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March 2010 Law Section 1402

Affordable Care Act of 2010 Section 1402


Impact

“Reduced Cost Sharing” in the Affordable Care Act of 2010 (Obamacare) is a spending of our tax dollars on what is sometimes called a subsidy and sometimes called “premium assistance”.

It is not a reduction of costs as implied by the word “reduced” in the title.

This section specifies that our tax dollars will be paid directly to health insurance companies, as per Section 1402(c)(3), below as “periodic and timely payments to the issuer”. It will be an automatic flow of money to for-profit companies based on a sharing of our tax information from the IRS to HHS, as seen by the frequent reference to “household income” in this section.


Glossary of Terms

HHS = Health and Human Services
Secretary = Secretary of HHS
issuer = health insurance company that issues a health insurance policy
out-of-pocket: health insurance premiums, co-payments, deductibles, and coinsurance are examples of out-of-pocket costs.


Section 1402. Reduced Cost-Sharing for Individuals
Enrolling in Qualified Health Plans.

All bolding has been added.
We added comments in italics.

SEC. 1402. (NOTE: 42 USC 18071.)
REDUCED COST-SHARING FOR INDIVIDUALS ENROLLING IN QUALIFIED HEALTH PLANS.

(a) In General.–In the case of an eligible insured enrolled in a qualified health plan–

(1) NOTE: Notification. the Secretary shall notify the issuer of the plan of such eligibility; and
(2) the issuer shall reduce the cost-sharing under the plan at the level and in the manner specified in subsection (c).

And the federal government, via the actions of the Secretary, will pay for the entire amount of the reduction, paying that money directly to the issuer.

(b) Eligible Insured.–In this section, the term “eligible insured” means an individual–

(1) who enrolls in a qualified health plan in the silver level of coverage in the individual market offered through an Exchange; and
(2) whose household income exceeds 100 percent but does not exceed 400 percent of the poverty line for a family of the size involved.

In the case of an individual described in section 36B(c)(1)(B) of the Internal Revenue Code of 1986, the individual shall be treated as having household income equal to 100 percent for purposes of applying this section.

(c) Determination of Reduction in Cost-sharing. —

TEMPORARY NOTE: The effort to put the following information into a table format and see its impact in dollars has already been completed by others. We have not yet linked to that information, but there is no use in anyone doing the work that has already been done. We need efficiency in our efforts.

(1) Reduction in out-of-pocket limit.

(A) In general.–The reduction in cost-sharing under this subsection shall first be achieved by reducing the applicable out-of pocket limit under section 1302(c)(1) in the case of —

(i) an eligible insured whose household income is more than 100 percent but not more than 200 percent of the poverty line for a family of the size involved, by two-thirds;
(ii) an eligible insured whose household income is more than 200 percent but not more than 300 percent of the poverty line for a family of the size involved, by one-half; and
(iii) an eligible insured whose household income is more than 300 percent but not more than 400 percent of the poverty line for a family of the size involved, by one-third.

(B) Coordination with actuarial value limits.–

(i) In general.–The Secretary shall ensure the reduction under this paragraph shall not result in an increase in the plan’s share of the total allowed costs of benefits provided under the plan above

(I) 90 percent in the case of an eligible insured described in paragraph (2)(A);
(II) 80 percent in the case of an eligible insured described in paragraph (2)(B); and
(III) 70 percent in the case of an eligible insured described in clause (ii) or (iii) of subparagraph (A).

(ii) Adjustment.–The Secretary shall adjust the out-of pocket limits under paragraph (1) if necessary to ensure that such limits do not cause the respective actuarial values to exceed the levels specified in clause (i).

(2) Additional reduction for lower income insureds.– The <> Secretary shall establish procedures under which the issuer of a qualified health plan to which this section applies shall further reduce cost-sharing under the plan in a manner sufficient to —

(A) in the case of an eligible insured whose household income is not less than 100 percent but not more than 150 percent of the poverty line for a family of the size involved, increase the plan’s share of the total allowed costs of benefits provided under the plan to 90 percent of such costs; and

(B) in the case of an eligible insured whose household income is more than 150 percent but not more than 200 percent of the poverty line for a family of the size involved, increase the plan’s share of the total allowed costs of benefits provided under the plan to 80 percent of such costs.

(3) Methods for reducing cost-sharing.–

(A) NOTE: Notification. In general. — An issuer of a qualified health plan making reductions under this subsection shall notify the Secretary of such reductions and the Secretary shall make periodic and timely payments to the issuer equal to the value of the reductions.
In other words, the entire value of the reduced cost-sharing in Section 1402 is covered by our taxes.

(B) Capitated payments.–The Secretary may establish a capitated payment system to carry out the payment of cost-sharing reductions under this section. Any such system shall take into account the value of the reductions and make appropriate risk adjustments to such payments.

(4) Additional benefits.–If a qualified health plan under section 1302(b)(5) offers benefits in addition to the essential health benefits required to be provided by the plan, or a State requires a qualified health plan under section 1311(d)(3)(B) to cover benefits in addition to the essential health benefits required to be provided by the plan, the reductions in cost- sharing under this section shall not apply to such additional benefits.

(5) Special rule for pediatric dental plans.–If an individual enrolls in both a qualified health plan and a plan described in section 1311(d)(2)(B)(ii)(I) for any plan year, subsection (a) shall not apply to that portion of any reduction in cost-sharing under subsection (c) that (under regulations prescribed by the Secretary) is properly allocable to pediatric dental benefits which are included in the essential health benefits required to be provided by a qualified health plan under section 1302(b)(1)(J).

(d) Special Rules for Indians. —

(1) Indians under 300 percent of poverty.–If an individual enrolled in any qualified health plan in the individual market through an Exchange is an Indian (as defined in section 4(d) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(d))) whose household income is not more than 300 percent of the poverty line for a family of the size involved, then, for purposes of this section —

(A) such individual shall be treated as an eligible insured; and

(B) the issuer of the plan shall eliminate any cost- sharing under the plan.

(2) Items or services furnished through indian health providers.–If an Indian (as so defined) enrolled in a qualified health plan is furnished an item or service directly by the Indian Health Service, an Indian Tribe, Tribal Organization, or Urban Indian Organization or through referral under contract health services–

(A) no cost-sharing under the plan shall be imposed under the plan for such item or service; and

(B) the issuer of the plan shall not reduce the payment to any such entity for such item or service by the amount of any cost-sharing that would be due from the Indian but for subparagraph (A).

(3) Payment.–The Secretary shall pay to the issuer of a qualified health plan the amount necessary to reflect the increase in actuarial value of the plan required by reason of this subsection.

(e) Rules for Individuals Not Lawfully Present.–

(1) In general.–If an individual who is an eligible insured is not lawfully present–

(A) no cost-sharing reduction under this section shall apply with respect to the individual; and

(B) for purposes of applying this section, the determination as to what percentage a taxpayer’s household income bears to the poverty level for a family of the size involved shall be made under one of the following methods:

(i) A method under which–

(I) the taxpayer’s family size is determined by not taking such individuals into account, and
(II) the taxpayer’s household income is equal to the product of the taxpayer’s household income (determined without regard to this subsection) and a fraction–

(aa) the numerator of which is the poverty line for the taxpayer’s family size determined after application of subclause (I), and

(bb) the denominator of which is the poverty line for the taxpayer’s family size determined without regard to subclause (I).

(ii) A comparable method reaching the same result as the method under clause (i).

(2) Lawfully present.–For purposes of this section, an individual shall be treated as lawfully present only if the individual is, and is reasonably expected to be for the entire period of enrollment for which the cost-sharing reduction under this section is being claimed, a citizen or national of the United States or an alien lawfully present in the United States.

(3) NOTE: Regulations.   Secretarial authority.–The Secretary, in consultation with the Secretary of the Treasury, shall prescribe rules setting forth the methods by which calculations of family size and household income are made for purposes of this subsection. Such rules shall be designed to ensure that the least burden is placed on individuals enrolling in qualified health plans through an Exchange and taxpayers eligible for the credit allowable under this section.

(f) Definitions and Special Rules.–In this section:

(1) In general.–Any term used in this section which is also used in section 36B of the Internal Revenue Code of 1986 shall have the meaning given such term by such section.

(2) Limitations on reduction.–No cost-sharing reduction shall be allowed under this section with respect to coverage for any month unless the month is a coverage month with respect to which a credit is allowed to the insured (or an applicable taxpayer on behalf of the insured) under section 36B of such Code.

(3) Data used for eligibility.–Any determination under this section shall be made on the basis of the taxable year for which the advance determination is made under section 1412 and not the taxable year for which the credit under section 36B of such Code is allowed.

Additional Information

Source for Section 1402: Pages 113 through 115 in the consolidated document of the law: 907 page document (pdf): “Ppaca&Hcera; Public Laws 111-148&111-152: Consolidated Print”.
      If you have any difficulty accessing a pdf file, please go here.

Complexity of the Affordable Care Act of 2010.

Obamacare is the name that some people give to the Affordable Care Act of 2010.



The information at this web page is just one part of the burdens of the Affordable Care Act of 2010, which needs to be replaced with the maximum efficiency and benefits of Improved Medicare for All.

 

 

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