AAA Health Care Reform Update

November 20, 2009

The American Ambulance Association is distributing to its members each week an update on health care reform legislation being considered by Congress.   The update focuses on those aspects of health care reform legislation that are most important to ambulance service providers and professionals as businesses, employers, individuals and Medicare and health care providers.   The focus of this week's update is the Patient Protection and Affordable Care Act which is the new Senate Democratic bill on health care reform.   The bill is the result of the merging of the respective bills passed by the Senate Committees on Finance and Health, Education, Labor and Pensions with additional new provisions.   The legislation was unveiled on Wednesday by Senate Majority Leader Harry Reid (D-NV) who plans to bring to the Senate Floor on Saturday evening for a cloture vote to proceed to consideration of the bill.

This Update was developed by Patton Boggs and AAA staff.

Patient Protection and Affordable Care Act

What the Senate Bill Means to Ambulance Service Providers

The Patient Protection and Affordable Care Act extends Medicare bonus payments made for ground ambulance services in urban, rural, and super rural areas beginning April 1, 2009 through the end of 2010.   This is a change from the Senate Finance Committee bill, in which the relief began in January of 2010 and lasted through 2011.   The AAA is currently advocating for the relief to be effective January 1, 2010, so that there would be no interruption in relief and that the extension be for two years.

Additionally, the bill incorporates a productivity adjustment beginning in 2010 for ambulance services.   This adjustment, which assumes that providers become more efficient each year, would have the effect of reducing annual Medicare updates.  

The legislation authorizes funding to the Assistant Secretary for Preparedness and Response to support pilot projects that design, implement, and evaluate innovative models of regionalized, comprehensive, and accountable emergency care and trauma systems.   The Secretary is also required to support emergency medicine research, including pediatric emergency medical research.

What the Senate Bill Means for Businesses and Employers

The Patient Protection and Affordable Care Act authorizes a number of modifications to how employers provide insurance.   For example, it penalizes certain employers that do not provide health insurance, provides tax credits for small businesses who offer insurance, creates state-based health insurance exchanges, and encourages workplace wellness programs.

Employers with more than 200 employees must automatically enroll new full-time employees in coverage, but employees can opt out of coverage if they have coverage from another source. The bill would assess a $750 fee on employers with more than 50 employees that do not offer health coverage and that have at least one full-time employee receiving the premium assistance tax credit.   Employers with 50 or fewer employees are exempt from the penalty.   An employer with more than 50 employees that does offer coverage but has at least one full-time employee receiving the premium assistance tax credit will pay the lesser of $3,000 for each of those employees receiving a tax credit or $750 for each of their full-time employees total.

The legislation would provide a sliding scale tax credit for small employers with less than 25 employees and average annual wages of less than $40,000 that purchase health insurance for employees.   The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $20,000.   To be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost.   Any insurance plan offered by a small employer could not have a deductible that exceeds $2,000 for individuals and $4,000 for families unless employer contributions are offered that offset deductible amounts above these limits.   In 2011 and 2012, the tax credit would be up to 35 percent of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50 percent of the total premium cost.   The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $20,000.  In 2011 through 2013, eligible employers can receive a small business tax credit for up to 35 percent of their contribution toward the employee's health insurance premium.   In 2014 and beyond, eligible employers who purchase coverage through the State Exchange can receive a tax credit for two years of up to 50 percent of their contribution.  

The legislation would create state-based insurance exchanges to facilitate the purchase of qualified health plans.   These exchanges would be required to create small business health options programs (SHOP) to assist small business employers in facilitating the enrollment of their employees with health care insurance coverage.

Finally, the bill would encourage small businesses to establish workplace wellness programs by offering employees rewards of up to 30 percent of the cost of coverage for participating in certain health promotion and disease prevention programs.   Rewards may be in the form of premium discounts, waivers of cost-sharing requirements, or benefits that would otherwise not be provided.

What Health Reform in this Bill Means for Individuals

The legislation requires U.S. citizens and legal residents to obtain health insurance coverage.   This requirement would be enforced through a tax penalty of $95 in 2014, $350 in 2015, $750 in 2016 and indexed thereafter; for those under 18, the penalty will be one-half these amounts.   Exemptions to the penalty would be granted for financial hardship, religious objections, American Indians, or if the individual has income below 100 percent of the poverty level.

The legislation implements fundamental reforms to the health insurance market by prohibiting insurance companies from rejecting insurance applicants based on health status and varying premiums to reflect differences in beneficiaries' health.   It would also prohibit pre-existing condition exclusions and would forbid insurers from retroactively canceling approved health-insurance policies in the individual and small group insurance markets.   Finally, most insurance plans would be prohibited from charging cost-sharing for preventive services.

To ensure access to affordable health insurance, individuals are able to receive refundable premium credits.   The credit is calculated on a sliding scale starting at two percent of income for those at or above 100 percent of poverty and phasing out to 9.8 percent of income for those at 400 percent of poverty.

The legislation would create state-based insurance exchanges to facilitate the purchase of qualified health plans.    The merged legislation establishes a public health insurance option, called the Community Health Insurance Option, to be offered in the state-based health insurance exchange.   However, States are allowed to enact a law to opt out of offering it.   Additionally, it creates the Consumer Operated and Oriented Plan (CO-OP) program to encourage the creation of non-profit, member-run health insurance companies.

To pay for the $894 billion proposal, the legislation makes several tax changes relate to health insurance.   It imposes an excise tax of 40 percent on insurance companies and plan administrators for any health coverage plan that is above the threshold of $8,500 for single coverage and $23,000 for family coverage.   An additional threshold amount of $1,350 for singles and $3,000 for families is available for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions, including emergency medical technicians, paramedics, and first-responders.

The bill also would limit the maximum annual contribution to a flexible spending account (FSA) to $2,500 per year.   In addition, FSA holders would no longer be eligible for reimbursement for an FSA purchase of over the counter medication unless prescribed by a physician.   Finally, the bill would increase the threshold for the itemized deduction of medical expenses from 7.5 percent of adjusted gross income to 10 percent.