qualify for the subsidy, the beneficiaries cannot be eligible for other acceptable coverage. The U.S. Department of Health and Human Services (DHHS) and Internal Revenue Service (IRS) on May 23, 2012, issued joint final rules regarding implementation of the new state-based health insurance exchanges to cover how the exchanges will determine eligibility for uninsured individuals and employees of small businesses seeking to buy insurance on the exchanges, as well as how the exchanges will handle eligibility determinations for low-income individuals applying for newly expanded Medicaid benefits.[122][123] According to DHHS and CRS, in 2014 the income-based premium caps for a "silver" healthcare plan for a family of four will be the following:

Health Insurance Premiums and Cost Sharing under PPACA for Average Family of 4[13][123][124][125][126]

Income % of federal poverty level

Premium Cap as a Share of Income

Income $ (family of 4)a

Max Annual Out-of-Pocket Premium

Premium Savingsb

Additional Cost-Sharing Subsidy


3% of income






4% of income






6.3% of income






8.05% of income






9.5% of income






9.5% of income






9.5% of income





a.^ Note: In 2016, the FPL is projected to equal about $11,800 for a single person and about $24,000 for family of four.[127][128] See Subsidy Calculator for specific dollar amount.[129] b.^ DHHS and CBO estimate the average annual premium cost in 2014 to be $11,328 for family of 4 without the reform.[124]

•    Two federally regulated 'multi-state plan' (MSP) insurers, with one being non-profit and the other being forbidden from providing coverage for abortion services, become partially available. They will have to abide by the same federal regulations as required by individual state's qualified health plans available on the exchanges and must provide the same identical cover privileges and premiums in all states. MSPs will be phased in nationally, being available in 60% of all states in 2014, 70% in 2015, 85% in 2016 with full national coverage in 2017.[130]

•    Section 2708 to the Public Health Service Act becomes effective, which prohibits patient eligibility waiting periods in excess of 90 days for group health plan coverage. The 90-day rule applies to all grandfathered and non-grandfathered group health plans and group health insurance issuers, including multiemployer health plans and single-employer group health plans pursuant to collective bargaining arrangements.[131] Plans will still be allowed to impose eligibility requirements based on factors other than the lapse of time; for example, a health plan can restrict eligibility to employees who work at a particular location or who are in an eligible job classification. The waiting period limitation means that coverage must be effective no later than the 91st day after the employee satisfies the substantive eligibility requirements.[132]

•    Two years of tax credits will be offered to qualified small businesses. To receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full-time equivalent ("FTE") employee of no more than $50,000 and have no more than 25 FTEs. For the purposes of the calculation of FTEs, seasonal employees, and owners and their relations, are not considered. The subsidy is reduced by 3.35 percentage points per additional employee and 2 percentage points per additional $1,000 of average compensation. As an example, a 16 FTE firm with a $35,000 average salary would be entitled to a 10% premium subsidy.[133]

•    A $2,000 per employee penalty will be imposed on employers with more than 50 full-time employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill).[34][134] "Full-time" is defined as, with respect to any month, an employee who is employed on average at least 30 hours of service per week.[134] In July 2013, the Obama administration announced this penalty would not be enforced until January 1, 2015.[135][136]

•    For employer-sponsored plans, a $2,000 maximum annual deductible is established for any plan covering a single individual or a $4,000 maximum annual deductible for any other plan (see 111HR3590ENR, section 1302). These limits can be increased under rules set in section 1302.

•    To finance part of the new spending, spending and coverage cuts are made to Medicare Advantage, the growth of Medicare provider payments are slowed (in part through the creation of a new Independent Payment Advisory Board), Medicare and Medicaid drug reimbursement rates are decreased, and other Medicare and Medicaid spending is cut.[47][137]

•    Revenue is increased from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs.[138]

•    Members of Congress and their staff are only offered health care plans through the exchanges or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use).[139]

•    A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue.[110]

•    Health insurance companies become subject to a new excise tax based on their market share; the rate gradually rises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue.[110]

•    The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5% to 10% of adjusted gross income (AGI).[140]

•    Consumer Operated and Oriented Plans (CO-OP), which are member-governed non-profit insurers, entitled to a 5-year federal loan, are permitted to start providing health care coverage.[141]

•    The CLASS Act provision would have created a voluntary long-term care insurance program, but in October 2011 the Department of Health and Human Services announced that the provision was unworkable and would be dropped.[142][143] The CLASS Act was repealed January 1, 2013.[144]

Effective by October 1, 2014

•    Federal payments to so-called 'disproportionate share hospitals', which treat large numbers of indigent patients, are to be reduced and subsequently allowed to rise based on the percentage of the population that is uninsured in each state.[145]

Effective by January 1, 2015

•    CMS begins using the Medicare fee schedule to give larger payments to physicians who provide high-quality care compared with cost.[146]

Effective by October 1, 2015

•    States are allowed to shift children eligible for care under the Children's Health Insurance Program to health care plans sold on their exchanges, as long as HHS approves.[145]

Effective by January 1, 2016

•    States are permitted to form health care choice compacts and allows insurers to sell policies in any state participating in the compact.[145]

•    The threshold for itemizing medical expenses increases from 7.5% of income to 10% for seniors.[147]

Effective by January 1, 2017

•    A state may apply to the Secretary of Health & Human Services for a "waiver for state innovation" provided that the state passes legislation implementing an alternative health care plan meeting certain criteria. The decision of whether to grant the waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period.[148] A state receiving the waiver would be exempt from some of the central requirements of the ACA, including the individual mandate, the creation by the state of an insurance exchange, and the penalty for certain employers not providing coverage.[149][150] The state would also receive compensation equal to the aggregate amount of any federal subsidies and tax credits for which its residents and employers would have been eligible under the ACA plan, but which cannot be paid out due to the structure of the state plan.[148] To qualify for the waiver, the state plan must provide insurance at least as comprehensive and as affordable as that required by the ACA, must cover at least as many residents as the ACA plan would, and cannot increase the federal deficit. The coverage must continue to meet the consumer protection requirements of the ACA, such as the prohibition on increasing premiums because of pre-existing conditions.[151] A bipartisan bill sponsored by Senators Ron Wyden and Scott Brown, and supported by President Obama, proposes making waivers available in 2014 rather than 2017, so that, for example, states that wish to implement an alternative plan need not set up an insurance exchange only to dismantle it a short time later.[149] In April 2011 Vermont announced its intention to pursue a waiver to implement the single-payer system enacted in May 2011.[152][153][154][155] In September 2011 Montana announced it would also be seeking a waiver to set up its own single payer healthcare system.[156]

•    States may allow large employers and multi-employer health plans to purchase coverage in the Exchange.

•    Two federally regulated 'multi-state plan' (MSP) insurers are scheduled to be fully phased-in, becoming available to all states (for more, see: section on provisions effective by January 1, 2014).[130]

Effective by January 1, 2018

•    All existing health insurance plans must cover approved preventive care and checkups without co-payment.[45]

•    A 40% excise tax on high cost ("Cadillac") insurance plans is introduced. The tax (as amended by the reconciliation bill)[157] is on insurance premiums in excess of $27,500 (family plans) and $10,200 (individual plans), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their employees may value their coverage using the age and gender demographics of a national risk pool.[110][158]

Effective by January 1, 2019

•    Medicaid extends coverage to former foster care youths who were in foster care for at least six months and are under 25 years old.[51]

Effective by January 1, 2020

The Medicare Part D coverage gap (a.k.a., "donut hole") will be completely phased out and hence closed.

START HERE: Tips for using this Pathfinder

      It shouldn't come as a surprise that such a fundamentally transforming piece of legislation as the Affordable Care Act (or, 'Obamacare') would spur significant research, practical, and scholarly resources. At the same time one can become quickly overwhelmed but the myriad of information just a few 'clicks' away. This research guide, or pathfinder, should provide multiple avenues for uncovering appropriate information in a timely manner. 

      The first noticeable options are the various tabs available. Under each tab will be found a variety of links, documents, search tips, and other compilations. Where actual documents are not directly uploaded to this guide, sufficient cites and links should allow the user to directly download such documents from the appropriate sources as needed. So please click away!

      Also, at the lower right under each tab will be found a green box (similar to the "Table of Contents" box under this "Introduction" tab) with dicta relating to that section. This is often a best starting point the first time a tab is opened as it will provide unique guidance and nuances for that tab along with suggestions of where to look next for related material that might not be found under that exact tab. 

      Many of these resources will be updated accordingly, with the first update in mid-July 2013.

      Please send any found errors, corrections, dead links, updates, or other feedback to the author of this guide via one of the means listed, and it is truly hoped that this pathfinder will help any and all in gleaning a better understanding of what should be the most significant piece of legislation in a generation or more.

Helpful Search Terms

      Because of the nature of the legislation produced for 'Obamacare' (see "Legislative History" for thorough discussion), there can be some difficulty identifying appropriate search terms for researching the topic. Even in legal databases such as Westlaw searching the term "Obamacare" will produce significant results as many authors often insert phrases such as "commonly referred to as 'Obamacare'." Another common phrase that can be helpful is "mandate" in searches such as "employer mandate" or "individual mandate." While these simple searches can provide a vast amount of material, they should not be relied on to be near complete.

      From a much more accurate approach, the official name of the act should help in filling in the picture, but as to the healthcare overhaul, this is not so simple. The entirety of the legislation comes from two nearly back-to-back bills signed by President Obama on 23- and 30-March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 respectively. A thorough search for details should include reference to both as the latter includes a number of key changes to the prior. This may be impacted further by abbreviations and variations of either or both acts titles, including whether a source might use "and" or "&" in either title and an important result could be missed if searching for one specific phrase all in quotes. Subsequently, and very effective search chain was developed combining a number of key phrases with advanced connectors, as shown by the following Westlaw example:

  • "patient protection" /s "affordable care act" & "health care" /s "education reconciliation act"

which returns documents containing both of "patient protection" used within the same sentence as "affordable care act" and "health care" used within the same sentence as "education reconciliation act."

      Another helpful example search term is for clarifying the mandate. Official government speak for the employer mandate is:

  • "Employer shared-responsibility payment"

and employing searches for that precise phrase will yield a great many more applicable results than "employer mandate," especially very specific technical sources such as tax practitioner continuing education materials. Using such an exact technical phrase also empowers very helpful broad web-based searches outside of law databases including many hands-on results either on administrative agency websites or directly sourced from official administrative agency materials.

      For wading through the quagmire of the act's coming into being, this string is a helpful 'filter'* for narrowing results:

  • "legislative history" AND "Senate" AND "house" AND "mandate" AND "signature" OR "signed"

* "filter results" is a Westlaw option for narrowing down search results; other sources feature similar tools with similar names.

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