Overall approach to expanding access to coverage

Require most U.S. citizens and legal residents to have health insurance. Create state-based American
Health Benefit Exchanges through which individuals can purchase coverage, with premium and cost sharing credits available to individuals/families with income between 133-400% of the federal poverty
level (the poverty level is $18,310 for a family of three in 2009) and create separate Exchanges through which small businesses can purchase coverage.

Require employers to pay penalties for employees who receive tax credits for health insurance through an Exchange, with exceptions for small employers.

Impose new regulations on health plans in the Exchanges and in the individual and small group markets.
Expand Medicaid to 133% of the federal poverty level.

Individual Mandate Requirement to have coverage

Require U.S. citizens and legal residents to have qualifying health coverage.

Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income.

The penalty will be phased-in according to the following schedule: $95 in 2014, $325 in 2015, and $695 in 2016 for the flat fee or 1.0% of taxable income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income in 2016. Beginning after 2016, the penalty will be increased annually by the cost-of-living adjustment. Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold (in 2009 the threshold for taxpayers under age 65 was $9,350 for singles and $18,700 for couples).

Employer Requirements

• Assess employers with 50 or more employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees from the assessment. (Effective January 1, 2014)

• Exempt employers with fewer than 50 employees from any of the above penalties.

• Require employers that offer coverage to their employees to provide a free choice voucher to employees with incomes less than 400% FPL whose share of the premium exceeds 8% but is less than 9.8% of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan and will be used to offset the premium costs for the plan in which the employee is enrolled.

Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange. (Effective January 1, 2014)

Other requirements • Require employers with more than 200 employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

Expansion of Public Programs

Treatment of Medicaid

• Expand Medicaid to all non-Medicare eligible individuals under age 65 (children, pregnant women,
parents, and adults without dependent children) with incomes up to 133% FPL based on modified
adjusted gross income (as under current law and in the House and Senate-passed bills undocumented
immigrants are not eligible for Medicaid). All newly eligible adults will be guaranteed a benchmark
benefit package that meets the essential health benefits available through the Exchanges.

Premium Subsidies to Employers - Small business tax credits

• Provide small employers with no more than 25 employees and average annual wages of less than
$50,000 that purchase health insurance for employees with a tax credit.

– Phase I: For tax years 2010 through 2013, provide a tax credit of up to 35% of the employer’s
contribution toward the employee’s health insurance premium if the employer contributes at least
50% of the total premium cost or 50% of a benchmark premium. The full credit will be available to
employers with 10 or fewer employees and average annual wages of less than $25,000. The credit
phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these
requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the
employee’s health insurance premium.

– Phase II: For tax years 2014 and later, for eligible small businesses that purchase coverage through
the state Exchange, provide a tax credit of up to 50% of the employer’s contribution toward the
employee’s health insurance premium if the employer contributes at least 50% of the total premium
cost. The credit will be available for two years. The full credit will be available to employers with 10 or
fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size
and average wage increases. Tax-exempt small businesses meeting these requirements are eligible
for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance
premium.

Reinsurance program

• Create a temporary reinsurance program for employers providing health insurance coverage to retirees
over age 55 who are not eligible for Medicare. Program will reimburse employers or insurers for 80%
of retiree claims between $15,000 and $90,000. Payments from the reinsurance program will be used
to lower the costs for enrollees in the employer plan. Appropriate $5 billion to finance the program.
(Effective 90 days following enactment through January 1, 2014)

Tax Changes Related to Health Insurance or Financing Health Reform Tax changes related to Health Insurance

• Impose a tax on individuals without qualifying coverage of the greater of $695 per year up to a maximum of three times that amount or 2.5% of household income to be phased-in beginning in 2014.

• Exclude the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through an HRA or health FSA and from being reimbursed on a tax-free basis through an HSA or Archer Medical Savings Account. (Effective January 1, 2011)

• Increase the tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20% (from 10% for HSAs and from 15% for Archer MSAs) of the disbursed amount. (Effective January 1, 2011)

• Limit the amount of contributions to a flexible spending account for medical expenses to $2,500 per year increased annually by the cost of living adjustment. (Effective January 1, 2013)

• Increase the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of
adjusted gross income to 10% of adjusted gross income for regular tax purposes; waive the increase for
individuals age 65 and older for tax years 2013 through 2016. (Effective January 1, 2013)

• Increase the Medicare Part A (hospital insurance) tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and impose a 3.8% tax on unearned income for higher-income taxpayers (thresholds are not indexed). (Effective January 1, 2013)

• Impose an excise tax on insurers of employer-sponsored health plans with aggregate values that
exceed $10,200 for individual coverage and $27,500 for family coverage (these threshold values will
be indexed to the consumer price index for urban consumers (CPI-U) for years beginning in 2020).
The threshold amounts will be increased for retired individuals age 55 and older who are not eligible
for Medicare and for employees engaged in high-risk professions by $1,650 for individual coverage
and $3,450 for family coverage. The threshold amounts may be adjusted upwards if health care costs
rise more than expected prior to implementation of the tax in 2018. The threshold amounts will be
increased for firms that may have higher health care costs because of the age or gender of their
workers. The tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is
imposed on the issuer of the health insurance policy, which in the case of a self-insured plan is the
plan administrator or, in some cases, the employer. The aggregate value of the health insurance plan
includes reimbursements under a flexible spending account for medical expenses (health FSA) or
health reimbursement arrangement (HRA), employer contributions to a health savings account (HSA),
and coverage for supplementary health insurance coverage, excluding dental and vision coverage.
(Effective January 1, 2018)

• Eliminate the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments.
(Effective January 1, 2013)

• Impose new annual fees on the pharmaceutical manufacturing sector, according to the following
schedule:
– $2.8 billion in 2012-2013;
– $3.0 billion in 2014-2016;
– $4.0 billion in 2017;
– $4.1 billion in 2018; and
– $2.8 billion in 2019 and later.

• Impose an annual fee on the health insurance sector, according to the following schedule:
– $8 billion in 2014;
– $11.3 billion in 2015-2016;
– $13.9 billion in 2017;
– $14.3 billion in 2018
– For subsequent years, the fee shall be the amount from the previous year increased by the rate of
premium growth.
For non-profit insurers, only 50% of net premiums are taken into account in calculating the fee.
Exemptions granted for non-profit plans that receive more than 80% of their income from government
programs targeting low-income or elderly populations, or people with disabilities, and voluntary
employees’ beneficiary associations (VEBAs) not established by an employer. (Effective January 1, 2014)

• Impose an excise tax of 2.3% on the sale of any taxable medical device. (Effective for sales after
December 31, 2012)

• Limit the deductibility of executive and employee compensation to $500,000 per applicable individual for health insurance providers. (Effective January 1, 2009)

• Impose a tax of 10% on the amount paid for indoor tanning services. (Effective July 1, 2010)

• Exclude unprocessed fuels from the definition of cellulosic biofuel for purposes of applying the cellulosic
biofuel producer credit. (Effective January 1, 2010)

• Clarify application of the economic substance doctrine and increase penalties for underpayments
attributable to a transaction lacking economic substance. (Effective upon enactment)

Reserved

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