HealthyCal.org

With Sunday’s vote in the House of Representatives, Congress has passed the first piece of an historic overhaul of the nation’s health care system. What will this reform mean for you — as a consumer of insurance, a patient and a California taxpayer?

In the short run, it is going to depend on where you are in the system. Most likely you will not be affected much at all for many years, despite all the fury unfolding in Washington and across the nation. In the long run, the effects could be more profound.

The bill does a lot of things, but most of them can be divided into two major categories. It tightens regulation of the insurance industry. And it expands access to care for the poor and for low-income working people.

Congress and the president, mindful of the costs and also the political implications, have front-loaded the insurance regulations, which are popular with the middle-class and independent voters, and saved the public care expansions for later. Still, if you have insurance now, especially if you have it through work, you probably will not see much if any change in that coverage.

If you are working or self-employed and have been trying to buy coverage, you might find it easier to do so in the near future. If you have been denied coverage because of a pre-existing medical condition, this bill could be just what you have been waiting for. The legislation will also place new mandates on how insurers structure their policies, require them to cover children until an older age, and limit the amount they can make you pay out of pocket.

Here is a breakdown of the major pieces of the legislation, organized by the dates on which they take effect:

Taking effect in 2010
–Increase in Medicare prescription drug benefits. A one-time rebate of $250 for seniors who have exhausted the first part of their drug benefit and are paying 100 percent of the cost of their medication. The following year, low-income and middle-income seniors would begin getting a 50 percent discount on brand-name drugs.
–A high-risk insurance pool for people with pre-existing conditions who have been turned down for regular coverage. This pool would be available until 2014, when new regional insurance exchanges will be created and take over this function.
–Insurers prohibited from imposing lifetime limits on a person’s benefits.
–Insurers prohibited from rescinding coverage when a person becomes sick or disabled, except in cases of fraud.
–Insurers required to cover dependent children on a family policy until the age of 26.
–Subsidies for small business. Tax credits covering up to 35 percent of premiums for employers with 10 or fewer workers and average wages of $25,000 or less. This subsidy would climb to 50 percent of premium costs in 2014 but would phase out as a firm’s number of employees and average wages grows. The credit would end once a company had more than 25 workers or average wages of $50,000 or more.
–Tanning tax. A 10 percent tax on the purchase of indoor tanning services.

Taking effect in 2011:
–Insurers required to spend at least 80 percent of their revenue on medical claims.

Taking effect in 2013
–Higher payments for doctors who treat the poor. The federal government would reimburse states that increase payments to primary care doctors in the Medicaid program to match what is paid under Medicare. These federal subsidies are intended to entice more doctors into the Medicaid program in advance of major expansions in enrollment in 2014. But the new subsidies to the states expire in 2015.
–A higher Medicare payroll tax rate, adjusted for the first time according to income. The rate would increase from the current flat 1.45 percent to 2.35 percent on income above $200,000 for individuals and $250,000 for couples. These groups would pay an additional 3.8 percent tax on capital gains, dividends, interest and other investment income.
–A new cap of $2,500 on the amount of money people can set aside tax-free to pay for medical expenses.

Taking effect in 2014:
–Individual mandate, requiring most people to buy insurance. People who did not comply would face penalties beginning at $95 a year or 1 percent of their income, whichever was higher. These penalties would rise over time.
–Insurance exchange. States or regions would organize new insurance marketplaces for people who could not find coverage in the private market. There would also be two national plans, including one non-profit. Insurers competing to win customers through the exchanges would have to justify rate increases and could be barred from the exchange if they raise rates excessively.
–Insurers prohibited from charging older people more than three times what they charge younger people.
–Insurers required to offer minimum benefits, to be determined later by the federal government. The minimum plan would cover 60 percent of the costs and limit out-of-pocket costs to consumers to about $6,000 annually for individuals and $12,000 for families.
–Subsidies for individuals. Tax credits would be available for low and moderate income people who buy through the exchange. People with incomes below about $33,000 for a family of four would pay 2 percent to 4 percent of their income in premiums, and health plans would be required to pay 94 percent of the cost of their benefits. These subsidies would continue at a lower level for families with incomes up to four times the poverty level, or about $88,000 for a family of four.
–Employer penalties. Employers would not be required to offer coverage to their employees, but if they did not and their workers used the exchange, employers with more than 50 employees would have to pay a fee of $2,000 for every worker who used the exchange, after the first 30 employees. Employers that do offer coverage would also have to pay a fee if their workers opted for insurance sold through the exchange.
–Expansion of Medicaid (Medi-Cal in California). This government-subsidized insurance would expand to cover everyone with incomes up to 133 percent of the poverty level, or about $29,000 for a family of four. Currently, families with children, the aged and disabled qualify for this system, and at lower income levels. The federal government would pay the full cost of this expansion until 2016, then phase down its contribution to 90 percent by 2020. The state would be responsible for the remainder of the cost.
–Higher reimbursement rates for states that cover children through the program for the working poor, known as Healthy Families in California. The federal government currently pays an average of 70 percent of the cost. This would increase to 93 percent.

Taking effect in 2018
–A new tax on so-called “Cadillac” or expensive health insurance plans. This 40 percent tax would take effect on individual plans costing more than $10,200 a year and on family plans costing more than $27,500.

–Daniel Weintraub

Note: This item was updated at 3:43 p.m to correct some of the dates at which insurance reforms will take effect.

Photo by Steve Rhodes.