House Passes Health Care Reform H.R. 3590 Patient Protection and Affordable Care Act

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As you’ve no doubt heard, last night the House of Representatives passed H.R. 3590 Patient Protection and Affordable Care Act in a vote of 219-212. 3590 then heads to President Obama’s desk for his signature into law. The House also passed HR 4872 Reconciliation Act of 2010, which now heads to the Senate for a vote, needing only a simple majority. Regardless of how you feel about health care reform in general and the bill specifically, it’s important to understand what’s inside because it will affect you and your family.

Fortunately, we can rely on a straightforward recap by Reuters plus a few details from the Tax Foundation. There will be no commentary on my part to get in the way of the facts, just what’s in the bill if it’s signed by law.


  • Exclusion for assistance provided to participants in State student loan repayment programs for certain health professionals (retroactive to Jan. 1, 2009)
  • Qualifying therapeutic discovery project credit (retroactive to Jan. 1, 2009) – provision expires at end of 2010
  • Modification of section 833 treatment of certain health organizations (retroactive to January 1, 2010)
  • Make the adoption credit refundable; increase qualifying expenses threshold, and extend the adoption credit through 2011 (retroactive to Jan. 1, 2010)
  • Small Business Tax Credit for certain small businesses providing health insurance to employees (retroactive to Jan. 1, 2010). In 2013, restricted only to insurance purchased through an exchange and only available for two consecutive years
  • Exclusion of unprocessed fuels from the cellulosic biofuel producer credit (retroactive to January 1, 2010)

Changes within the first year

Many of these take effect six months after the bill is signed into law.

  • Insurance companies will be barred from dropping people from coverage when they get sick. Lifetime coverage limits will be eliminated and annual limits are to be restricted.
  • Insurers will be barred from excluding children for coverage because of pre-existing conditions.
  • Young adults will be able to stay on their parents’ health plans until the age of 26. Many health plans currently drop dependents from coverage when they turn 19 or finish college.
  • Uninsured adults with a pre-existing conditions will be able to obtain health coverage through a new program that will expire once new insurance exchanges begin operating in 2014.
  • A temporary reinsurance program is created to help companies maintain health coverage for early retirees between the ages of 55 and 64. This also expires in 2014.
  • Medicare drug beneficiaries who fall into the “doughnut hole” coverage gap will get a $250 rebate. The bill eventually closes that gap which currently begins after $2,700 is spent on drugs. Coverage starts again after $6,154 is spent.
  • A tax credit becomes available for some small businesses to help provide coverage for workers.
  • A 10 percent tax on indoor tanning services that use ultraviolet lamps goes into effect on July 1.

Changes for 2011

  • Medicare provides 10 percent bonus payments to primary care physicians and general surgeons.
  • Medicare beneficiaries will be able to get a free annual wellness visit and personalized prevention plan service. New health plans will be required to cover preventive services with little or no cost to patients.
  • A new program under the Medicaid plan for the poor goes into effect in October that allows states to offer home and community based care for the disabled that might otherwise require institutional care.
  • Payments to insurers offering Medicare Advantage services are frozen at 2010 levels. These payments are to be gradually reduced to bring them more in line with traditional Medicare.
  • Employers must report value of health benefits on W-2’s.
  • An annual fee is imposed on manufacturers and importers of branded drugs according to market share, does not apply to companies with less than $5 million of sales.
  • Increase in additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses to 20%.

Changes for 2012

  • Physician payment reforms are implemented in Medicare to enhance primary care services and encourage doctors to form “accountable care organizations” to improve quality and efficiency of care.
  • An incentive program is established in Medicare for acute care hospitals to improve quality outcomes.
  • The Centers for Medicare and Medicaid Services, which oversees the government programs, begin tracking hospital readmission rates and puts in place financial incentives to reduce preventable readmissions.

Changes for 2013

  • $500,000 deduction limitation on taxable year pay to officers, employees, directors, and service providers of covered health insurance providers (goes into effect in 2013, but applies to compensation for services performed from Jan. 1, 2010 forward)
  • A national pilot program is established for Medicare on payment bundling to encourage doctors, hospitals and other care providers to better coordinate patient care.
  • The threshold for claiming medical expenses on itemized tax returns is raised to 10% of income. The threshold remains at 7.5% for the elderly through 2016.
  • Medicare Hospital Insurance tax increased by 0.9%, thus the Medicare payroll tax is raised to 2.35% from 1.45% percent for individuals earning more than $200,000 and married couples with incomes over $250,000.
  • Unearned Income Medicare Contribution on 3.8% on investment income for taxpayers with AGI in excess of $200,000/$250,000.
  • A 2.3 percent excise tax in imposed on the sale of medical devices. Anything generally purchased at the retail level by the public is excluded from the tax.
  • Limit health flexible spending arrangements (FSAs) in cafeteria plans to $2,500; indexed to CPI-U after 2013. Over the counter drugs will no longer be reimbursed without a prescription.

Changes for 2014

  • State health insurance exchanges for small businesses and individuals open.
  • Most people will be required to obtain health insurance coverage or pay a fine if they don’t. Healthcare tax credits become available to help people with incomes up to 400 percent of poverty purchase coverage on the exchange.
  • Health plans no longer can exclude people from coverage due to pre-existing conditions.
  • Employers with 50 or more workers who do not offer coverage face a fine of $2,000 for each employee if any worker receives subsidized insurance on the exchange. The first 30 employees aren’t counted for the fine.
  • Health insurance companies begin paying a fee based on their market share.

Changes for 2015

  • Medicare creates a physician payment program aimed at rewarding quality of care rather than volume of services.

Changes for 2018

  • The Cadillac health care tax: 40% excise tax on health coverage in excess of $10,200/$27,500 (subject to adjustment for unexpected increase in medical costs prior to effective date) and increased thresholds of $1,650/$3,450 for over age 55 retirees or certain high-risk professions, both indexed for inflation by CPI-U plus 1%; adjustment based on age and gender profile of employees; vision and dental excluded from excise tax; levied at insurer level; employer aggregates and issues information return for insurers indicating amount subject to the excise tax; nondeductible.

If you want to read the entire bill, it’s available here from the Library of Congress.

US healthcare bill would provide immediate benefits [Reuters]
Timeline of Tax Provisions in the House Health Care Bill [Tax Foundation]

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123 Responses to “House Passes Health Care Reform H.R. 3590 Patient Protection and Affordable Care Act”

  1. Jon says:

    This isn’t a political statement. Just an honest fear. I hear that the federally-run Post Office is going to stop delivering mail on Saturday because the $ just isn’t there to operate.

    What happens when our federally-run healthcare system just shuts down on Sundays because the $ just isn’t there to operate?

  2. eric says:

    Wow, I totally missed a mammoth of a post. Understandable how health care gets people riled up. There’s still a lot I don’t know yet about what bill entails..thanks for the introductory post.

  3. P says:

    I am very upset that we are forced to purchase insurance. If I couldn’t afford it before, how can I now that it is a law. I have paid cash for my doctor visits and other medical needs. Now I’m forced to pay every month for an insurance…just in case I get sick along with the copays. The affordable insuracne idea is a joke. If I could afford $500 to whatever a month on insurance, I would have saved the money and paid cash for any medical expenses I have. I’m sick of this whole idea.

  4. P says:

    Perhaps they should have contacted the uninsured and asked for their opinion…oh yea that’s right they really don’t care about our opinion.

  5. Anonymous says:

    I think that the doughnut hole requirement of paying over $5,000. before medicare will start paying for prescriptions again is a way of trying to kill off the sick elderly because the insurance companies and congress hope that those of us with serious health probs. and expensive med. will not be able to get our meds and thus will die and not have to be a burden on the insurance co, medicare or society. Killing off the elderly and very sick is the name of the game. Congress, the medical system, insurance companies and pharmaceutical companies all know what’s happening and most are all for it,

  6. myra says:

    so here is a quick question, with the health care reform, would a hsa account help a small business owner with 14 employees, keep her from the financial ramifications, when all this mess actually gets worked out and takes affect, there are several business owners, that i talk to on a regular basis, and they would like to do this, for in fear that if they set up an actual health care program through a group policy, the cost would be too much to handle. but the fear of the “fines” scares them as well.

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