An Introduction To U.S. Health Care Reform

By Cynthia Borrelli

Posted: 8th July 2011 18:27

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (the “PPACA” or “Health Care Reform.”)  The centerpieces of Health Care Reform are “individual responsibility” provisions generally requiring individuals to maintain health coverage or pay assessments, and the “employer responsibility” provisions, under which large employers must offer group health coverage to full-time employees, and contribute to the cost of coverage, or pay a penalty.

The employer responsibility provisions of Health Care Reform are designed to require employers to shoulder a large portion of the burden of providing group health coverage to their employees, either directly through subsidized employer-sponsored coverage or by funding a portion of the cost of coverage provided through the Exchange.

A. PPACA Creates State-Run Insurance Exchanges

PPACA, as adopted, does require states to establish, by January 1, 2014, government-run insurance market places to be known as “Exchanges.”  These Exchanges should be viewed as last-resort alternatives to private health coverage.  They would be open to individuals and employers with 100 or fewer employees. 

B. No Change in Tax Treatment of Employer-Paid Premiums

PPACA does not change the long-standing rule that permits an employer to pay a portion of the health plan premium on behalf of a covered person without treating that payment as additional income paid to the covered person.  The value of the plan benefits remain tax-favored as well.

C. Employer Limits of Coverage by Plan

Insurers can offer, and an employer can purchase, four types of health plans:  Bronze, Silver, Gold and Platinum, all of which provide at least certain defined “essential benefits.” 


A. Coverage Mandates Generally

B. Grandfathered Plan

Under PPACA, a “grandfathered plan” is a health plan in existence on March 23, 2010.  PPACA contains important provisions exempting existing health plans from the applications of some of PPACA’s improvements in health care coverages and qualities, i.e., the “Insurance Reform Provisions.”  While grandfathered plans are excluded from complying with some, but not all, of these Insurance Reform Provisions, other PPACA provisions apply regardless of a plan’s grandfathered status. 

C. Non-Grandfathered Plans

Effective for plan years starting on or after September 23, 2010, the following reforms apply to plans which are not considered “grandfathered plans”:

D. Insurance Reforms

1. Preventative Care

 Preventative care is defined under PPACA as follows:

Note:  Grandfathered plans are exempt from requirements to cover certain preventative health services with no cost-sharing. 

2. Wellness Coverage

PPACA creates a $200,000,000 five-year program to provide grants to certain small employers (fewer than 100 employees) for comprehensive workplace-wellness programs.  PPACA also provides a free, annual wellness visit and personalized prevention plan services for Medicare beneficiaries and eliminated cost-sharing for preventive services beginning in 2011.

3. Annual/Lifetime Limits/Access to Coverage for Uninsured Individuals with Pre Existing Conditions

Perhaps the most significant of the insurance reforms is the application of annual/lifetime limits.  This rule applies to all group health plans (e.g., grandfathered and non-grandfathered).  The effective date for this rule started with the first plan year on or after September 23, 2010.  Prohibitions relate only to limits on the dollar value of benefits.  Note:  Employers are not required to pay for family coverage.  

a. Annual and Lifetime Limits

Within six months of enactment, PPACA eliminated the ability of insurers to rescind existing policies, except in cases of fraud or intentional misrepresentation of a material fact.  Any cancellation also must be with prior written notice.  Insurers will be banned from setting lifetime caps on essential benefits and restricted in their ability to set annual limits for coverage until 2014, at which point annual limits will also be eliminated. 

Until 2014, annual limits may only be imposed on “essential benefits.”

b. Pre-Existing Conditions Coverage

PPACA essentially guarantees that those with pre-existing conditions will have the ability to purchase insurance coverage. 

c. Pre-Existing Condition Coverage for Children

Within six months of enactment, insurers will be prohibited from denying coverage to children under 19 years of age based on pre-existing conditions. 

4. Extended Coverage for Young Adults

Group health plans and health insurance issuers offering group or individual health insurance coverage that includes dependent coverage of children must make coverage available for children to age 26, regardless of the adult child’s marital or student status if the plan itself provides for dependent children. 

5. Reinsurance for Covering Early Retirees

PPACA requires establishment of a temporary reinsurance program to reimburse participating employment-based plans for a portion of the cost of providing health insurance coverage to early retirees and their spouses, surviving spouses, and dependents. 

6. Impact on Government-Funded Plans/Medicare/Medicaid

PPACA will further affect individuals by making the following changes to Medicare and Medicaid programs:

7. Expanded Insurance Coverage/Voluntary Long Term Care Insurance Option

PPACA creates a long-term care insurance program for adults who become disabled.  Participation will be voluntary. 


Under PPACA, health plans will be subject to increased administrative responsibilities, including:


The representation provided by Bressler, Amery & Ross’s insurance practice group covers a broad range of property-casualty, annuity, life, health and disability insurance issues as well as managed care law and reinsurance issues.  Our attorneys handling these matters appear before state and federal regulatory agencies and self-regulatory bodies, administrative law judges, and state and federal courts.  Our clients include insurers, reinsurers, managed care organizations, insurance holding company systems, insurance agents, brokers and consultants, broker-dealers and investment advisors.  We advise clients on corporate, marketing, product development, and regulatory compliance matters and provide representation in regulatory enforcement, litigation, arbitration, and appraisal proceedings.  Cynthia Borrelli can be contacted on +1 973 966 9685 or by email at


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