Thomas More petition on ACA reaches Supreme Court

Finally, the moment we've all been waiting for - a case challenging the Patient Protection and Affordable Care Act (ACA) has reached the U.S. Supreme Court. The Thomas More Law Center has filed a writ for petition of certiorari, asking the High Court to review the Sixth Circuit's decision in Thomas More Law Center v. Barack Hussein Obama, and to find that the individual mandate of the ACA is unconstitutional. The petition reiterates the Sixth Circuit's admonition to prove that there is a limit to Congress' Commerce Clause power.

The petition quotes Judge Sutton, who, while concurring with the opinion of the Sixth Circuit, had stated that, "the Court either should stop saying that a meaningful limit on Congress's commerce powers exists or prove that it is so." Also, Judge Graham, in his dissent, appeared to throw down the gauntlet to the Supreme Court, when he stated, as was reprinted in the Thomas More petition, "...the Court remains committed ...to establish a framework of meaningful limitations on congressional power under the Commerce Clause. The current case is an opportunity to prove it so."

So, it would appear that the Thomas More Law Center is offering the U.S. Supreme Court an opportunity to put limits on Congress's apparent power to exceed what it argues are the sensible limits of the Commerce Clause.

In the petition, and common to arguments of those opposing the individual mandate, is the contention that, if the mandate is upheld, there would be virtually no limits on Congress's Commerce Clause authority. "What aspect of human activity would escape federal power?" Graham is quoted as asking, as though, if the individual mandate were found to be constitutional, the U.S. would be on the road to Congressional Commerce Clause Perdition, with the federal government taking the opportunity to regulate every aspect of every citizen's life.

The petitioners argue that, for the individual mandate to be upheld, those subject to it must be engaged in some affirmative economic activity. The ACA is impermissibly regulating, they say, the "decision to not engage in commercial or economic activity."

The government will no doubt argue in return that virtually everyone will, at some point in their lives, incur healthcare expenses and thus, be active in the healthcare market. The petitioners have anticipated that argument, stating that requiring someone to purchase health insurance just because he will probably participate economically in the healthcare arena is like saying that, because we all have to participate in the food market, Congress has the right to force us to purchase health foods under penalty of law.

The Sixth Circuit had stated in its opinion, however, that neither the Commerce Clause nor the Supreme Court have ever acknowledged a distinction between activity and inactivity.

I can't wait to see the federal government's response, due in 30 days, and I hope it's good, because it's easy to see how a holding that the individual mandate is unconstitutional could be disastrous for health plans that have already altered their documents and procedures to comply with the health care reform law, as well as for any citizen currently lacking health care coverage who is looking to 2014 for some security that he won't be bankrupted by medical bills, should he need care he now can't afford. Thomas More's reply, due 10 days later, should be just as entertaining.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Don't expect those medical loss ratio rebates yet

There's a handy little loophole in the Patient Protection and Affordable Care Act (ACA) that state insurance commissioners have been taking advantage of. States may ask the HHS to adjust minimum loss ratio requirements set forth in the ACA based on the volatility of their individual insurance markets due to the establishment of state exchanges.
 
So far, at least five states, including Iowa, Kentucky, Maine, Nevada, and New Hampshire have received waivers from the requirement of the Patient Protection and Affordable Care Act (ACA) that health insurers must spend at least 80% of individual insurance revenue on health care and quality improvement for their insureds. Surprisingly, North Dakota's request was turned down.

Normally, if states do not meet this medical loss ratio requirement, beginning in 2011, they must provide an annual rebate to each enrollee on a pro rata basis,

"except that such percentage shall be adjusted to the extent the Secretary determines that the application of such percentage with a State may destabilize the existing individual market in such State."

(Act Sec. 1001(5) of the Affordable Care Act, as amended by Act Sec. 10101(f), adding PHSA Sec. 2718(b)(1)(B)).

So, the ACA allows a state to obtain a waiver from the ACA's full medical loss ratio requirements if they would cause a substantial number of insurers to pull out of the state or stop offering health plans to individuals or families, thus disrupting the insurance system, and states that have so far received waivers have claimed that this is exactly what is happening.

The HHS released guidelines for these waivers, and requires a state to show that one or more insurers is likely to pull out as a result of the MLR requirements. Kentucky Insurance Commissioner Sharon P. Clark apparently did not, in her waiver application, name any particular insurer that was going to pull out as a result of the requirements, although at least one insurer had apparently indicated that it would probably do so. Iowa Insurance Commissioner Susan Voss, seemed more concerned that virtually none of the state's top individual insurers come close to meeting the 80% mark required by the ACA.

At first glance, it would seem that citizens of those five states were protected by the federal government, because it gave the states less leniency than they were requesting: For example, Iowa requested permission to require that only 60% of revenue received by insurance companies be spent on health care and quality improvement in 2011, 70% in 2012, and 75% in 2013. It only received permission from the HHS for the insurance companies selling insurance in Iowa to reach a medical loss ratio of 67% in 2011, 75% in 2012, and the full 80% in 2013. Kentucky requested a requirement of only 65% for 2011, 70% for 2012, and 75% for 2013, but insurance companies in that state will only have to reach a medical loss ratio of 75% in 2011, and then the full 80% in 2012.

One can't help wondering, however, if the states' insurance commissioners simply engaged in some classic negotiating and asked for more than they expected to get. Giving them extra time to comply makes it appear that the federal government is demanding relatively strict compliance with the law, and by requesting the waivers, state insurance commissioners appear to the insurance companies to be advocating for them.  Everybody wins.

Health program spending linked to preventable death declines

Finally, a study (to be published in August by Health Affairs) has been completed that shows evidence of a link between increased spending on local health programs, and decreases in incidences of community mortality rates from a variety of causes. For those who are worried about the effect of increased federal spending on health programs, often for the poor and for those with limited access to health care, as mandated by the Patient Protection and Affordable Care Act (ACA), this should be terrific news. It would seem, as the study's authors purport, that increased public health spending could be a good investment, assuming a drop in mortality rates is viewed by most of us as a good thing.

The study's authors argue convincingly that increases in public health investments may result in better community health outcomes. For example, for every 10% increase in spending, infant deaths fell an average of approximately 6.9%, and for the same increase in spending, cardiovascular disease mortality fell an average of approximately 3.2%. In addition, diabetes mortality and cancer mortality fell by approximately 1.4% and 1.1%, respectively, for every 10% increase in spending. These mortality rates, as well as other used in the study, were expected by the authors to be most likely to respond to interventions via public health programs.

The study looked primarily at per capita spending by almost 3,000 local public health agencies, and at some measures of direct federal and state public health spending, over a 13-year period. The authors explained that they studied spending by local agencies partly because most federal, state, and philanthropic funding ends up getting channeled through local public health agencies.

The authors of the study estimate that the $15 billion in federal funds authorized under the ACA's Prevention and Public Health Fund could generate a substantial increase in public health, especially since other sources of funding for local public health programs have been reduced as a result of the recession.

The authors acknowledged that the study has its limits, and that factors other than public health spending may have influenced mortality rates, although their analytic methods apparently accounted for the effects of community characteristics that could have an independent influence on the health of the population. There were other variables that the authors noted had an effect on the incidence of mortality, but these were primarily social determinants, such as level of education, race, and having a certain percentage of the local population above the federal poverty level. Furthermore, the authors acknowledged that money, in and of itself, was not likely to create lasting health gains. Still, one of the most consistent determinants of preventable mortality was found to be public health spending.

The authors of the study also estimated that a 10% increase in public spending would result in a 3.2% reduction in cardiovascular mortality, and would necessitate $312,274 more annual funding for the average metropolitan community studied. Increasing the average number of primary care physicians in each area by 27, the number estimated to be required to bring about a similar mortality reduction, instead of adding to local public health funds, would cost far more than that, they pointed out.

Two control conditions, Alzheimer's mortality and residual mortality, showed no connection between outcomes for the population and public health spending. The study's authors have stated that this study provides a foundation for future analysis, especially of spending on more specific programs such as tobacco cessation, nutrition, and physical activity.

Source: Glen P. Mays and Sharla A. Smith, Evidence Links Increases In Public Health Spending To Declines In Preventable Deaths, Health Affairs (2011), doi: 10.1377/hlthaff.2011.0196.

Contraceptives In Recommended Preventive Services

A new report from the Institute of Medicine (IOM) recommends that eight preventive health services for women be added to the services that health plans will cover at no cost to patients under a provision of the Patient Protection and Affordable Care Act of 2010. The recommendations include one for contraceptive services, which is likely to be the most controversial of the IOM’s proposals.

The ACA requires group health plans to cover, with no cost sharing, the following:
• certain evidence-based items (with A or B ratings) in the recommendations of the United States Preventive Services Task Force, a part of the Department of Health and Human Services’ (HHS) Agency for Healthcare Research and Quality;
• immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention;
• evidence-based preventive care and screenings for infants, children, and adolescents provided for in the comprehensive guidelines supported by the HHS’s Health Resources and Services Administration (HRSA); and
• additional women’s preventive care and screenings “in comprehensive guidelines supported by the HRSA.”

At the HHS’s request, an IOM committee identified critical gaps in preventive services for women, as well as measures that will further ensure women’s health and well-being.

The IOM committee's eight recommendations are based on a review of existing guidelines and an assessment of the evidence on the effectiveness of different preventive services. The committee identified diseases and conditions that are more common or more serious in women than in men or for which women experience different outcomes or benefit from different interventions. The report suggests the following additional services:

• screening for gestational diabetes;
• human papillomavirus (HPV) testing as part of cervical cancer screening for women who are older than age 30;
• counseling on sexually transmitted infections;
• counseling and screening for HIV;
• contraceptive methods and counseling to prevent unintended pregnancies;
• lactation counseling and equipment to promote breastfeeding;
• screening and counseling to detect and prevent interpersonal and domestic violence; and
• yearly well-woman preventive care visits to obtain recommended preventive services.

The report also recommends that HHS’s guidelines on preventive health services for women be updated routinely in light of new science. As part of this process, HHS should establish a commission to recommend which services health plans should cover, noted the IOM. The commission should be separate from the groups that assess evidence of health services’ effectiveness, and it should consider cost-effectiveness analyses, evidence reviews, and other information to make coverage recommendations.

Wither Medicare

With the Urban Institute, The Kaiser Family Foundation (KFF) reviewed the income, assets, and demographics of the current Medicare population in a report released earlier this year, Projecting Income and Assets: What Might the Future Hold For The Next Generation Of Medicare Beneficiaries?Key findings of the KFF and Urban Institute researchers include the following:

• Half of Medicare beneficiaries had incomes less than $21,000 in 2010; median per capita income is lower for black and Hispanic beneficiaries than for white beneficiaries and declines with age among seniors. Per capita income is highly skewed: less than 5% of beneficiaries have incomes of $83,000 or higher.

• Per capita income is projected to rise, but much of this growth is projected to occur at higher incomes (34% of whites with incomes at or above 600% of the poverty level in 2030, compared with 22% in 2010), leading to a wider income gap among the next generation of beneficiaries.

• Between 2010 and 2030, white beneficiaries will see greater gains in income than black or Hispanic beneficiaries (again, at the higher income levels) while the proportion of whites in the 200% to 599% of poverty income level (44%) will drop to equal approximately the same proportion of blacks (45%) and Hispanics (43%) at the same “middle income” level. However, the proportion of blacks and Hispanics with incomes below twice the poverty level in 2030 is projected to be 40% of those populations, compared to 22% of white beneficiaries.

• Half of all Medicare beneficiaries have less than $60,000 in home equity, half have less than $2,000 in retirement savings, and half have less than $30,000 in financial assets, but 5% have financial assets valued at more than $890,000.

• The average value of home equity was substantially higher for white than black or Hispanic beneficiaries in 2010; these differences are projected to persist for the next decades.

• White beneficiaries have significantly more in savings than black or Hispanic beneficiaries; the gap in savings is expected to widen by 2030. White Medicare beneficiaries are projected to have $471,353 in savings in 2030, more than four times the average savings projected to be held by black beneficiaries ($101,148) and more than three times the average savings projected to be held by Hispanic beneficiaries ($143,639).

“While a small share of the Medicare population lives on relatively high incomes, most are of modest means, with half of people on Medicare living on less than $21,000 in 2010,” the KFF report concluded. “The income and assets of Medicare beneficiaries overall are projected to be somewhat greater in 2030 than in 2010; yet, only a minority of the next generation of beneficiaries will have significantly higher incomes and assets than the current generation, with much of the growth projected to be concentrated among those with relatively high incomes. Racial disparities in both income and assets are projected to persist for the next decades.

“As policymakers consider options for decreasing federal Medicare spending and addressing the federal debt and deficit, this analysis raises questions about the extent to which the next generation of Medicare beneficiaries will be able to bear a larger share of costs.”

More Than One In Ten Uninsured At Least One Year

In 2010, 11.7%, or 35.7 million Americans, had been uninsured for more than a year, the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) reported recently. The study, Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2010, found that 48 million individuals (16%) were uninsured in 2010, and 60.3 million (19.8%) had been uninsured for at least part of the year prior to the survey.

The NCHS found that 61.2% of individuals were covered in 2010 by a private health insurance plan. Nearly two-thirds (64.1%) of adults ages 18 to 64 were covered by a private plan, compared with 53.8% of children younger than age 18. In 2010, 22% of persons under age 65 years were covered by public plans at the time of interview. More than one-third of children (39.8%) were covered by a public plan, compared with 15% of adults ages 18 to 64.

Uninsured status varied by demographic characteristics, as follows:
• Poverty status. The NCHS found that 42.2% of poor adults ages 18 to 64 were uninsured in 2010. Also, 10.2% of poor children did not have health insurance.
• Race/ethnicity. Hispanic individuals were more likely than all other races to be uninsured. The survey found 30.4% of Hispanics were uninsured in 2010, compared with 19% of African-Americans, and 11.6% of whites.
• Age and sex. For all individuals younger than age 65, the percentage who were uninsured in 2010 was highest among those ages 19 to 25 (33.9%), and lowest among those younger than age 18 (7.8%). In addition, the NCHS found that men were more likely than women to lack health insurance coverage: 18.2%, compared with 13.9%.
• Region. In 2010, the percentage of persons who were uninsured among the 20 largest states ranged from 4.0% in Massachusetts (which has a coverage mandate) to 26.1% in Arizona. In addition, the NCHS noted that lack of health insurance coverage was greatest in the South and West regions of the United States. Nationally, 7.8% children in 2010 lacked coverage in 2010, but rates were higher in Arizona (22.6%), Florida (14.0%), and Texas (12.6%).

Meanwhile, rising health care costs, along with the current depressed state of the economy, have prompted many health care consumers to delay care, alter household spending, and worry about their ability to pay for future health care costs, according to new research from Deloitte. One-quarter of U.S. consumers have skipped seeing a doctor when sick or injured, 19% delayed or skipped treatment recommended by a doctor, and 36% have asked their doctor to prescribe a generic drug instead of a brand name drug to save money. And nearly one-quarter of Americans (23%) are not confident of their household capacity to handle future health care costs, while two-fifths (38%) assign the U.S. health care system failing grades.

A recent study discussed in a July 8 post revealed that having health insurance made a difference in insureds’ health and access to health care services, including prevention. Maybe the Affordable Care Act (ACA) will help improve the health of the U.S. population through coverage expansion.

You can obtain access to a comprehensive analysis of the ACA, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, here.

Proposed regs provide basic frameworks for state and small business exchanges under health reform

Two new regulations proposed by the Department of Health and Human Services (HHS) set basic standards for health benefits exchanges established under the Patient Protection and Affordable Care Act. Basically, these rules do the following:

1. Set standards for establishing state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, performing the basic functions of an Exchange, and certifying health plans for participation in the Exchange; and 
2. Provide guidelines to help protect insurers against risk selection and market uncertainty, through three programs, which begin in 2014: a temporary reinsurance program and a risk corridor program, both of which give insurers payment stability as insurance market reforms begin, and an ongoing risk adjustment program that will make payments to health insurance issuers that cover higher-risk populations to more evenly spread the financial risk borne by issuers.

Here's a brief explanation of the proposed rules on standards for the Exchanges.

Framework for Exchanges. The proposed Exchange rule establishes state flexibility in a number of ways. For example, each state can structure its Exchange in its own way: (1) as a nonprofit entity established by the state, (2) as an independent public agency, or (3) as part of an existing state agency. In addition, a state can choose to operate its Exchange in partnership with other states through a regional Exchange or it can operate subsidiary Exchanges that cover areas within the state. Any combination of these options can be approved by the HHS. Exchanges that are run by independent agencies or nonprofits must have governance principles that ensure freedom from conflicts of interest and promotion of ethical and financial disclosure standards.

Exchanges will perform a variety of functions, including:

• certify health plans as Qualified Health Plans (QHPs) to be offered in the Exchange; 
• operate a website to facilitate comparisons among qualified health plans for consumers; 
• operate a toll-free hotline for consumer support, provide grant funding to entities for consumer assistance, called "Navigators," and conduct outreach and education to consumers regarding Exchanges; and 
• facilitate enrollment of consumers in Exchange-qualified health plans.

The proposed rules provide states with substantial flexibility in determining how to perform these functions.


Exchange plans must be approved by the HHS no later than January 1, 2013. The proposed rule allows for conditional approval if the state is advanced in its preparation but cannot demonstrate complete readiness by the January 1, 2013 date. The proposed rule also allows states that are not ready for 2014 to apply to operate the Exchange for 2015 or any subsequent year. The HHS will continue working with states to support their progress.
 
Qualified Health Plans. Health Benefit Exchanges must offer affordable health plans that provide high quality, coverage like that of a typical employer plan. Health plans offered through the Exchange must be certified as Qualified Health Plans (QHPs). To be certified, health plans must meet minimum standards proposed in this proposed rule but primarily set out in the law. The proposed rule gives states considerable flexibility in establishing standards for health plans offered in their Exchanges. For example, Exchanges have flexibility on the following:
 

• Number and type of health plan choices: The proposed rule allows Exchanges to work with local health insurers on structuring qualified health plan choices that are in the best interest of their enrollees. This could mean that any health plan that meets the standards can participate, that health plan issuers with successful competitive bids can participate, or anywhere in between. It also gives Exchanges flexibility on accreditation deadlines, allowing new and innovative health plans to sell through the Exchange as they gain accreditation.
• Standards for health plans: Rather than proposing a national standard, the proposed rule allows Exchanges, working with state insurance departments, to set the standards to ensure that consumers have a choice of health care providers within each qualified health plan. As with network adequacy standards, marketing standards would be set by states and Exchanges in the proposed rule. This allows health plans to align their Exchange marketing with other commercial practices in a state.

Small Business Health Options Program (SHOP). Beginning in 2014, Exchanges will operate a SHOP, a program that offers small employers and their employees new choices. Through the SHOP, employers can choose the level of coverage they will offer (bronze, silver, gold or platinum plans), define their contribution toward their employees' coverage, and then offer the employees choices of multiple insurers and plans. Employees choose among the plans that fit their needs and their budget. Employers can offer coverage from multiple insurers, just like larger companies and government employee plans, but get a single bill and write a single check.

The proposed rules provide states and their Exchanges flexibility in structuring SHOP exchanges, as to the size of small businesses that can participate in SHOP and as to the structure of choices for small businesses.

Starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50 percent of their premium payments, if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full time employees coverage, and pay at least 50 percent of the premium. Employees offered affordable and minimum value health insurance by their employer are not eligible for advance payments of tax credits to reduce premiums for coverage purchased through the individual Exchange.

Navigators. Exchanges also will build partnerships with and award grants to entities known as "Navigators," which will do such things as (1) distributing fair and impartial information about enrollment in qualified health plans, premium tax credits, and cost-sharing reductions and (2) assisting consumers in selecting qualified health plans.

States that operate an Exchange will award grants to Navigators. The proposed rule allows states to choose at least two from the list of potential Navigator organizations and decide how to fund and design the program.

HHS proposes standards for establishing Health Insurance Exchanges

The U.S. Department of Health and Human Services (HHS) has proposed a framework to assist states in building health insurance exchanges, state-based competitive marketplaces authorized by 2010's federal health insurance legislation. Individuals and small businesses will be able to purchase affordable private health insurance via these Exchanges. Starting in 2014, Exchanges will make it easy for individuals and small businesses to compare health plans, get answers to questions, find out if they are eligible for tax credits for private insurance or health programs like the Children's Health Insurance Program (CHIP), and enroll in a health plan that meets their needs.


"Exchanges offer Americans competition, choice, and clout," according to HHS Secretary Kathleen Sebelius. "Insurance companies will compete for business on a transparent, level playing field, driving down costs; and Exchanges will give individuals and small businesses the same purchasing power as big businesses and a choice of plans to fit their needs."



The recent HHS announcement is designed to help support and guide states in their efforts to implement Exchanges. HHS proposed new rules offering states guidance and options on how to structure their Exchanges in two key areas:

• Setting standards for establishing Exchanges, setting up a Small Business Health Options Program (SHOP), performing the basic functions of an Exchange, and certifying health plans for participation in the Exchange, and;
• Ensuring premium stability for plans and enrollees in the Exchange, especially in the early years as new people come in to Exchanges to shop for health insurance.

These proposed rules set minimum standards for Exchanges, give states the flexibility they need to design Exchanges that best fit their unique insurance markets, and are consistent with steps states have already taken to move forward with Exchanges.


States leading the way. According to HHS, 49 states, the District of Columbia and four territories have accepted grants to help plan and operate Exchanges. In addition, over half of all states are taking additional action beyond receiving a planning grant such as passing legislation or taking Administrative action to begin building exchanges. States will continue to implement exchanges on different schedules through 2014.
 
"States are leading the way in implementing health reform" and the HHS proposal "builds on that momentum by giving states flexibility to design the Exchange that works for them," says Center for Consumer Information and Insurance Oversight Director Steve Larsen. "This regulation allows us to meet states where they are."


Ongoing process. The proposals build on over a year's worth of work with states, small businesses, consumers and health insurance plans and offer states substantial flexibility, HHS indicates. For example, it allows states to decide whether their Exchanges should be local, regional, or operated by a non-profit organization, how to select plans to participate, and whether to partner with HHS to split up the work.

According to HHS, in drafting these proposals, the administration examined models of Exchanges, held numerous meetings with stakeholders and consulted closely with state leaders, consumer advocates, employers and insurers. To continue that conversation, HHS is accepting public comments on the proposed rules over the next 75 days to learn from states, consumers, and other stakeholders how the rules can be improved and HHS will modify these proposals based on feedback from the American people. To facilitate that public comment process, HHS will convene a series of regional listening sessions and meetings.


To reduce duplication of effort and the administrative burden on the states, HHS also announced that the federal government will partner with states to make Exchange development and operations more efficient. States can choose to develop an Exchange in partnership with the federal government or develop these systems themselves. This provides states more flexibility to focus their resources on designing the right Exchanges for their local insurance markets.

Eliminating tax benefits for employer-provided health coverage may drive workers to insurance exchanges

Although several recent studies suggest that federal health reform legislation will help to reverse a long-term reduction in employer-provided health insurance coverage, despite a McKinsey and Company report to the contrary, an added complication could be the elimination or reduction of federal tax breaks for employer-provided coverage, as part of debt reduction efforts. According to an analysis from the nonpartisan Employee Benefit Research Institute (EBRI), workers may prefer to enter health insurance exchanges rather than keeping employment-based health coverage if the tax treatment for employer-provided health benefits is eliminated or significantly cut back as part of the federal debt reduction effort.

According to the EBRI analysis, most workers would face an increase in taxes and might then question the value of keeping employer-provided health coverage if they have to start paying taxes on a benefit that is currently not taxed. Lowest-income workers in particular, would find the health exchanges more advantageous than employment-based health benefits, while higher-income workers would not, EBRI suggests.

Further, if enough workers do not prefer their employer's health benefits, EBRI predicts, the likelihood would grow that many employers would stop offering health benefits at all. "Even if only a fraction workers preferred an insurance exchange over employment-based coverage, it would send a clear message to employers that millions of workers will no longer value the benefit," said Paul Fronstin, director of EBRI's Health Research and Education Program and author of the report. However, EBRI acknowledges that “predicting how this might play out by firm size, industry, worker earnings, geographic region, among other things, is highly uncertain.” The findings are published in the July 2011 EBRI Issue Brief, "Employment-Based Health Benefits and Taxation: Implications of Efforts to Reduce the Deficit and National Debt."

Debt reduction efforts. As EBRI points out, the tax preference associated with employer-provided health coverage is the largest tax expenditure the U.S. budget, accounting for $1.1 trillion in foregone tax revenue during 2012-2016. By contrast, retirement plans account for about $700 billion in foregone tax revenue and the mortgage interest deduction accounts for about $600 billion, EBRI says, suggesting that this makes the tax treatment of health coverage “an almost inescapable target.”

President Obama's bipartisan National Commission on Fiscal Responsibility and Reform released proposed changes in December 2010 that would achieve $4 trillion in deficit reduction by 2020. As part of the proposal, the commission called for reducing the preferential tax treatment of employer-provided health benefits as they apply to workers. Under the proposal, the tax benefits would be reduced, first by capping, then freezing, phasing down, and ultimately eliminating them. The Commission did not recommend any changes to the employer deduction as a business expense.

Coverage. Under current law, workers will be able to enroll in health insurance exchanges beginning in 2014 as a result of last year’s federal Patient Protection and Affordable Care Act (PPACA).

According to EBRI, employment-based health coverage is the most common source of health coverage in the United States. In 2009, 59 percent of nonelderly individuals were covered by an employment-based health benefits plan, with 68.2 percent of workers covered, 34.6 percent of nonworking adults covered and 55.8 percent of children covered.

    For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Yes, It Matters If You Have Health Insurance

Is having health insurance worthwhile? The answer to this question could help to determine whether the individual mandate will ensure the success of the Patient Protection and Affordable Care Act. (ACA)


From Oregon, where a groundbreaking study has just been published on the first-year effects of Medicaid insurance on the previously uninsured, the answer appears to be yes.


According to a working paper issued by the National Bureau of Economic Analysis, “In this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group.”

A New York Times article notes that the report’s design is “like that used to test new drugs. People were randomly selected to have Medicaid or not, and researchers then asked if the insurance made any difference. Health economists and other researchers said the study was historic and would be cited for years to come, shaping health care debates.”

The working paper notes that having insurance resulted in “ increases in hospital, outpatient, and drug utilization, increases in compliance with recommended preventive care, and declines in exposure to substantial out-of-pocket medical expenses and medical debts. There is also evidence of improvement in self-reported mental and physical health measures, perceived access to and quality of care, and overall wellbeing.”

In addition, according to the paper, “Insurance is associated an increase in reported compliance with recommended preventive care such as mammograms and cholesterol monitoring. Insurance also results in decreased exposure to medical liabilities and out-of-pocket medical expenses, including a 6.4 percentage point (25%) decline in the probability of having an unpaid medical bill sent to a collection agency and a 20 percentage point (35%) decline in having any out-of-pocket medical expenditures.”

Surprisingly to many, this is the first major study that has been able to track the actual effects of insurance on those previously uninsured. According to an National Public Radio report, “As high-level budget talks drag on in Washington, the Medicaid program for the poor remains a prime candidate for cuts. In recent months, Republicans have criticized Medicaid for badly serving its target population. But a new study — the first of its kind in nearly four decades — finds that Medicaid is making a bigger impact than even some of its supporters may have realized.”

The authors of the report acknowledge that it is unclear how or whether the Oregon results will translate well to the insurance expansions expected in 2014 due to the ACA. Nevertheless, this study provides compelling evidence that having health insurance is, indeed, good for you.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Appellate Court Validation Of Health Reform Strikes Down “Inactivity” Argument

We all know that the Supreme Court eventually will rule on the constitutionality of the Patient Protection and Affordable Care Act (ACA), but the first appellate court ruling on the ACA does give a boost to the Obama Administration.

In affirming a district court ruling that the is constitutional, the Sixth Circuit U.S. Court of Appeals stated that the ACA’s minimum coverage provision “is a valid exercise of Congress’s authority under the Constitution’s Commerce Clause. The minimum coverage provision is in IRC Sec. 5000A, as added by the ACA.

The 2-1 decision (Thomas More Law Center, Jann Demars; John Ceci; Steven Hyder; And Salina Hyder, v. Barack Hussein Obama, et al., No. 10-2388), is the first reached at the appellate court level and also is the first of more than a dozen ACA cases in which a judge appointed by a Republican President has affirmed the ACA’s constitutionality.

Judges Boyce Martin Jr., appointed by President Jimmy Carter, and Jeffrey Sutton, appointed by President George W. Bush, voted to uphold the ACA. Dissenting was Judge James Graham, appointed by President Ronald Reagan

Two Reasons ACA Succeeds Under Commerce Clause

The Sixth Circuit found two reasons why the ACA is “facially constitutional” under the Commerce Clause: “First, the provision regulates economic activity that Congress had a rational basis to believe has substantial effects on interstate commerce. In addition, Congress had a rational basis to believe that the provision was essential to its larger economic scheme reforming the interstate markets in health care and health insurance.”

The court noted that “by requiring individuals to maintain a certain level of coverage, the minimum coverage provision regulates the financing of health care services, and specifically the practice of self-insuring for the cost of care. The activity of foregoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan. Thus, the financing of health care services, and specifically the practice of self-insuring, is economic activity.

The court also noted that “even if self-insuring for the cost of health care were not economic activity with a substantial effect on interstate commerce, Congress could still properly regulate the practice because the failure to do so would undercut its regulation of the larger interstate markets in health care delivery and health insurance. ….Congress had a rational basis for concluding that the minimum coverage requirement is essential to its broader reforms to the national markets in health care delivery and health insurance. Therefore, the minimum coverage provision is a valid exercise of the Commerce Clause power.”

Activity Vs. Inactivity

The Thomas More decision emphasizes that the oft-repeated “inactivity” argument (that the minimum coverage provision exceeds Congress’s power under the Commerce Clause because it regulates inactivity rather than activity) is invalid. Even dissenting Judge Graham dismissed this argument.

According to the court, “The text of the Commerce Clause does not acknowledge a constitutional distinction between activity and inactivity, and neither does the Supreme Court. Furthermore, far from regulating inactivity, the provision regulates active participation in the health care market. The vast majority of individuals are active in the market for health care delivery because of two unique characteristics of this market: (1) virtually everyone requires health care services at some unpredictable point; and (2) individuals receive health care services regardless of ability to pay.

“…Thus, although there is no firm, constitutional bar that prohibits Congress from placing regulations on what could be described as inactivity, even if there were it would not impact this case due to the unique aspects of health care that make all individuals active in this market.”

Also At Appellate Courts

We are still waiting for several additional ACA decisions at the appellate court level::

The Fourth Circuit U.S. Court of Appeals heard oral arguments on May 10 in two cases: Commonwealth of Virginia v. Kathleen Sebelius, in which the ACA’s individual mandate was declared unconstitutional; and Liberty University v. U.S., which upheld the ACA.

The Eleventh Circuit U. S. Court of Appeals heard oral arguments on June 8 in State of Florida v. U.S. Dept. of HHS (11-11021-HH), in which the district court declared the entire ACA unconstitutional.

The D.C. Circuit U.S. Court of Appeals is scheduled to hear oral arguments on September 23 in Margaret Peggy Lee Mead, et al., v. Eric H. Holder, Jr., et al., in which  the individual mandate in the ACA was upheld.

The Ninth Circuit U.S. Court of Appeals will hear arguments on July 13 in Baldwin v. Sebelius, a case dismissed by a district court. The plaintiff, Steve Baldwin, filed an appeal directly to Supreme Court, which sent the case back to Ninth Circuit,

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