Health overhaul: Immediate change, long term steps

2013

Standardizes insurance company paperwork, first in a series of steps to reduce administrative costs.

Limits medical expense contributions to tax-sheltered flexible spending accounts (FSAs) to $2,500 a year, indexed for inflation. Raises threshold for claiming itemized tax deduction for medical expenses from 7.5 percent of income to 10 percent. People over 65 can still deduct medical expenses above 7.5 percent of income through 2016.

Increases Medicare payroll tax on couples making more than $250,000 and individuals making more than $200,000. The tax rate on wages above those thresholds would rise to 2.35 percent from the current 1.45 percent. Also adds a new tax of 3.8 percent on income from investments.

Imposes a 2.3 percent sales tax on medical devices. Eyeglasses, contact lenses, hearing aids and many everyday items bought at the drug store are exempt.

2014

Prohibits insurers from denying coverage to people with medical problems, or refusing to renew their policy. Health plans cannot limit coverage based on pre-existing conditions, or charge higher rates to those in poor health. Premiums can only vary by age (no more than 3-to-1), place of residence, family size and tobacco use.

Coverage expansion goes into high gear as states create new health insurance exchanges — supermarkets for individuals and small businesses to buy coverage. People who already have employer coverage won't see any changes.

Provides income-based tax credits for most consumers in the exchanges, substantially reducing costs for many. Sliding scale credits phase out completely for households above four times the federal poverty level, about $88,000 for a family of four.

Medicaid expanded to cover low-income people up to 133 percent of the federal poverty line, about $29,300 for a family of four. Low-income childless adults covered for the first time.

Requires citizens and legal residents to have health insurance, except in cases of financial hardship, or pay a fine to the IRS. Penalty starts at $95 per person in 2014, rising to $695 in 2016. Family penalty capped at $2,250. Penalties indexed for inflation after 2016.

Penalizes employers with more than 50 workers if any of their workers get coverage through the exchange and receive a tax credit. The penalty is $2,000 times the total number of workers employed at the company. However, employers get to deduct the first 30 workers.

2018

Imposes a tax on employer-sponsored health insurance worth more than $10,200 for individual coverage, $27,500 for a family plan. The tax is 40 percent of the value of the plan above the thresholds, indexed for inflation.

2020

Doughnut hole coverage gap in Medicare prescription benefit is phased out. Seniors continue to pay the standard 25 percent of their drug costs until they reach the threshold for Medicare catastrophic coverage, when their copayments drop to 5 percent.

Sources: House Energy and Commerce Committee; Kaiser Family Foundation.