Source: https://www.cga.ct.gov/2010/rpt/2010-R-0255.htm
Timestamp: 2019-04-24 00:43:25+00:00

Document:
The federal Patient Protection and Affordable Care Act (P.L. 111-148, PPACA) became law on March 23, 2010. PPACA was amended by the Health Care and Education Reconciliation Act (P.L. 111-152, HCERA), which became law on March 30, 2010. This report provides a brief summary of key provisions that affect private health insurance.
Major provisions of PPACA, including a requirement for most Americans to have health insurance, take effect in January 2014. Before then, various consumer-oriented provisions take effect for new and grandfathered plans. A grandfathered plan is, generally, health insurance coverage that existed on March 23, 2010 (PPACA § 1251). Plans will lose their grandfather status if they make significant changes that reduce benefits or increase costs to consumers.
Certain details on the law's implementation will not be available until various federal agencies, primarily the Department of Health and Human Services (HHS), issue regulations and guidance.
This report is broken into two main sections: provisions effective before 2014 and provisions effective after 2014. Appendix A outlines a variety of funding opportunities related to private health insurance. Appendix B lists additional background resources.
4. has a preexisting condition.
The high-risk pool cannot impose a preexisting condition exclusion. The out-of-pocket limit imposed must not be greater than the maximum amount applicable to a high-deductible health plan. (In 2010, the out-of-pocket maximum for such plans is $5,950 for single coverage and $11,900 for family coverage.) The premium rate charged may vary based on age by a factor of no more than four to one and must be established at a standard rate for a standard population.
The federal government has appropriated $5 billion nationally to support the high-risk pool program. Under the program, a state may choose to operate its own pool or have HHS run the pool.
Connecticut's Preexisting Condition Insurance Plan is operated by the Health Reinsurance Association under contract with the Department of Social Services. Medical benefits are coordinated through the UnitedHealthcare provider network. Benefits, premium information, and applications are available at http://www.ct.gov/dss/cwp/view.asp?Q=463668&A=2345.
over but not eligible for Medicare, and their spouses and dependents (§ 1102). The law allocates $5 billion for this program. The program will operate from June 21, 2010 to January 1, 2014 while funding is available.
HHS will reimburse valid claims that participating employers submit by paying 80% of the costs that exceed $15,000 but are less than $90,000. The amounts will be adjusted annually by the medical component of the Consumer Price Index rounded to the nearest $1,000. Employers must use the reimbursements to reduce premiums and other out-of-pocket costs for plan enrollees.
Certain small businesses that purchase health insurance for employees are eligible for a tax credit toward a share of the cost of the insurance (§ 1421, as amended by § 10105(e)). PPACA provides a tax credit to employers with fewer than 25 full-time equivalent (FTE) employees and average annual wages of less than $50,000. The maximum credit is available to employers with 10 or fewer FTE employees and average annual wages of less than $25,000. The credit is phased out as the (1) number of FTEs increases from 10 to 25 and (2) average wages increase from $25,000 to $50,000. To be eligible, the employer must contribute at least 50% of the total insurance premium cost.
For 2010 through 2013, eligible (1) for-profit employers will receive a small business tax credit of up to 35% of their premium contributions and (2) nonprofit employers will receive a credit of up to 25% of their contributions. Beginning in 2014 the maximum credit is 50% for for-profit employers and 35% for nonprofit employers. The tax credit available beginning in 2014 is available for only two consecutive tax years.
The Internal Revenue Service has issued guidance on the small business tax credit, which is available at http://www.irs.gov/newsroom/article/0,,id=223666,00.html.
PPACA requires the HHS secretary to establish a process for the annual review of unreasonable increases in premiums for health insurance coverage beginning in 2010 (§ 1003). The law appropriates $250 million for a five-year period for this program, which includes grants to states to create and strengthen insurance rate review processes.
HHS announced a first round of grants on June 7, 2010. According to a June 8, 2010 press release from Governor M. Jodi Rell's office, the Office of Policy Management and the Public Health and Insurance departments will jointly prepare the state's application for the funding. Any grant money received must be used to enhance the state's rate review process and make insurance rate information more available to the public and HHS.
3. September 23, 2012 but before January 1, 2014, less than $2 million (45 CFR § 147.126).
which the requirements relating to restricted annual limits may be waived if compliance with the regulations would result in a significant decrease in access to benefits or a significant increase in premiums.
10. pediatric services, including oral and vision care (§ 1302(b)).
For plan years beginning on and after September 23, 2010, PPACA prohibits coverage rescissions except for instances of fraud or intentional misrepresentation of material fact (e.g., lying on an application for coverage or knowingly omitting material information) (§ 1001). “Rescission” refers to retroactively canceling insurance after a policyholder becomes sick or injured. Where cancellation is permissible, an insurer must provide prior notice.
For plan years beginning on and after September 23, 2010, new individual and group health insurance plans must provide full coverage for preventive care and screenings that the U.S. Preventive Services Task Force recommends, including vaccinations and cancer screenings (§ 1001). Grandfathered plans, those existing as of March 23, 2010, do not have to comply with this provision.
For plan years beginning on and after September 23, 2010, health insurance plans that provide dependent coverage must extend coverage to adult children until age 26, whether they live with their parents, are married, attend college, or are dependents for income tax purposes (§ 1001). Prior to 2014, a child may enroll for coverage under a parent's grandfathered plan only if he or she is not eligible for health insurance at his or her place of employment.
It requires group comprehensive health care plans to (1) extend coverage eligibility to unmarried children under age 26 and (2) offer continuation coverage to the end of the month in which the child meets the criteria for losing coverage under an individual policy (listed above) (CGS §§ 38a-497 and 38a-554).
effective, insurers issuing policies in Connecticut will be allowed to terminate coverage for a child only when that child turns age 26 or becomes covered under a health insurance plan through his or her employment.
For plan years beginning on and after six months after PPACA's enactment, September 23, 2010, health insurance plans cannot deny enrollment or specific benefits to children under age 19 because of a preexisting condition (§ 1251, as amended by § 10103 and HCERA § 2301). For plan years beginning on and after January 1, 2014, the prohibition is expanded to all children and adults (§ 1201, as amended by § 10103(e) and HCERA § 2301).
A “preexisting condition” is a medical condition that was present before enrolling for health insurance coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date.
For plan years beginning on and after September 23, 2010, health insurers must report incurred claims, administrative expenses, and earned premiums to the HHS secretary (§ 1001, as amended by § 10101). Beginning January 1, 2011, an insurer must maintain a medical loss ratio of at least 85% in the group market and 80% in the small group and individual markets. If these ratios are not maintained, the insurers must issue rebates to each enrollee on a pro rata basis. HHS will be issuing regulations to define medical loss ratio, which is generally the amount of each premium dollar spent on medical care.
6. allows premium discounts or rewards based on enrollee participation in wellness programs (§ 1201, as amended by § 10103 and HCERA § 2301).
“Adjusted community rating” prohibits insurers from setting premiums based on health factors. It requires a base rate (community rate) that is adjusted for key, permissible characteristics, such as age. Under PPACA, premiums will be allowed to vary based on family composition, location, age, and tobacco use. The HHS secretary must publish rules relating to permissible age-rating bands.
The essential health benefits package will provide coverage in four benefit tiers: bronze, silver, gold, or platinum. A qualified health plan (see below) will generally have to provide coverage at one or more of the four levels, even if it does not offer plans on a health benefit exchange. The benefit levels differ in terms of the actuarial value of coverage. A bronze plan will cover 60% of the cost of essential health benefits, silver will cover 70%, gold will cover 80%, and platinum will cover 90%.
PPACA limits the annual out-of-pocket limit that may be imposed on a health plan providing the essential health benefits to no more than the maximum amount applicable to a high-deductible health plan. (In 2010, the out-of-pocket maximum for such plans is $5,950 for single coverage and $11,900 for family coverage.) It also limits the permissible deductible for a small group market health plan to $2,000 for single coverage and $4,000 for family coverage.
PPACA also permits insurers to offer a catastrophic health plan in the individual market for (1) young adults under age 30 and (2) people who are exempt from the individual mandate (discussed below).
PPACA establishes “qualified health plans”, a new health plan that is subject to a list of requirements related to marketing, choice of providers, essential health benefits, and other matters, whether or not the plan is offered through an exchange (§ 1301). An insurer issuing a qualified health plan through an exchange must offer at least one silver and one gold level plan. The insurer must also charge the same premium for a qualified health plan, whether or not it is offered through an exchange. But premium credits and cost-sharing subsidies (discussed below) are available only through the exchanges.
PPACA requires states to create, by 2014, an “American Health Benefit Exchange” and a “Small Business Health Options Program (SHOP) Exchange” (§ 1311). These exchanges will be online marketplaces where individuals and small businesses, respectively, will be able to compare and purchase qualified health plans. If a state fails to establish the exchanges or is not making adequate progress in doing so by January 1, 2013, HHS can organize a federally-run exchange or contract directly with a local nonprofit entity to run an exchange within a state or among several states.
Beginning in 2014, individuals may enroll in a qualified health plan through an exchange if they are lawful residents who are not incarcerated. Unauthorized aliens are prohibited from using the exchange.
Until 2016, states can define a small business as one with 100 or fewer employees or 50 or fewer employees. (Connecticut currently defines a small employer as one with 50 or fewer employees, including a self-employed person.) Beginning in 2016, PPACA requires small business to be defined as one with 100 or fewer employees. Beginning in 2017, states may expand the exchange to large employers, but are not required to do so.
PPACA permits a state to merge the two exchanges into one if it has separate resources to assist individuals and employers. A state may also have one or more exchange (“subsidiary exchanges”) if each serves a sufficiently large and geographically distinct area.
7. provide employers the names of employees who dropped the employers' coverage and received premium tax credits because the plan was unaffordable.
The HHS secretary, in consultation with the inspector general, is authorized to audit exchanges annually. If misconduct is found, up to 1% of federal payments due to the exchange may be rescinded until corrective action is taken.
A person with income above 400% of the federal poverty level (FPL) ($43,320 in 2009) is not eligible for the tax credit. A person who is eligible for Medicare, Medicaid, military coverage (TRICARE), an employer-sponsored plan, or a grandfathered plan is also not eligible for the tax credit. However, a person with income up to 400% FPL who is eligible for, but not enrolled in, an employer-sponsored plan will be eligible for the tax credit if (1) his or her premium contribution for the employer's self-only coverage exceeds 9.5% of household income or (2) the plan covers less than 60% of total allowed costs.
PPACA establishes premium caps based on a person's income and on the premium of the second lowest cost silver plan available. If a person's income is between 300% and 400% FPL, he or she will have to pay no more than 9.5% of income in premium. The amount of premium a person has to pay as a percentage of his or her income decreases as the income level decreases, as shown in Table 1. A person may enroll in a higher cost silver plan or a higher level plan (e.g., gold or platinum), but he or she would have to pay any additional premium amount.
Source: Congressional Research Service, Report R40942, Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (PPACA).
Beginning in January 2014, people who qualify for premium tax credits and are enrolled in a silver plan through an exchange are also eligible for cost-sharing subsidies (i.e., assistance in paying any required out-of-pocket expenses). Exchange plans are required to limit out-of-pocket costs to no more than those permitted under federally qualified high-deductible health plans. In 2010, the out-of-pocket maximum for high-deductible health plans is $5,950 for single coverage and $11,900 for family coverage. The cost-sharing subsidies further reduce the out-of-pocket maximums for qualifying individuals based on income level, as shown in Table 2. Additional cost-sharing subsidies (e.g., reductions in copayments and deductibles) will be provided as necessary to ensure the plan covers the percentages of allowed health care expenses by income level shown in Table 2.
Beginning in January 2014, PPACA requires individuals, with some exceptions, to maintain a minimum level of health insurance (§ 1501 as amended by § 10106 and HCERA §§ 1002). People exempt from the mandate include those who (1) have a qualifying religious exemption, (2) are not in the United States lawfully, or (3) are incarcerated.
People who do not comply with the requirement must pay a penalty, with some exceptions. The penalty amount increases overtime and is calculated as the greater of either (1) a percentage of the amount by which household income exceeds the personal exemption for the applicable tax year or (2) a flat dollar amount assessed on each taxpayer and dependent with a family's total penalty capped at 300% of the flat dollar amount. The percentage amount is 1% in 2014, 2% in 2015, and 2.5% thereafter. The annual flat dollar amount is $95 in 2014, $325 in 2015, and $695 thereafter, adjusted for inflation. The flat dollar amount is reduced by one-half for dependents under age 18. Furthermore, the penalty charged cannot exceed the national average premium for a bronze-level qualified health plan.
4. anyone who the HHS secretary determines to have had a hardship obtaining insurance under a qualified health plan.
If a person does not pay a required penalty, the Internal Revenue Service will collect the funds by reducing the amount of any future tax refunds.
PPACA does not explicitly require employers to provide health benefits to employees. Instead, it requires employers with more than 50 FTEs to pay a penalty if they (1) do not provide health benefits or (2) provide coverage that does not meet certain requirements (§ 1511 et seq. as amended by § 10106 and HCERA §§ 1003). The number of FTEs for a given month is calculated as (1) the number of full-time employees and (2) the aggregate number of hours of service for employees who are not working full time, divided by 120. Full-time employees are those working an average of at least 30 hours a week.
An employer may be subject to a penalty only in relation to its full-time employees.
Employer Does Not Offer Benefits. An employer with at least 50 FTEs that does not offer health benefits to its full-time employees will be subject to a penalty if any full-time employee receives premium tax credits in an exchange plan. Such an employer will have to file a return with the federal government stating that it does not offer coverage, the number of full-time employees, and any other information the HHS secretary requires. The employer must give its employees notice of and information about the exchange.
The employer's penalty for a given month is calculated as the number of full-time employees minus 30, multiplied by one-twelfth of $2,000. After 2014, the penalty amount will be indexed by a premium adjustment percentage for the calendar year.
Employer Offers Benefits. An employer with at least 50 FTEs that offers its employees health benefits will be subject to a penalty if any full-time employee receives premium tax credits in an exchange plan because he or she is not enrolled in the employer's plan and (1) the employee's required premium contribution through the employer's plan for self-only coverage exceeds 9.5% of the employee's household income or (2) the employer's plan pays for less than 60% of covered health care expenses (§ 1401 as amended by HCERA § 1001).
8. other information the HHS secretary requires, if any.
The employer must give their employees notice of and information about the exchange.
Employers with more than 200 full-time employees that offer coverage must automatically enroll new full-time employees in a plan. They must give new employees adequate notice and an opportunity to opt out of the automatic enrollment.
An employer's penalty for a given month is based on each full-time employee who receives a premium tax credit in an exchange plan. The monthly penalty that the employer will pay is one-twelfth of $3,000 for each full-time employee receiving a premium credit. But the total monthly penalty for the employer cannot exceed an amount calculated as the number of full-time employees minus 30, multiplied by one-twelfth of $2,000. After 2014, the penalty amount will be indexed by a premium adjustment percentage for the calendar year.
PPACA includes a number of funding opportunities for states and other entities. The chart below lists the available funding opportunities under PPACA that are related to the private insurance reforms.

References: § 1251
 § 10105
 § 147
 § 10103
 § 2301
 § 10103
 § 2301
 § 10101
 § 10103
 § 2301
 § 10106
 § 10106
 § 1001