Patient Protection and Affordable Care Act
On June 28, 2012, the U.S. Supreme Court upheld almost all of the Patient Protection and Affordable Care Act (PPACA) ("HealthCare Reform"), which was originally signed into law by the President on Tuesday, March 30, 2010. Chief Justice John Roberts Jr. was the swing vote in upholding the individual mandate, which requires that most everyone carry health insurance. The Court ruled the penalty for failing to carry insurance fell within Congress' taxing power. By affirming the mandate, the Court allowed the other major parts of the law to remain intact. These provisions will go into effect in 2014. However, the Court did strike down the stipulation which held that states that choose not to expand Medicaid will lose federal funding of their existing Medicaid programs. Since the ruling allows states to opt-out of Medicaid expansion, it is estimated that more than 15 million Americans expecting coverage under this provision could stay uninsured.
Effects of Health Care Reform
The Patient Protection and Affordable Care Act (PPACA)("Health Care Reform")will change almost every facet of the health care community over the next 10 years...so what happens next? There are some immediate changes that will take effect as well as a steady timeline for implementation. To provide some insight into how members and others in the optical industry may be affected, The Vision Council has outlined key points about health care reform ruling below.
What Happened to Vision Care?
- There will be more Americans receiving vision care because of healthcare reform. However, there is no mandate for individuals to have vision coverage.
- Pediatric vision care will include individuals up to the age of 22 as a result of the extension of the Well-Baby Program, which includes vision care.
- By 2014 every state must have a health care insurance exchange up and running. Exchanges will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in the future.
- Insurance plans sold to individuals and to employers through the exchanges must include a core package of items and services known as "essential health benefits." The benefits are required to cover 10 categories: Ambulatory patient services, Emergency services, Hospitalization, Maternity and newborn care, Mental health and substance use disorder services, including behavioral health treatment, Prescription drugs, Rehabilitative and habilitative services and devices, Laboratory services, Preventive and wellness services and chronic disease management, and Pediatric services, including oral and vision care.
- Vision plans were not included as plans that could participate in the exchanges as standalone plans; however each state has the discretion to add them as standalone plans if they wish.
Medical Device Taxes
- PPACA imposed a 2.3 percent excise tax to be paid by medical device manufactures upon the first sale of a product.
- Eyeglasses, contacts and hearing aids are specifically exempted from the tax.
- The tax will become effective January 1, 2014.
Flexible Spending Accounts
- As of January 1, 2011, reimbursements from Health Flexible Spending Accounts ("Health FSAs") are only allowed for insulin and for prescribed medicine or drugs. FSA money may still be used for over-the-counter (OTC) medicines if they are prescribed.
- The OTC prohibition does not apply to some items that are not medicines or drugs. For example, crutches, bandages and diagnostic devises (like blood sugar testing kits) will still be reimbursable.
- Beginning January 1, 2013, employers must limit employee contributions to Health FSAs to $2,500 per year. Prior to PPACA enactment FSA contributions had no IRS limit but were widely limited to $5,000 by employers.
- This means employees with FSA accounts will have roughly half the amount of pretax dollars available when receiving optical services or purchasing medical devices.
The IRS has updated its regulations concerning Flexible Spending Accounts and Health Savings Accounts on eyewear and eye exams. The Vision Council has created an FAQ overview concerning FSA, HSA and HRA's, reflecting the latest regulations.
What Happens to Business in this New Law?
- This legislation mandates individual businesses to offer insurance. Starting in 2015, employers that employ an average of 50 full-time employees must provide health coverage that meets minimum coverage requirements or pay a fine.
- Most large businesses already offer health care of some sort to their employees. In the future, those businesses could have premiums reduced because the cost for overall insurance will go down with the addition of 31 million Americans in the system. However, this is not guaranteed because an unknown number of them may have preexisting conditions, come from high-risk pools or could reach their annual/lifetime caps. Because of this, premiums could also potentially stay at current levels.
- If you currently are offering a "Cadillac" health care plan, taxes will be levied on such plans in 2014. Note, that for purposes of calculating the tax, the benefits package value will exempt non-medical benefits such as life insurance, disability insurance, vision insurance, dental insurance, long-term care insurance, and accident coverage.
- The definition of small business varies by state (i.e. less than 10, 50 or 100), but a majority of the programs described in the new health care law are for businesses with 50 employees or under.
- If you currently do not offer all or any of your employees' health care benefits and you have a company of 10-25 employees earning $25,000-$50,000 annually, you may be eligible for a 35 percent tax credit back on the premium paid to extend benefits to those employees.
- Starting in 2014, small businesses will be eligible to buy health care benefits through state health insurance pools called "SHOP" exchanges (Small Business Health Options Programs). These allow small businesses to group together to buy health insurance at the same rates as larger businesses. Companies with 10 or fewer employees may also receive a 50 percent tax credit.
For all other questions, please contact Maureen Beddis.