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Healthcare Reform - Phase 1
October, 2010



The Affordable Care Act (ACA), signed into law by President Obama six months ago, began rolling out starting September 23, 2010 with many consumer protection provisions. The act brings about an expansion of health care benefits for most Americans who already have insurance coverage as well as the millions of Americans who are lacking coverage altogether. For small business owners who need to administrate and explain these coverage changes to their employees, it’s important to review your individual health plan, be prepared to answer questions and know where to direct those questions you cannot answer yourself.

Pre-existing Conditions

Item number one on the list of changes is the inclusion of healthcare coverage to the approximately 125 million Americans with pre-existing conditions. Ailments such as diabetes or cancer often meant that health insurers would refuse to cover such patients. As of September 23, 2010 healthcare coverage cannot be denied based on pre-existing conditions.


Phase I of the law requires insurers to now also offer coverage to all children under the age of 18, even if they have pre-existing conditions. For families with an ill child, this will be a huge relief. While the law doesn’t mean that the coverage will be ‘affordable,’ parents will at least now have the option of including the child in their coverage without the fear of denial. In advance of the new legislation, insurers in four states have dropped their child-only coverage in an effort to curb high costs when, according to insurers, “parents only cover the child when he or she becomes seriously ill.” This push-back on lawmakers throws a wrench in the original intent behind the health care reform but there is little authority to spur health care providers toward changing their position.

Coverage for Young Adult Children

Insurers must also extend coverage for children up to the age of 26 through their parents’ coverage. The law applies only if they do not have their own employer-sponsored health insurance. This is a huge benefit for the millions of college and post-college twenty-somethings who are currently struggling without any health coverage at all. Effective dates for this change will vary depending on your health care plan renewal period and individual plan requirements.

Healthcare Facts
*US Census Bureau

  • More than 50 million Americans, or 1 out of every 6 citizens did not have health
    coverage in 2009 – an increase of 4 million from just one year before.

  • The ACA is expected to cover 32 million of the 50 million uncovered Americans by 2014.

Ban on Lifetime coverage limits and annual limits begin to phase out

For the millions of Americans who haven’t suffered a serious illness, this provision may not mean much, but for an individual or family with a member battling a chronic or acute condition, the limits can be reached very quickly, previously leaving the individual or family with no coverage and insurmountable health care charges waiting to be paid.

Prohibition on Rescinding Coverage

Insurers will be prohibited from cancelling coverage with the exception of proof of claimant fraud. While this provision applies primarily to the individual insurance market, it will still affect many who have faced cancellation due to high plan usage for chronic or serious illness or injury.

Free Coverage for Preventative Care for Items like Mammograms and Cholesterol Screenings

That means no more copayments, coinsurance or deductibles for some cancer screenings, flu shots, vaccinations recommended by the Centers for Disease Control and Prevention, or well baby visits. For families with more than one child, annual exams and vaccinations can add up to hundreds of dollars just in copayments. Now, these are all covered by the health plan at no charge to the subscriber.

Aid for Seniors

More than 4 million seniors who have reached the capitation on their Medicare deductibles and out of pocket prescription drug benefits, affectionately called ‘in the doughnut hole’, will now be receiving (or may have already received) $250 checks to help cover the costs of prescription drugs. What is the doughnut hole? According to a report, in addition to a $310 deductible, Medicare beneficiaries pay 25% of their drug costs until the total reached $2,830 for the year. Then they fall into a coverage gap. At that point, enrollees must pay all costs out of pocket until their annual expenses exceed $6,440. After that they will pay 5% of drug costs for the remainder of the calendar year. For those seniors who continue to fall into that gap, starting in 2011 there will be a 50% discount on brand-name drugs and a 7% discount on generic medications needed. Those discount figures will increase until 2020 and reach a total of 75% discount. The ‘doughnut hole’ will also be diminished until it no longer exists in 2020.

Changes to Medicaid

The bill further expands Medicaid and subsidy programs to low-income Americans. “Those who are at 133 percent of the federal poverty level, or $29,327 for a family of four, would be eligible for Medicaid, starting in 2014.”

Tax Credits for Small Business

ACA provides tax credits and the ability for small business to shop in insurance exchanges in order to obtain employee healthcare plans with more affordable premiums. We’ve written previously about the postcard campaign that went out to employers announcing some of the tax cuts available. The effectiveness of these credits still is yet to be seen, but at least knowing that they exist and evaluating the credits with your accountant can be a step in the right direction.

To learn more about today’s healthcare reform and how it may impact your small business, talk with a Fiducial Advisor by calling 866-FIDUCIAL or visit the web site at