U.S. asks Supreme Court to review Eleventh Circuit health reform case

The Department of Justice (DOJ) has filed a petition for certiorari in HHS v. Florida. You may recall that the Eleventh Circuit ruled on that case in August, finding that the individual mandate (also called the minimum coverage provision) of the Patient Protection and Affordable Care Act (ACA) is unconstitutional.

“The Department has consistently and successfully defended this law in several courts of appeals, and only the 11th Circuit Court of Appeals has ruled it unconstitutional. We believe the question is appropriate for review by the Supreme Court,” according to a statement posted on the DOJ’s website.

“Throughout history, there have been similar challenges to other landmark legislation such as the Social Security Act, the Civil Rights Act, and the Voting Rights Act, and all of those challenges failed. We believe the challenges to Affordable Care Act — like the one in the 11th Circuit — will also ultimately fail and that the Supreme Court will uphold the law,” according to the DOJ statement.

Appellate court ruling. The Eleventh Circuit upheld the district court’s ruling that the mandate exceeded Congress’ power under the Commerce Clause, but reversed the finding that the provision is not severable from the remainder of ACA, thus keeping the law’s other provisions intact. The court also found the individual mandate was enacted as a regulatory penalty, not a revenue-raising tax, and, as such, is outside Congress’ power under the Taxing and Spending Clause.

Questions presented. The question presented in the petition is "[w]hether Congress had the power under Article I of the Constitution to enact the minimum coverage provision."

The DOJ also suggests that the Court direct the parties to address the following question: "[w]hether the suit brought by respondents to challenge the minimum coverage provision of the [ACA] is barred by the Anti-Injunction Act, 26 U.S.C. 7421(a)."

Commerce power. The DOJ argues the minimum coverage provision is a valid exercise of Congress’ Commerce Power because it sets forth a rule that governs how individuals finance their participation in the health care market. This rule targets the main vehicle of such financing -- insurance. The petition indicates that the economic conduct of the uninsured and the resulting cost-shifting have direct and well-documented effects on interstate commerce.

In addition, the DOJ opposes the respondents’ argument that the minimum coverage provision regulates “inactivity.” “No court of appeals has accepted that proposition, which lacks any foundation in the Constitution’s text or this Court’s precedents,” the petition states.

Further, the DOJ argues that the Eleventh Circuit failed to defer to Congress’ policy judgments regarding its objective of reducing cost-shifting. Instead, the court inappropriately applied a “strict scrutiny” level of review to a commerce case and made its own independent judgment about whether the minimum coverage provision would accomplish that objective. “Based on an extensive legislative record, Congress reasonably concluded that the minimum coverage provision will mitigate the problem of cost-shifting in the health care market. Indeed, the CBO has estimated that, without the minimum coverage provision, there would be 16 million more people without insurance in 2019,” the petition states.

Taxing power. The DOJ also argues that Congress’ taxing power provides independent authority for enactment of the minimum coverage provision. The DOJ concedes that the practical operation of the minimum coverage provision is as a tax. The provision amends the Internal Revenue Code and will generate some revenue. In addition, the provision is part of the ACA’s larger statutory scheme to expand insurance coverage through various Code amendments, including tax penalties for large employers that adequate coverage to full-time employees. As such, the minimum coverage provision is “the mirror image of statutory provisions of the sort that have long been regarded as within Congress’s broad discretion to determine the amount of tax owed, and falls equally within Congress’s broad taxing power.”

Anti-Injunction Act. Note that the Eleventh Circuit did not address the Anti-Injunction Act (AIA) question, but two other circuits did and they reached conflicting results. The Sixth Circuit in Thomas More v. Obama found the AIA did not bar the challenge to the individual mandate because the ACA penalty is not a tax, while the Fourth Circuit in Liberty University v. Timothy Geithner, found the AIA prohibits a suit seeking to bar the collection of a tax.

The DOJ contends the AIA does not bar challenges to the minimum coverage provision and asks the Court to consider the applicability of the AIA along with the Constitutional issues. By including this question in its petition, the DOJ has seemingly provided the Court with an opportunity to sidestep the Constitutional questions. And yet, a ruling on this issue could have far-reaching consequences for non-health reform-related cases in the future.

Other petitions in Eleventh Circuit case. The 26 states involved in the case and the other challengers, including the National Federation of Independent Business (NFIB), had filed their own petitions for certiorari in the case prior to the government’s filing. The states ask the court to address, among other issues, whether the mandate exceeds Congress’ powers and, if so, to what extent the mandate can be severed from the remainder of the ACA. The other challengers’ question presented is “whether the ACA must be invalidated in its entirety because it is nonseverable from the individual mandate that exceeds Congress’ limited and enumerated powers under the Constitution.”

“The Eleventh Circuit ruling confirmed NFIB’s view that the individual mandate in the health-care law is unconstitutional. It is now imperative that the Supreme Court rule on whether the entire law can stand without the mandate,” said Karen Harned, executive director of NFIB’s Small Business Legal Center. “The sooner the Court takes up this case, the sooner small businesses and individuals will know whether they will have to bear the full weight, financially and economically, of this bad law.”

“While the survival of the new health-care law remains an open question, small businesses and individuals will continue to face uncertainty and trepidation, hesitant to hire or expand,” Harned said. “In filing our petition today, we are attempting to impress upon the Court the urgency of this issue.”

Petition from Sixth Circuit. The DOJ also has responded to the petition for certiorari (filed on July 26, 2011) in the Thomas More Law Center v. Obama case arising out of the Sixth Circuit. In that case, the Sixth Circuit ruled that the ACA and its individual mandate are constitutional. The individual mandate is "a valid exercise of legislative power by Congress under the Commerce Clause," the court held.

The Sixth Circuit noted that the Supreme Court has previously held that Congress may regulate economic activity, even if wholly intrastate, as long as it substantially affects interstate commerce, and that Congress also may regulate even non-economic intrastate activity if doing so is essential to a larger scheme that regulates economic activity.

Next steps. The DOJ has asked the Court to hold the petition in the Thomas More case pending the disposition of its petition in the Florida case.

It is now widely expected that the Court will agree to hear one of these appeals by the end of 2011 and likely make a decision in the summer of 2012.

Lawmakers raise doubts about CLASS Act’s future

The Repeal CLASS Working Group has sent a letter to Department of Health and Human Services (HHS) Secretary Kathleen Sebelius seeking clarification about HHS’ plans to implement the Community Living Assistance Services and Supports (CLASS) program and push for more information on critical decisions made by HHS prior to CLASS becoming law.

The Repeal CLASS Working Group is comprised of Republican leadership in both the House and Senate charged with overseeing implementation of the new health care law. In mid-September, the group released a report apparently detailing the insolvency of the CLASS Act.

What is CLASS? CLASS was established as part of the Patient Protection and Affordable Care Act and creates a national, voluntary program to provide insurance coverage to purchase community living services for Americans who become disabled and require long-term care. News reports have indicated CLASS’ head actuary has said HHS will close the CLASS office. HHS has thus far rejected claims that the program as a whole is being shuttered.

The lawmakers wrote, “The Repeal CLASS Working Group released a report last week revealing that officials within the Department of Health and Human Services (HHS) warned that the Community Living Assistance Services and Supports (CLASS) long-term care entitlement program would be unsustainable, but that officials at HHS may have ignored those warnings. Today we received information that the HHS Administration on Aging is effectively closing the CLASS office, and that all the office’s employees have been reassigned or asked to leave.”

These developments raise important questions about the future of the CLASS program.

Questions about implementation. In addition, the bicameral group requested answers on a number of questions regarding the process for making decisions about CLASS implementation and financing, including:

• How many people have been reassigned or asked to leave the CLASS office? Who will be working on the CLASS program going forward?
• Why did Secretary Sebelius support the inclusion of the CLASS program into the PPACA in a July 2009 letter to Senator Kennedy when HHS knew at that time that it was unsound and presented a substantial risk of a future bailout?
• Why did the Assistant Secretary for Planning and Evaluation say that “we’re entirely persuaded that reasonable premiums, solid participation rates, and financial solvency over the 75-year period can be maintained” at the same time an employee in his office was writing that CLASS “[s]eems like a recipe for disaster.”
• Were any concerns about the CLASS program’s sustainability communicated to Secretary Sebelius by HHS staff in the year before the health law passed? What were Secretary Sebelius’ actions upon hearing these concerns? If Secretary Sebelius was not informed of these concerns, what actions did Secretary Sebelius take to remedy this significant communication failure at HHS?

Deadline for answers. The lawmakers ask Sebelius to provide the requested information no later than October 6, 2011.

The letter’s authors include: Rep. Darrell Issa (R-CA), Rep. Fred Upton (R-MI), Senator John Thune (R-SD), Senator Tom Coburn (R-OK), Rep. Denny Rehberg (R-MT), Senator Jeff Sessions (R-AL), Rep. Cliff Stearns (R-FL), Rep. Charles Boustany (R-LA), Senator Lindsey Graham (R-SC), Rep. Joe Pitts (R-PA), Rep. Phil Gingrey, M.D. (R-GA), Rep. Michael C. Burgess, M.D. (R-TX), and Rep. Trey Gowdy (R-SC).

Health Reform Exchange Partnership Opportunities Expanded

The Department of Health and Human Services (HHS) has provided some additional information to states on partnership opportunities for establishing American Health Benefit Exchanges.

According to the HHS, "The Partnership model describes Exchanges where both HHS and a state work together to operate different functions of the Exchange. The goal of the Partnership is to take advantage of the state's expertise and knowledge of their insurance markets to support a seamless consumer experience. States may use Exchange grant funding to support the functions they choose to operate under the Partnership that are related to establishing the Exchange."

The HHS noted that "some states have expressed a preference for a flexible state partnership model combining state-designed and operated business functions with federally-designed and operated business functions." Examples of such shared business functions might include eligibility and enrollment, financial management, and health plan management systems and services. States have the option to operate an exclusively state-based Exchange.

Under the proposed partnership model, states may choose one of the following options:

State plan management. If electing to operate the plan management function, states will help tailor health plan choices for their state's Exchange. This option builds on the existing strengths and expertise of states. Plan management functions include the collection and analysis of plan information, plan monitoring and oversight, and data collection and analysis-all functions that states have extensive experience performing in the current marketplace. The HHS will coordinate with the state regarding plan oversight, including consumer complaints and issues with enrollment reconciliation. Where appropriate, the HHS will help to ensure that Exchanges meet all of the required standards so consumers have access to a range of high quality plan options.

State consumer assistance. If electing the consumer assistance functions, a state would oversee in-person consumer assistance, manage the Navigator program (which will help provide direct assistance helping people sign up for insurance), and conduct outreach and education-all functions that build on existing state relationships. Other consumer assistance functions which can be more centralized-including call center operations, managing the consumer website, and written correspondence with consumers to support eligibility and enrollment-would be operated by the HHS.

Both plan management and consumer assistance. If electing this option, states would perform both of these functions.

Close To A Million Young Adults Have Insurance Through Health Reform

As noted earlier, implementation of health reform provisions in 2014 is projected to dramatically reduce the number of uninsured.

With little fanfare, mostly general support, and virtually no opposition, one provision of the Patient Protection and Affordable Care Act already has helped to cover between 500,000 and 900,000 new individuals.

According to recent figures from the Census Bureau, even though young adults are the age group least likely to have health insurance, 18-24 year olds were the only age group to experience a significant increase in the percentage with health insurance, from 70.7% in 2009 to 72.8% in 2010. This two percentage point increase in the share of adults 18-24 with coverage represents 500,000 more young adults with health insurance.

This increase in the share of 18-24 year olds is most likely due to the provision in the Patient Protection and Affordable Care Act (ACA) that allows children to remain on their parents' plans until age 26 According to an issue brief from the Department of Health and Human Services' Office of the Assistant Secretary for Planning and Evaluation, "Given that the fraction with health coverage was stable or decreasing in other groups, the two percentage point increase in share with health coverage among 18-24 year olds almost certainly reflects the effects of the extension of dependent coverage to age 26."

Data from the National Center for Health Statistics of the Centers for Disease Control and Prevention (CDC) agrees. Among adults aged 19–25, the percentage without health insurance at the time of the most recent National Health Interview Survey (NHIS) fell from 33.9% (10 million) in 2010 to 30.4% (9.1 million) according to the

This percentage is lower than in 1997, when 31.4% of adults aged 19–25 were uninsured.

This is especially good news for a population that is nearly three times as likely to be underemployed in the fourth quarter of 2009 as the oldest group of workers.

Not yet a subscriber to Wolters Kluwer Law & Business? 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.

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Access To Employer-Sponsored Health Insurance Continues To Decline

Health Reform Extends Employment-Based Health Insurance For Dependents To Adult Children

Could Health Reform Really Eliminate Most Of The Uninsured And Underinsured?

Two recent reports suggest that the Patient Protection and Affordable Care Act (ACA) could reduce the majority of uninsured and underinsured in the country. Does that make the law worthwhile? For employees? For employers?

A Commonwealth Fund study found that provisions in the ACA to increase health insurance affordability could reduce the number of underinsured by 70%.

The number of underinsured adults—those with health insurance, but high medical expenses relative to income—rose by 80% between 2003 and 2010, from 16 million to 29 million, according to the Commonwealth Fund. The study defined underinsured adults as those who reported at least one of the following conditions:

• family out-of-pocket medical care expenses (not including premiums) that are 10% or more of income;

• among low-income adults (those with incomes below 200% of the federal poverty level (FPL)), medical expenses that are 5% or more of income; or

• per-person deductibles that are 5% or more of income.

Nearly half (44%) of U.S. adults, or 81 million people, were either underinsured or uninsured in 2010, up from 75 million in 2007 and 61 million in 2003. Low-income families were most at risk of being underinsured, according to the Commonwealth Fund. Seventy-seven percent of those with incomes below 133% FPL, and 58% of those with incomes between 133% and 250% FPL were either underinsured or uninsured. If the ACA succeeds in reaching these individuals (those with incomes lower than 250% FPL), the number of underinsured could be reduced by 70% once the law is fully implemented.

According to the report, "The ACA can diminish these risks and alleviate concerns for families; however, the extent to which it will do so depends on benefit design, the choice of plans offered through the health insurance exchanges, and growth in health care costs relative to family income. If plan designs allow for high deductibles that apply to primary care and medications or high cost-sharing for essential care, more families will be exposed to financial risk. As such, designs will need to take a value-based approach that ensures access and financial protection for essential care."

The study, Affordable Care Act Reforms Could Reduce the Number of Underinsured U.S. Adults by 70 Percent, published in the online journal Health Affairs, contained responses from 4,005 adults age 19 and older in the continental United States.

Uninsured Could Be Down To 5%

In response to the ACA, three-quarters of Americans without health insurance are likely to obtain coverage starting in 2014, according to a recent survey by the Health & Life Sciences practice of Oliver Wyman, part of Marsh & McLennan Companies. Consequently, it appears that the ACA would reduce the proportion of uninsured to 5% of the population.

Under the ACA, approximately 33 million Americans will be required to purchase health insurance for themselves, and another 18 million uninsured will be eligible to receive coverage under Medicaid. Many will receive federal subsidies, and those who choose not to obtain coverage will pay a penalty.

The study, completed through detailed surveys of approximately 800 currently uninsured individuals, asked about their health status, their income, and their attitudes toward the health system. To determine how the uninsured would make buying decisions, participants were asked to choose from among a number of actuarial-appropriately priced potential options that may be available through the health insurance exchanges beginning in 2014. Participants also could elect to could buy insurance and instead pay the applicable penalty.

Overall, 76% of respondents chose to purchase insurance. "Our research shows that uninsured Americans overwhelmingly see value in coverage," said Terry Stone, a partner in Oliver Wyman's Health & Life Sciences practice. "But few really understand their options or even what a health care exchange is. They need to be educated."

Beginning in 2014, taxpayers with household income between 100% and 400% of the federal poverty line can qualify for a sliding-scale refundable health insurance premium assistance credit. With lower federal premium assistance credits, middle-income uninsured are less likely than low-income or high-income uninsured to buy health insurance: 34% of respondents with incomes between 300% and 400% of the FPL, and 28% of those with incomes between 250% and 300% of the FPL would not buy health insurance, compared with 18% of low income (those with incomes at 100% to 133% of FPL) and 19% of those with greater disposable income at 600% or higher of FPL.

"In today's political and economic climate, we can expect pressure to reduce subsidies," said Mr. Stone. "If that happens we're likely to see more people go without insurance—and unable to purchase coverage on their own. And the group most affected will not be the poorest, but middle-income Americans."

Not yet a subscriber to Wolters Kluwer Law & Business? 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.

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Access To Employer-Sponsored Health Insurance Continues To Decline

Health Reform Extends Employment-Based Health Insurance For Dependents To Adult Children

Determining What’s Affordable Under Health Reform

The government recently responded to employers who have questioned how to determine whether their coverage is “affordable” under the Patient Protection and Affordable Care Act (ACA).

A large employer generally is subject to an assessable payment if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction and either

(1)   the employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage; or

(2)   the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage that either is unaffordable or does not provide minimum value.

Whether an employer's health coverage is affordable to its fulltime employees is essential in determining whether an employee can receive a premium tax credit and, in turn, whether the employer is subject to an assessable payment.

Right now, coverage under an employer-sponsored plan is affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.5% of the employee's household income for the taxable year.

The Internal Revenue Service has proposed a safe harbor that would set the affordability standard at 9.5% of wages, instead of 9.5% of household income.

Proposed Safe Harbor

In Notice 2011-73, the IRS notes that the safe harbor it plans to develop is designed to make it easier for employers to determine whether the health coverage they offer is affordable coverage. Thus, the safe harbor would use 9.5% of wages that the employer paid to an employee, instead of the employee's household income, as the standard for affordability.

This modification would be made in response to employers' comments that they generally do not know employees' household income and would be unable to determine coverage affordability using that information. This contemplated safe harbor would only apply for purposes of the employer shared responsibility provision, and would not affect employees' eligibility for health insurance premium tax credits, the IRS emphasized. An employee's eligibility for the premium tax credit would continue to be based on the affordability of employer-sponsored coverage relative to an employee's household income.

Application of the safe harbor would be determined after the end of the calendar year and on an employee-by-employee basis, taking into account the W-2 wages and the employee contribution. So, for example, the employer would determine whether it met the proposed affordability safe harbor for 2014 for an employee by looking at that employee's W-2 wages for 2014 and comparing 9.5% of that amount to the employee's 2014 employee contribution for the employer-provided health insurance premiums.

An employer also could use the safe harbor prospectively, at the beginning of the year, by structuring its plan and operations to set the employee contribution at a level so that the employee contribution for each employee would not exceed 9.5% of that employee's W-2 wages for that year, the IRS said. "It is contemplated that employers, on a consistent basis, would be permitted to make reasonable and necessary adjustments for pay periods so that the employee contribution does not exceed 9.5% of the employee's W-2 wages."

In particular, IRS seeks comments on the following issues:

• Whether or how wages and employee contribution amounts would need to be determined for employees who are employed by an employer for less than a full year, employees who move between full-time and part-time status, situations in which the plan year is not a calendar year, and other similar special circumstances.

• Whether there are other possible safe harbor methods for determining the affordability of coverage under an employer-sponsored plan for purposes of calculating an employer's potential assessable payment under IRC Sec. 4980H(b).

• How to coordinate any affordability safe harbor with the full-time employee look-back/stability safe harbor described earlier in Notice 2011-36.

Comments may be submitted via email to Notice.Comments@irscounsel.treas.gov. The deadline for comments is Dec.13, 2011. Comments should include a reference to Notice 2011-73.

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Internal Revenue Service Notice 2011-73, issued on September 13, 2011.

The shared responsibility provisions will apply to certain employers starting in 2014. The proposed safe harbor would set the affordability standard at 9.5% of wages, instead of 9.5% of household income.

In Notice 2011-36, the IRS sought comments on potential approaches that could be incorporated in future proposed regulations addressing ACA "shared responsibility" provisions, particularly the definition of a "full-time employee."

Enroll America wants you to know about ACA's health coverage

A non-profit 501(c)(3) organization has been created to help those of us without health insurance understand how to apply for coverage, in compliance with the individual mandate of the Patient Protection and Affordable Care Act (ACA). The launch of Enroll America was announced on Wednesday, September 14, via teleconference. As long as the new organization doesn't drown in bureaucracy or get bogged down in politics, which wouldn't be surprising, since it is composed of organizations that have both opposed and supported the ACA, it should prove to be extremely helpful.

According to a memo on the Grantmakers in Health website (gih.org), Enroll America is a collaborative effort on the part of consumer organizations, (such as those representing children, early retirees, and racial and ethnic minorities), and health care industry stakeholders, (including representatives of hospitals, doctors, nurses, pharmaceutical companies, and community health centers), to ensure that Americans with low-to moderate incomes receive all the benefits they're entitled to from the health care reform legislation. An earlier memo indicated that Enroll America would be launched in September 2010, so the announced launch is a year later than originally anticipated.

Organizations on board so far are major players such as Aetna, Express Scripts, the American Hospital Association (AHA), the American Association of Retired Persons (AARP) and Families USA, whose former deputy director of health policy, Rachel Klein, is to be Enroll America's executive director. A public information campaign is slated for 2013 and 2014.

Those consumer and health industry organizations have, in turn, established a Best Practices Institute, which will give various state-based and community-based organizations technical and collaborative assistance.

Enroll America has clarified that optimal features making up each state's enrollment system should include the following:

• Medicaid and subsidy applications should be short and simple, and available in multiple languages;
• Applications should be available for submission online;
• Eligibility should be verifiable using existing databases, that would have documentation already submitted for either other means-tested programs, such as food stamps, or for Social Security or IRS matters, so that applicants would most likely not have to bring in pay stubs or other paperwork;
• Because some people might have difficulty understanding if they are eligible for either Medicaid or coverage through the exchanges, they should be able to fill out just one application in order to enroll; and
• Enrollment periods should be reasonably long (12-month periods) so that it is not necessary to file frequent renewal applications.

The new organization is planning to conduct webinars and teleconferences with regard to relevant federal regulations, and to inform state-based organizations about other states' successful enrollment models. Enroll America had originally stated that it was hoping to obtain financial resources via interest group contributions and philanthropic grants, and it has announced that it has already raised $6 million.

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.

Yet again, a court declares individual mandate unconstitutional

In the latest of a long string of court decisions addressing the constitutionality of the Patient Protection and Affordable Care Act (ACA), the U.S. District Court for the Middle District of Pennsylvania has decided that the ACA's minimum essential coverage provision, also known as the individual mandate, exceeds Congress' authority under the Commerce Clause (Goudy-Bachman v. United States Department of Health and Human Services, No. 1:10-CV-763, September 13, 2011). The court added that the ACA did not have to be thrown out in its entirety, and that the individual mandate provision could be severed from the ACA as long as the guaranteed issue reform and the preexisting condition reform were severed along with it, since the individual mandate was a funding source for those provisions.

The guaranteed issue provision states that health insurers may not deny coverage on the basis of various health status factors, such as medical condition or history, disability, or genetic makeup.This guarantees that everyone who applies for coverage will be accepted. The preexisting condition reform provides that insurers may not limit or deny coverage on the basis of a pre-existing medical condition. The rest of the ACA, the court advised, should be left intact.

The plaintiffs were a married couple, self-employed, with two children, and no health insurance. They had apparently been paying their medical bills out-of-pocket, and claimed that they had to drop their health insurance because their monthly premiums were unaffordable, and totaled more than their mortgage. The court pointed out that they had met the requisite standing requirements, showing an injury in fact when they asserted that they had to put off the purchase of a new car in order to save money for the ACA's required purchase of health insurance in 2014.

Judge Christopher Conner conceded in his opinion that the United States is certainly facing a health care crisis, and added that, although Congress intended that the individual mandate be enacted under its Commerce Clause power, "nothing prohibits Congress from redoubling its efforts and invoking another enumerated power, such as the Tax and Spending Clause...to address the uninsured free rider issue." Judge Conner declined to engage in the current somewhat hysterical warnings from certain sectors of society and from some previous court decisions, which have claimed that allowing Congress to require the purchase of health insurance would effectively turn the U.S. into a socialist state, and grant Congress infinite power to mandate the purchase of an unlimited numbers of goods and services, and simply stated that the individual mandate cannot withstand Constitutional scrutiny.


The court stated that, although the individual mandate represented an unprecedented use of Congress's Commerce Clause power, that was not the reason it was finding the individual mandate to be unconstitutional, and that it was, in fact, according respect to the Congress's rationale in passing it. The court also stated that it was rejecting the distinction of activity and inactivity in the health care market for purposes of Commerce Clause analysis, characterizing those particular distinctions and "imprecise and unhelpful." Various plaintiffs have tried to use that characterization to allege that the government is not regulating activity, but, instead, is impermissably regulating mere inactivity, or a lack of participation in the health care market.

The court then held, however, that it was problematic that the individual mandate in many instances regulates those who have not yet, and may never, enter the health care market. The court found that, until an individual both obtains health care services and fails to pay for them, that person's status has no effect whatsoever on interstate commerce. Thus, it said, the individual mandate impermissably regulates now for anticipated future conduct. Furthermore, the court rejected the government's argument that the market timing of the individual mandate should be allowed because of the uniqueness of the health care market, pointing to the Goudy-Bachman's argument that, in a sense, every market is unique in some way.
 
The court adopted the Eleventh Circuit's rationale regarding the government's Necessary and Proper approach to Commerce Clause analysis in Florida ex rel. Attorney General v. United States Department of Health and Human Services, F.3d, 2011 WL 3519178 (CA-11) 2011. In that case, the HHS had argued that the individual mandate was necessary to effect a larger regulatory scheme. The court rejected that argument, and held that the purchase of insurance required by the individual mandate did not burden or obstruct Congress's ability to enforce regulation of the health insurance industry, and that, just because the individual mandate was placed within a broader regulatory scheme did not mean it was essential to that scheme.

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.

Job creation, better health care - what will the ACA provide next?

The Department of Health and Human Services (HHS) has announced that approximately $700 million in funding, provided by the Patient Protection and Affordable Care Act (ACA), has been made available to help build and update our community health centers. These centers provide needed care in many underserved and low-income American communities, delivering care to nearly 20 million patients regardless of their ability to pay, at more than 8,100 service delivery sites around the country. In 2010, they employed more than 131,000 staff. As HHS Secretary Kathleen Sebelius has pointed out, "For many Americans, community health centers are the major source of care that ranges from prevention to treatment."


And, according to the HHS, the newly-available funding will help create thousands of jobs in the health care industry, which is probably a good thing, since the health care industry is one of the few areas in which job openings are almost certainly guaranteed to increase dramatically in the coming years. This is partly because the ACA is  expected to create more patients. If the individual mandate holds up under Supreme Court scrutiny, many more Americans will be covered by health insurance than is now the case, and it is hoped that the ACA will encourage more people to seek out preventive, or wellness care. Hospitals are outsourcing many jobs, including physician services, supposedly because of the shortage of American health care workers.

Nothing was mentioned in the recent funding opportunity announcement from the HHS with regard to how the centers will be expected to fill the jobs that the ACA is expected to create, if the decline in the number of available health care workers becomes a reality. More funding for education for students who wish to go into medicine would seem to be in order, through such organizations as the National Service Health Corps (NSHC), which  serves areas of the U.S. that are short of health professionals through scholarship and loan repayment programs. The ACA authorized the NHSC to expand the benefits of those scholarship and loan repayment programs, but that provision seems to be in constant jeopardy from Congress. According to the Association of American Mecial Colleges' website, back in February, the House attempted to eliminate the NHSC appropriation and dissolve the NHSC Fund established under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152).with the Full-Year Continuing Appropriations Act (H.R. 1).


Community health centers will have two funding opportunities available to them;  approximately $600 million for health centers to expand their facilities via long-term projects, hire more employees and serve more patients, and $100 million for shorter-term projects involving immediate facility needs. Also, the ACA will provide $11 billion in funding for community health centers over the next five years.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Appeals Court Dismisses Virginia's ACA Challenge

In two separate cases decided on September 8, the Fourth Circuit U.S. Court of Appeals dismissed challenges to the Patient Protection and Affordable Care Act (ACA). In both cases, rather than ruling on the merits of the ACA itself, the court ruled that plaintiffs did not have standing to sue.

In Commonwealth of Virginia v. Kathleen Sebelius (No. 11-1057) in which the ACA's individual mandate was declared unconstitutional by a district court, a three-judge panel in the Fourth Circuit ruled unanimously that Virginia lacked standing to sue. Thus, the court vacated the judgment of the district court and sent the case back with instructions to dismiss the case.

Virginia contended that Congress lacked constitutional authority to enact the individual mandate in the ACA. However, noted the court, the individual mandate imposes no obligations on the state of Virginia. Nevertheless, Virginia maintained that it had standing to bring this action because the individual mandate allegedly conflicts with a newly-enacted state statute, the Virginia Health Care Freedom Act (VHCFA) which states that “[n]o resident of this Commonwealth . . . shall be required to obtain or maintain a policy of individual insurance coverage.”

The Fourth Circuit appeals court concluded:

“Contrary to Virginia’s arguments, the mere existence of a state law like the VHCFA does not license a state to mount a judicial challenge to any federal statute with which the state law assertedly conflicts. Rather, only when a federal law interferes with a state’s exercise of its sovereign 'power to create and enforce a legal code' does it inflict on the state the requisite injury-in-fact.”

The Third Circuit Court of Appeals in another case (New Jersey Physicians, Inc., v. President of U.S. (No. 10-460; Aug. 3, 2011)), also found that those challenging the validity of the ACA did not have standing to sue because they could not demonstrate any injury caused by the law.

Liberty University
In a 2-1 decision, the Fourth Circuit also vacated a district court decision that had declared the ACA constitutional.

In Liberty University v. Timothy Geithner (No. 10-2347), the Fourth Circuit based its opinion on the penalty imposed by the ACA if individuals do not purchase insurance. Arguing that the penalty in essence is a form of a tax, the court concludes that a suit cannot be brought against this “tax” because the federal Anti-Injunction Act (AIA) “provides that ‘no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.’” The court thus vacated the lower court decision because the AIA bars a suit seeking to bar the collection of a tax, despite the fact that neither Liberty University nor the federal government had claimed that the AIA affected the case.

The September 8 decisions are the fourth and fifth appeals court rulings on the ACA. One appeals court has ruled the ACA constitutional, one (the Eleventh Circuit in State of Florida v. U.S. Department of Health and Human Services, et. al., where 26 other states joined Florida) ruled the individual mandate, but not the entire ACA, unconstitutional, while the Sixth Circuit in (Thomas More Law Center, Jann Demars; John Ceci; Steven Hyder; And Salina Hyder, v. Barack Hussein Obama, et al., No. 10-2388) ruled that the individual mandate is “a valid exercise of Congress’s authority under the Constitution's Commerce Clause.” The Sixth and Eleventh Circuit appeals court cases are now in the Supremes’ court.

The September 8 Fourth Circuit opinions are available here.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Next Steps: Bundled Payments

Doctors, hospitals, and other health care providers now can volunteer to participate in a new Medicare program known as the Bundled Payments for Care Improvement initiative (Bundled Payments initiative), the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) recently announced.

This new initiative, established by the Patient Protection and Affordable Care Act (ACA), is intended to help improve care for patients while they are in the hospital and after they are discharged, and, ultimately, save money. Many experts believe that medical costs, and unnecessary and duplicative tests and procedures may be reduced by switching from the current fee-for-service payment system to a bundled payment for all medical services and supplies provided for treatment of a specific medical incident. This new Medicare payment initiative is expected to set an example for private sector payers.

The Bundled Payments initiative will make one bundled payment for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for each medical service separately, as is currently done through fee-for-service. Bundled payments will give doctors and hospitals new incentives to coordinate care, improve the quality of care, and save money for Medicare, the HHS said. The program is expected to start in 2012.

Medicare and nearly all group payers currently pay separately for the services of hospitals, physicians, and other clinicians who provide care for beneficiaries. The new CMS initiative will bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay, known as an episode of care. It will promote better coordination of care, which can reduce unnecessary duplication of services, reduce preventable medical errors, help patients heal without harm, and, ultimately, lower costs for payers and patients.

The Bundled Payments initiative is being launched by the new Center for Medicare and Medicaid Innovation (Innovation Center), which was created by the ACA to carry out the critical task of finding new and better ways to provide and pay for health care to a growing population of Medicare and Medicaid beneficiaries, the CMS explained.

The Bundled Payments initiative is based on research and previous demonstration projects that suggest this approach has tremendous potential. For example, a Medicare heart bypass surgery bundled payment demonstration saved the program $42.3 million, roughly 10% of expected costs, and saved patients $7.9 million in coinsurance while improving care and lowering hospital mortality.

Under one of the bundled payment models, CMS would make a single, prospectively determined bundled payment to the hospital that would include all services provided during the inpatient stay by the hospital, physicians and other practitioners. Physicians and other practitioners would submit "no-pay" claims to Medicare and would be paid by the hospital out of the bundled payment.

More information about the initiative is available here.

Research on bundled payment results reviewed by the American Hospital Association in spring 2010 found the following:

Providers’ readiness to participate in bundled payment programs varies. Of the 734 hospitals that expressed interest in Medicare’s Heart Bypass Center Demonstration, 209 submitted pre-applications. Within a year of the introduction of Blue Cross Blue Shield of Massachusetts’ Alternative QUALITY Contract (BCBSMA AQC), about 20% of eligible providers had signed up for the payment program.

Bundled payment can spur quality improvement. This is especially true when bundled payment is paired with defined quality metrics. ProvenCare was coupled with 40 best practice steps based on the American Heart Association and the American College of Cardiology guidelines, and BCBSMA AQC has a performance incentive linked to a variety of nationally-recognized measures. ProvenCare reduced average length of stay (LOS) for heart bypass by 0.5 days and 30-day readmission rates by 44% over 18 months.

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.

Half of uninsureds unaware of health reform provisions designed to help them

Think that health reform won’t affect you? If so, you’re not alone, according to a recent survey from the Kaiser Family Foundation (KFF). In the August 2011 Kaiser Health Tracking Poll, nearly half of the uninsured do not expect to be affected at all by the health reform legislation, in either a positive or a negative way. This is true despite estimates that about 32 million people will gain coverage under the law.

Approximately half of the 50.7 million uninsured people in the U.S. are aware of the provisions in the Patient Protection and Affordable Care Act (ACA) that would make health care coverage easier to get and more affordable, according to recent research from the Kaiser Family Foundation.

The August Kaiser Health Tracking Poll found that only 52 percent of the uninsured are aware that the ACA will provide subsidies to help those with low and moderate incomes without health insurance purchase it, and 47 percent are aware that Medicaid will be expanded to cover more low-income adults. In addition, 51 percent of the uninsured said they were aware of the individual mandate in the ACA. Kaiser noted that, perhaps as a result of this lack of awareness, 47 percent of the uninsured do not expect to be affected in either a positive or a negative way by the ACA, while 31 percent believe that the ACA will help them when it comes to getting health care, and 14 percent expect that they could suffer under the law.

Other findings. When it comes to the ACA as a whole, the August poll found no major shift in national public opinion, Kaiser noted. Currently, 39 percent of Americans have a favorable view of the ACA, 44 percent hold an unfavorable view, and 17 percent do not know enough to say. However, Kaiser did find that 66 percent of Americans are positive about the new rule that requires insurers to cover the full cost of birth control and other preventive health services for women. Only 24 percent of surveyed respondents oppose the new rule.

Further, according to the Kaiser survey, only 27 percent of individuals with insurance provided through their employer said they would accept a more restricted list of doctors and hospitals in their networks, according to the poll. Less than a third of those polled were willing to pay more for brand name drugs or pay higher deductibles in return for lower premiums.