A Brave New World - The Affordable Care Act

A BRAVE NEW WORLD: This week, President Obama signed into law the main part of the
contentious health care reform legislation. Although some parliamentary problems still need to
be resolved, the entire bill will likely become law prior to Congress’ scheduled recess at the end
of this month.

The president’s signature will put into effect the Affordable Care Act as amended by the Health
Care Reconciliation Act. The impending new law imposes responsibilities on both citizens and
employers. Here are some of the highlights:

Citizen Responsibilities:

Citizens and legal residents must have “qualifying health coverage”. Penalties will be imposed
on individuals without coverage and phased in over several years. The tax penalty is the greater
of $695 annually up to a maximum of three times that amount ($2,085) per family or 2.5% of
household income. Either way, the new law imposes hefty penalties on individuals who fail to
comply. However, persons with incomes falling below the federal tax filing threshold ($9,350
for singles and $18,700 for couples in 2009) and anyone whose lowest cost plan exceeds 8% of
that person’s income are exempt from penalties.

Employer Responsibilities:

Beginning in 2014, employers with more than 50 employees will be assessed a penalty depending on whether health plans are offered and whether certain employees receive premium tax credits. Penalties will not be assessed on employers with 50 or less employees. Employers with more than 200 employees must enroll employees in plans offered by the employer and opting out will not be option.

Private Insurance:

Within 90 days of the enactment of the new law, a temporary national “high-risk” pool will be
established to provide coverage to individuals with pre-existing medical conditions. Within six
months, all policies must provide dependent coverage for children through age 26.

Other Provisions:

The new law increases payments to physicians and Medicare payments to providers in certain
rural areas. Access to Medicaid and types of services will expand. Medicaid will now additional
preventive and long-term care services. Medicaid eligibility will also now cover low-income
nonelderly, non-pregnant individuals who are not otherwise eligible for Medicare. The new law
also contains additional provisions to attack fraud in the federal healthcare programs.

The Invoice:

The Congressional Budget Office estimates the cost of the mandatory coverage will be $940
billion over ten years. This expense will be financed through a combination of savings from
Medicare and Medicaid, new taxes and fees, which the CBO estimates will raise $32 billion over
those ten years. It also estimates the proposal will reduce the deficit by approximately $143
billion during that period.

Is the new law a step closer to forced socialism or does it reflect a nation’s collective decision to
expand the benefits of its “social compact”? Whatever one’s political stance, health care reform,
for better or worse, is a new pillar in the structure of our government.

Brought to you by Cohen & Oalican, LLP