Health reform’s financial impact of health reform on employers less than expected, survey finds

Despite employer fears, the financial impact of the Patient Protection and Affordable Care Act (ACA) has not been as great as expected for most businesses, according to a survey from the Midwest Business Group on Health (MBGH). In contrast to prior surveys, many of this year’s respondents found complying with the ACA provisions cost them less than anticipated. Further, fewer employers indicated that they plan to drop coverage due to the law’s insurance mandate than was the case in the survey conducted two years ago, the MBGH found.

“While employers uniformly expressed concern with the administrative costs and reporting burdens in the law, there was surprising support for many of the coverage and system reform provisions,” said Larry Boress, MBGH president and CEO. “It’s clear that what some call ‘Obamacare’ is actually a compilation of insurance, health system and coverage reforms that are perceived by many employers as having some good, as well as having some costly, impacts. In addition, as employers have evaluated their options, the vast majority have determined there is value in continuing to offer health coverage in order to retain and recruit talent, as well as to ensure a productive workforce. Small employers fear the potential financial impact of future ACA changes, while larger organizations see the potential of improved cost and quality improvements as enabled through many of the requirements of the ACA.”

Employers’ views on ACA lawsuits. Not surprisingly, the survey also showed divergent views among employers on whether the Supreme Court will or should strike down the ACA’s individual mandate or the entire law. Employers, particularly larger ones, expect the Supreme Court to uphold the ACA but strike down the individual mandate. Of all employers, 42 percent hope the ACA is struck down in its entirety.

Cost impact of ACA. In contrast to what employers indicated in the 2010 survey, many of this year’s respondents found complying with the ACA provisions cost them less than anticipated. Although large employers found the cost impact of the ACA last year, including extending coverage to adult children up to age 26, was less than 2 percent, most small- and mid-sized employers responded that their increases were up to 5 percent. Many small employers anticipate increases in their health benefit costs over 10% in the future due to the ACA.

Portions of law employers do and don’t like. According to the MBGH, many surveyed employers indicated that they support ACA provisions that enable changes in provider payment, medical care coordination, and providing medical cost and quality information for consumers.

According to the MBGH survey, employers favor repeal of the following PPACA provisions:

• the excise tax on high cost plans;
• capping flexible spending account (FSA) contributions;
• prohibiting using FSA amounts for over the counter drugs with prescriptions; and
• reporting cash value of benefits on W-2 forms.

The MBGH survey finds that employers favor retaining the following ACA provisions:

• removal of co-pays for preventive care;
• mandating coverage of preventive services;
• creation of Health Insurance Exchanges;
• elimination of annual and lifetime limits on essential benefits; and
• extending coverage to adult children.

Finally, the survey found that employers are split on the value of some provisions. Provisions with mixed results include:
 

• requiring employers who drop coverage to offer vouchers to help people buy insurance;
• imposing penalties on employers who do not provide health benefits;
• mandating individuals obtain health insurance; and
• defining minimum essential benefits.

Views on maintaining insurance for employees. According to the MBGH survey, only 6 percent of all employers said they were likely to pay the penalty fee and drop health benefits coverage for employees in order to save money. This is down by more than half from the 2010 survey results. Also, less than 30 percent of employers that are likely to drop coverage will raise salaries to enable individuals to buy health coverage on their own.

 

Justices grapple with what parts of PPACA should be retained, if the insurance mandate is found unconstitutional

On March 28, in the third and final day of oral arguments on the Patient Protection and Affordable Care Act (PPACA) health reform law, the U.S. Supreme Court heard varying views on the issue of what parts of the law to retain, if they decide to rule the health insurance mandate is unconstitutional.

In some ways, this could be the most critical debate of the whole three days as the justices were left with three options, should they choose to invalidate the insurance mandate. Paul Clement, arguing on behalf of the 26 states challenging the law, urged the Court to invalidate the entire law. Deputy Solicitor General Edwin Kneedler, speaking on behalf of the government, urged the Court to remove only two other provisions—guaranteed issue and community rating—and keep the rest of the law, including the Health Insurance Exchanges, intact. H. Bartow Farr, assigned by the Court to advocate on behalf of the view that, if the mandate is unconstitutional, the rest of the law, including the guaranteed issue and community rating provisions, should remain intact.

The view of the challengers. Clement argued on behalf of the 26 states challenging the law that, if the individual mandate is unconstitutional, then the rest of the Act cannot stand. Without the individual mandate, the community rating and guaranteed issue provisions would cause health insurance premiums to skyrocket. These provisions are essential, he suggested, to the Health Insurance Exchanges and other parts of the law.

In response, Justice Elena Kagan pointed out that in Utah, for example, the exchanges operate perfectly well without an insurance mandate. She suggested that Congress would have preferred half a loaf to no loaf at all, in terms of the Exchanges. Justice Ruth Bader Ginsburg suggested that the conservative approach, if the mandate is tossed, would be to do a “salvage job” and keep parts of the law, rather than a “wrecking operation” that would throw out the entire law.

Justice Anthony Kennedy, often thought of as the swing vote, wondered what standard should be applied to decide which parts could stand. “Is it whether as a rational matter separate parts could still function, or does it focus on the intent of the Congress?” he asked. However, he noted it would be intrusive to go into legislative history but wondered whether the Court should use an objective, rational test.

Other justices, including Justice Stephen Breyer, wondered whether the Court would be required to go through all 2,700 pages of law text and choose what should stay and what should go. Later, in fact, Justice Antonin Scalia jokingly suggested that it would be a violation of the 8^th Amendment’s cruel and unusual punishment provision for the Court to have to go provision by provision through the 2,700 pages of law text.

According to attorney Clement, the individual mandate is tied, as the government suggests, to guaranteed-issue and community rating, but the individual mandate, guaranteed-issue, and community rating, together, are the heart of the PPACA. Further, they are what make the Exchanges work, which, in turn, are critical to the tax credits. The Exchanges are also key to the employer mandate because that mandate is imposed on an employer if one of the employees gets insurance on the Exchanges.

Government’s position. According to Deputy Solicitor General Kneedler, only a few provisions should be thought of as inseverable from the minimum coverage (insurance mandate) provision of the PPACA. However, in response, Justice Scalia, pointing out that, one way or another, Congress is going to have to reconsider this, suggested that it would be better to have them reconsider it in total. Justice Kennedy questioned whether, by keeping some provision but retaining others, the Court would be imposing a risk on insurance companies that Congress never intended, creating a new regime that Congress did not provide for or even consider.

Further, Kneedler suggested that the minimum coverage (mandate) provision along with the guaranteed-issue and community rating is the one package that Congress deemed essential. However, he argued that the PPACA is a huge law with many provisions that are completely unrelated to market reforms and operate in different ways, believing that it would be “extraordinary in this extraordinary Act to strike all of that down because there are many provisions and it would be too hard to do it.”

According to Kneedler, “the notion that Congress would have intended the whole Act to fall if there couldn't be a minimum coverage provision is refuted by the fact that there are many, many provisions of this Act already in effect without a minimum coverage provision.” He cited, as an example, the large number of young adults under age 26 who are already receiving insurance under the law. However, Justice Scalia noted that members of Congress would not have voted for the law without some of those other provisions.

Kneedler also suggested that it is the Court’s function to look at the text, structure, and legislative history of the law that Congress enacted, and not the financial balance sheet, which doesn't appear anywhere in the law.

A third alternative: Keep the rest of the law intact. As mentioned, attorney Farr was appointed by the Court to present the position that the law should remain intact, even if the mandate is struck down. Farr argued that, even if the Court rejects the mandate, contrary to the government’s view, the community rating and the guaranteed issue provisions should be kept intact. The minimum coverage mandate is a tool to make the nondiscrimination provisions, guaranteed issue and community rating work, Farr suggested. He further noted, for instance, that Congress included at least a half dozen other solutions to help with adverse selection, such as an annual enrollment period requirement and the subsidies to help pay for coverage.

Without guaranteed-issue and community rating, we’d be going back to the old, pre-PPACA system. Is that what Congress would’ve wanted, Farr wondered. When asked what remedy insurance companies would have if the Court were to throw out the mandate and nothing else, Farr said the insurers would not have a remedy in court but, instead, could go to Congress and seek adjustments. 

According to Justice Scalia: “if you take the heart out of the statute, the statute's gone.” The Court should not interject itself into the process of saying whether each provision is good or bad, he opined. According to Farr, taking out the mandate isn’t taking out the heart of the statute but taking out guaranteed issue and community rating, is getting closer to taking out the heart of the law.

Now what? Will the justices (or their law clerks) have to go line by line through 2,700 pages of law text to decide what stays and what goes? Will the law get tossed out, in its entirety, requiring Congress to start over? What's next?

Now, we wait and see, until June or so, to find out what the Court will do with this “extraordinary” law. Despite what many may say, what the Court ultimately rules is anyone’s guess.

Justices divided on insurance mandate during oral arguments

On March 27, the U.S. Supreme Court returned for a second day of oral arguments on the Patient Protection and Affordable Care Act (PPACA), this time focusing on the law’s controversial health insurance mandate. After reading the 131 pages of transcripts of today’s two hour oral arguments, all I can safely say is that the Supreme Court justices appear quite divided on the subject of the mandate. If the justices do reach a decision on the merits of the case, it could well be a 5 to 4 decision.

(Caution: Comments made during oral arguments are not always good indicators of how a justice ultimately votes. Commentators may be reading too much into the comments made at oral argument. Or not.)

During the first half of the oral arguments, when U.S. Solicitor General Donald Verrilli presented the government’s case in favor of the mandate, he was peppered with questions from the so-called conservative bloc of the Court. Just minutes into the oral argument, Justice Anthony Kennedy, who is often seen as the swing vote, framed the central challenge to the law as “Can you create commerce in order to regulate it?” Chief Justice John Roberts then wondered whether the government could force Americans to buy cell phones and, similarly, Justice Samuel Alito questioned whether the government could force individuals to buy burial insurance.

However, later on during the oral arguments, the liberal justices took their turns at peppering Paul Clement, who represented the 26 states who are challenging the PPACA, and Michael Carvin, who represented private challengers, with questions and comments. Justice Ruth Bader Ginsburg, for instance, after suggesting a correlation between 1930s Social Security and the health reform legislation, suggested that it would be very strange to think that the government can take over subsidizing those who need health care but, if the government wants to “preserve private insurers, it can't do that.”

Kennedy the likely swing vote. Not surprisingly, as is often the case, the decision may well rest in the hands of Justice Anthony Kennedy, the justice who is often considered the swing vote. Kennedy asked tough questions of both sides. As noted above, Kennedy initially framed the central challenge to the law as “Can you create commerce in order to regulate it?” Kennedy also observed that the requirement to buy health coverage is telling an individual it must act, suggesting that this “changes the relationship of the government to the individual in a fundamental way.” Observing that requiring “an affirmative duty to act to go into commerce” is a step “beyond what our cases allow” the Congress to wield in regulating interstate commerce, Kennedy suggested that a requirement to buy insurance is “unprecedented” and, therefore, the government has a “heavy burden of justification.

After initially appearing to side with the challengers, however, Kennedy later asked tough questions of the challengers. For Kennedy, perhaps his most telling comment, made to attorney Carvin, was: “It is true that if most questions in life are matters of degree, in the insurance and health care world, both markets--stipulate two markets--the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.” That is, the health insurance industry is unique.

Stay tuned. Day 3 of oral arguments on the health reform case are scheduled for March 28, with oral arguments on whether the health insurance reform law could survive if the mandate is struck down set for the morning. Finally, oral arguments on the PPACA’s broad expansion of Medicaid, which the challenging states claim is “coercive,” are scheduled to be held in the afternoon.

Then, it’s all in the hands of the nine Supreme Court Justices. Or, as many observers agree, it’s all most likely that the decision is in the hands of Justice Anthony Kennedy. At any rate, we should have a decision in about three months, by late June, the end of the Court’s current term.

 

Oral arguments begin in landmark health reform case

If the 90-minute oral arguments at the Supreme Court on March 26 are any indication, it appears that the Court will not take the easy way out on health reform. By relying on the Anti-Injunction Act (AIA), the Court could avoid having to immediately decide on the constitutionality of the 2010 health reform law and wait until after 2014, after the first penalties for failing to obtain health insurance have been collected and paid, to decide the case on its merits.

Instead, many Court watchers believe that the justices seem eager to get beyond the narrow jurisdictional issues raised during the March 26^th oral arguments and address the larger constitutional matters relating to the health reform case’s merits. These larger issues would include, for instance, the controversial individual mandate, which would require most Americans to buy some type of health insurance or face a tax penalty, a topic to be addressed at the Court on March 27.

What happened on Day 1 of oral arguments? At issue during the first of three days of scheduled oral arguments about the Patient Protection and Affordable Care Act (PPACA) is the AIA, an 1867 law that bars claims seeking a refund for a tax until after the tax has been collected and paid.  Why would an 1867 law apply to the PPACA? The health reform law’s individual mandate is found in Internal Revenue Code Sec. 5000A, which requires individuals who fail to maintain minimum essential health insurance coverage to pay a penalty.

On March 26, attorney Robert Long, who was appointed by the Supreme Court to defend the AIA, argued that the AIA is a “pay first, litigate later” rule that could be waived only by Congress, which did not do so in the 2010 PPACA law. The penalties called for in the law, for failing to obtain health insurance, should be considered the same as taxes, according to Long, because of the way they are collected. If the Court relied on the AIA, the PPACA could not be challenged until someone paid the tax, early in 2015, and then challenged the law.

During oral arguments, however, the justices appeared to dispute this notion. According to Justice Stephen Breyer, for instance, the penalty “is not attached to a tax. It is attached to a health care requirement.” According to Justice Ruth Bader Ginsburg, the purpose of the fine for non-compliance is to get people to leave the ranks of the uninsured. “This is not a revenue raising measure because, if it’s successful, nobody will pay the penalty and there will be no revenue to raise,” she said.

At one point, Justice Sonia Sotomayor asked Long a question about what "parade of horribles" would follow if the Court allowed the health reform lawsuits to proceed. Justice Antonin Scalia commented that there would be no such “parade of horribles” and that this is a question that could not be answered.

What’s ahead? The March 26 skirmish at the Supreme Court is only the preliminary oral argument on health reform. On Tuesday, March 27, the justices will hear two hours’ worth of oral arguments as to whether Congress had the authority to enact the individual mandate. Then, on Wednesday, March 28, the Court will hear oral arguments on two different issues. First, it will hear arguments as to what would happen to the PPACA if the Court strikes down the insurance mandate. Is the mandate severable from the rest of the law or, by striking down the mandate, would the Court have to strike down the entire law? Finally, the Court will hear arguments on whether the PPACA’s expansion of Medicaid is an unconstitutional “coercion” of the states.

Then, by late June, the end of the Supreme Court’s current term, the Court likely will announce its ruling on the merits of the case. That is, of course, unless the court watchers are wrong and the Court uses the AIA to put off its decision to a later time. After all, the Court has been known to confound Court watchers, from time to time.

Though implementing health reform, states are fighting for its repeal

As we’ve passed the second anniversary of landmark health reform legislation, the Patient Protection and Affordable Care Act (PPACA), 26 states are challenging the constitutionality of the law, even though every state, except for Arizona, is actively implementing the law. Though the PPACA strengthened federal laws, the states remain the primary regulators of health insurance and thus are key players in the implementation of the PPACA.

According to a new report from the Commonwealth Fund, 49 states plus the District of Columbia have either (1) passed new legislation, (2) issued a new regulation, (3) issued new subregulatory guidance (such as a bulletin), or (4) are actively reviewing insurer policy forms for compliance with the early market reform protections of PPACA. These 10 early market reforms, collectively known as the Patient’s Bill of Rights, include such protections as the prohibition on lifetime limits for essential health benefits and the requirement that dependent coverage must be available until age 26, and took effect on September 23, 2010.

According to the report, nearly half of the states—23 states plus the District of Columbia—took either legislative or regulatory action on at least one early market reform while an additional 26 states took action through subregulatory guidance or review of policy forms. Of these states, the Commonwealth Fund reports, 12 states—Connecticut, Hawaii, Iowa, Maine, Maryland, Nebraska, New York, North Carolina, North Dakota, South Dakota, Vermont, and Virginia—passed new legislation or issued a new regulation that addressed all 10 early market reforms. Thus, the report suggests, states have many options, and great flexibility, to ensure that the protections promised by the PPACA are delivered. According to the Commonwealth Fund, state regulators report that subregula­tory guidance or review of policy forms appear to have been the most effective tool in promoting compliance with the reforms.

Only one state took no action. According to the Commonwealth Fund, only one state, Arizona, did not pass new legislation, issue a new regulation, issue new subregulatory guidance, or report that the state is actively reviewing insurer policy forms for compliance with these early market reforms. However, the Commonwealth Fund notes, Arizona has indicated that it is informally advising insurers where their policy forms are not in compliance with federal law.

Going forward. States may have taken a cautious “wait and see” approach to implementing health reform, pending the Supreme Court’s decision on the constitutionality of the law. Further, as the Commonwealth Fund points out, many of the broader market reforms, such as a ban on preexisting condition exclusions, which would take effect in 2014, do not exist in state law. Where these state standards do exist, the report notes, they may be inconsistent with these broader market reforms found in the federal law.

It’s showtime!! Starting today, the U.S. Supreme Court will spend a highly unusual six hours over three days listening to and questioning attorneys for the parties on several aspects of the health reform law. This should be interesting. Stay tuned.

 

Will Anti-Injunction Act bar suit against individual mandate?

As we discussed on Wednesday, the first issue the High Court will take up when it begins its marathon three-day session on the constitutionality of the Affordable Care Act will be whether a jurisdictional issue associated with a 19th century statute will prevent the Court from reaching the question of the constitutionality of the individual mandate. Here's a brief FAQ on the Anti-Injunction Act and its relationship to the ACA, based on the amicus brief filed by Robert Long of Covington & Burling.

What is the Anti-Injunction Act? The Anti-Injunction Act, enacted in 1867, bars pre-enforcement challenges to tax laws, unless an exception to the Act applies.

What's the purpose of the Act? According to prior rulings by the Supreme Court, the purpose of the Act is to protect the government's need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference. Legal rights to any disputed sums collected by the government are to be determined in a suit for a refund, after the tax has been collected.

Why might the Act apply to the ACA? The individual mandate is house in Internal Revenue Code Sec. 5000A, which requires individuals who fail to maintain minimum essential coverage for themselves to pay a penalty. The Congressional Budget Office has estimated the penalty provision would produce 5-6 billion dollars per year in revenue by the end of this decade.



Is the Obama Administration pursuing this argument? At the outset of litigation against the ACA, the Administration did argue that the Injunction Act barred suits prior to 2014. District courts rejected this argument, however, and the government did not raise the issue in front of the 11th Circuit.

However, once the case reached the Supreme Court, the government suggested that the Court appoint counsel as friend of the court to argue that the suit is indeed barred by the Act. The Court agreed and appointed Long, who, along with colleagues at Covington & Burling, LLP, wrote the amicus brief.

Why might the Anti-Injunction Act bar the suit against the individual mandate? According to the amicus brief, the suit falls within the scope of the Anti-Injunction Act for two reasons. First, Congress directed the Code Sec. 5000A penalty to be "assessed and collected in the same manner" as taxes. Second, the term "tax" is broad enough to include the penalty set forth in the individual mandate section.

What if the Court agrees? If the Court were to agree that the Anti-Injunction Act applies in this situation, presumably it would not need to reach the question of whether the individual mandate is constitutional. That question would not become ripe for judicial review until 2014, when the penalty provision becomes effective.

High Court and the ACA: Three days, four issues

In an extraordinary three-day event beginning Monday March 26, the Supreme Court will work its way through arguments on four contentious issues arising from court challenges to the ACA.

Here's the schedule for the arguments (the appeals all stem from the Eleventh Circuit's ruling in August 2011).

Monday, March 26: The Court will hear 90 minutes of argument as to whether the suit brought by those challenging the individual mandate is barred by the Anti-Injunction Act. We'll talk more about this on Friday, but briefly: if the court were to hold the Anti-Injunction Act applies in this situation, that would essentially table challenges to the individual mandate until the provision becomes effective in 2014 (Department of Health and Human Services v. Florida, No. 11-398).

Tuesday, March 27: The High Court will hear two hours of argument as to whether Congress had the power under Article I of the Constitution to enact the individual mandate (Department of Health and Human Services v. Florida, No. 11-398).

Wednesday, March 28: The Court will hear arguments on two different issues today. First, the parties will debate what happens to the balance of the ACA if the High Court does strike down the individual mandate. Is the mandate severable from the rest of the law, or must the Court strike down the entire health reform law (National Federation of Independent Business v. Sebelius, No. 11-393; Florida v. Department of Health and Human Services, No. 11-400)?

In the final issued to be argued, the Court will hear one hour of argument on whether the expansion of Medicaid authorized by the ACA amounts to an unconstitutional "coercion" of the States (Florida v. Department of Health and Human Services, No. 11-400)?

High Court showdown on health reform just one week away

Next week, two years after passage of a sweeping overhaul of the nation's health care system, Supreme Court will hear arguments as to whether that overhaul should be allowed to proceed, should be struck down, or even whether it's premature to be discussing the issue.

Beginning Monday, March 26, the Court will spend a highly unusual six hours over three days listening to and questioning attorneys for the parties on several aspects of the health law.

Here at Health Reform Talk, we'll monitor all of next week's arguments closely and will offer our analysis of the highlights. We'll also spend this week giving you all the background you'll need to follow what's going on at next week's historic sessions.

So, how did we get here?


2010 enactment. On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (P.L. 111-148). Coupled with its companion legislation (the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), enacted on March 30, 2010), the Affordable Care Act contains significant expansions of access and coverage for almost all Americans. Chief among its provisions is a requirement that, beginning in 2014, most Americans purchase minimum qualifying coverage (the "individual mandate"). State-based Health Insurance Exchanges will provide a forum where individuals and small businesses can choose from competing private insurers offering qualifying coverage. Large employers must also offer minimum essential coverage or face a penalty.

In addition, the ACA expanded Medicaid eligibility and made significant changes to Medicare. (For more on the ACA, including the full text of the law and additional information on health reform and other recent developments in employee benefits, just click here.

Circuit Court decisions. The ACA was controversial from the start, and litigation quickly began in the district courts. Several federal appellate courts ultimately ruled on the law, with three courts upholding the law for various reasons, and one striking it down:

• In June 2011, the Sixth Circuit upheld the individual mandate.
• In August 2011, the Eleventh Circuit struck down the individual mandate, but held that the remainder of the law could remain in effect.
• In September 2011, the Fourth Circuit ruled that the Anti-Injunction Act bars challenges to the law until 2014, when the individual mandate is scheduled to go into effect.
• In November 2011, the Court of Appeals for the D.C. Circuit also upheld the mandate.

After much speculation about how and when the Supreme Court would reconcile the conflicting opinions from the circuit courts, the Court elected to review the Eleventh Circuit's ruling striking down the mandate.

Estimated Costs Of Health Reform Insurance Provisions, Number Covered, Lower For Ten-Year Period: CBO

The insurance coverage provisions of the Patient Protection and Affordable Care Act (ACA) over the 2012–2021 period are expected to cost just under a net $1.1 trillion and reduce the number of nonelderly people without health insurance coverage by 30 million to 33 million in 2016 and subsequent years. These are the main findings of the updated estimates the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) prepared for the March 2012 baseline budget projections.



The CBO and JCT projected net cost of just under $1.1 trillion for the ten-year period is about $50 billion less than the agencies’ March 2011 estimate for that ten-year period. The net costs reflect:

• Gross additional costs of $1.5 trillion for Medicaid, the Children’s Health Insurance Program (CHIP), tax credits, and other subsidies for the purchase of health insurance through the newly established exchanges and related costs, and tax credits for small employers.

• Offset in part by about $0.4 trillion in receipts from penalty payments, the new excise tax on high-premium insurance plans, and other budgetary effects (mostly increases in tax revenues).

“Those amounts do not encompass all of the budgetary impacts of the ACA because that legislation has many other provisions, including some that will cause significant reductions in Medicare spending and others that will generate added tax revenues, relative to what would have occurred under prior law,” the CBO and JCT explained. The two groups previously had estimated that the ACA will, on net, reduce budget deficits over the ten-year period, but they have not updated the overall budgetary impact.

The current estimate of the gross costs of the coverage provisions ($1.496 billion through 2021) is about $50 billion higher than last year’s projection. However, other budgetary effects of those provisions, which partially offset the gross costs, also have risen in CBO and JCT’s estimates (to $413 billion), leading to the small decrease in the net ten-year total. Over the ten-year period from 2012 through 2021, enactment of the coverage provisions of the ACA was projected in March 2011 to boost federal deficits by $1.131 billion, compared with the $1.083 billion estimate in March 2012.

Compared with prior law, the ACA is now estimated by CBO and JCT to reduce the number of nonelderly people without health insurance coverage by 30 million to 33 million in 2016 and subsequent years, leaving 26 million to 27 million nonelderly residents uninsured. The share of legal nonelderly residents with insurance is projected to rise from 82 percent in 2012 to 93 percent by 2022. According to the current estimates, from 2016 on, between 20 million and 23 million people will receive coverage through the new insurance exchanges, and 16 million to 17 million people will be enrolled in Medicaid and CHIP. At the same time, it is estimated that the number of people insured through an employer will be lower by 3 million to 5 million.

For more information on the report, Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act, visit http://www.cbo.gov.

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

HHS Issues Rules For Affordable Insurance Exchanges

The Department of Health and Human Services (HHS) has issued a final rule on Affordable Health Insurance Exchanges, which combines policies from two Notices of Proposed Rulemaking (NPRM) published in 2011. One rule, published on July 15, 2011, outlined a proposed framework to enable states to build Affordable Insurance Exchanges (Exchanges), which are new state-based competitive marketplaces created under the Patient Protection and Affordable Care Act (ACA). A second NPRM, published on August 17, 2011, outlined proposed standards for eligibility for enrollment in qualified health plans through the Exchange and insurance affordability programs, including premium tax credits. The final rule is scheduled to be published in the March 27 Federal Register.

Starting in 2014, one-stop marketplaces called Exchanges will be operational, enabling consumers and small businesses to choose a quality, affordable private health insurance plan that fits their health needs. Exchanges will offer health insurance options that meet consumer-friendly standards; facilitate consumer assistance; shopping for and enrollment in a private health insurance plan; and coordinate eligibility for premium tax credits and other affordability programs that ensure health insurance is affordable for all Americans. Through Exchanges, the public will have the same kinds of insurance choices as members of Congress.

The final rule offers a framework to assist states in setting up Exchanges. The framework preserves and, in some cases, expands the significant flexibility in the proposed rules that enables states to build an Exchange that works for their residents. For example, the final rule allows states to decide whether their Exchange should be operated by a nonprofit organization or a public agency, how to select plans to participate, and whether to partner with HHS for some key functions. The final rule also offers significant additional flexibility regarding the eligibility determination process. It makes it easier for small businesses to get coverage through the Small Business Health Options Program (SHOP), strengthens consumer protections, and keeps it simple for health plans interested in participating in Exchanges.

In response to the proposed rules, HHS received approximately 24,780 comments from the public. The commenters represented a wide variety of stakeholders, including but not limited to states, tribes, tribal organizations, health plans, consumer groups, health care providers, industry experts, and members of the public. In the final rule, HHS responds to comments submitted in response to the Exchange establishment and eligibility proposed rules and the request for comments. In addition to those comments received formally, HHS also engaged in listening sessions with a wide range of stakeholders across the country after the proposed rules were released. This public input was also integral to the development of the final rule policy.

The final rule includes standards for:

• The establishment and operation of an Exchange;
• Health insurance plans that participate in an Exchange;
• Determinations of an individual’s eligibility to enroll in Exchange health plans and in insurance affordability programs;
• Enrollment in health plans through Exchanges; and
• Employer eligibility for and participation in the SHOP.

As of Feb.22, 2012, 49 states and the District of Columbia have received Exchange Planning grants, while 33 states and the District of Columbia have received Exchange Establishment grants. HHS continues to provide technical assistance to states, including technical consultations, monthly user groups, working groups on core functions, and conferences.

Establishment Of Exchanges

The final rule outlines the standards for a state to establish an Exchange while prioritizing state flexibility in numerous ways. For example, each state can structure its Exchange in its own way: as a nonprofit entity established by the state, as an independent public agency, or 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 multiple Exchanges that cover distinct areas within the state. Any combination of these options can be approved. Exchanges that are run by independent agencies or nonprofits must have governance principles, include consumer representation, ensure freedom from conflicts of interest, and promote ethical and financial disclosure standards.

Exchanges will perform a variety of functions, including:

• Certify health plans as “qualified health plans” to be offered in the Exchange;
• Operate a website to facilitate consumer comparisons among qualified health plans;
• Operate a toll-free hotline for consumer support, provide grant funding to entities called “Navigators” for consumer assistance, and conduct consumer outreach and education on Exchanges;
• Determine consumer eligibility for enrollment in qualified health plans and for insurance affordability programs (premium tax credits, Medicaid, the Children’s Health Insurance Plan (CHIP) and the Basic Health Plan); and
• Facilitate consumer enrollment in qualified health plans.
  

States have substantial flexibility in determining how to perform these functions. The final rule simplifies the process for states’ Blueprints for Exchanges to be approved and updated; empowers states to determine a role for agents and brokers—including the use of on-line brokers; and removes processing of appeals from minimum Exchange functions.

The ACA provides that no later than Jan. 1, 2013, HHS must approve a state’s plan to operate an Exchange. However, HHS may grant a conditional approval if the state is advanced in its preparation but cannot demonstrate complete readiness by Jan. 1, 2013. States that are not ready for 2014 may apply to operate the Exchange for 2015 or any subsequent year. HHS will continue working with states to support their progress, including through new funding opportunities. New funding will be available for all Exchange models through a final award date no later than Dec. 31, 2014. The budget and project period for the Exchange Establishment Grants, from the date of award, is up to one year for Level One, and up to three years for Level Two.

Qualified Health Plans

Health plans offered through the Exchange must be certified as “qualified health plans.” Qualified health plans will provide high-quality coverage like that of a typical employer plan. To be certified by the Exchange, health plans must meet minimum standards that are primarily defined in the ACA. The final rule gives Exchanges the flexibility to establish additional standards for health plans offered in their Exchanges. For example, the final rule provides Exchanges with flexibility on the following:

• Number and Type of Health Plan Choices: Exchanges may work with health insurers on structuring qualified health plan choices that are in the best interest of their customers. This could mean that the Exchange allows any health plan meeting the standards to participate or that the Exchange creates a competitive process for health plans to gain access to customers on the Exchange.
• Standards for Health Plans: Exchanges, working with state insurance departments, may set specific standards to ensure that each qualified health plan gives consumers access to a variety of providers within a reasonable amount of time. Exchanges also will establish marketing standards to make sure that qualified health plans do not market plans in a way that discriminates against people with illnesses. Exchanges also may set the timeframes in which health issuers need to become accredited for their quality performance (if they are not already), allowing consumers access to new and innovative health plans through the Exchange as they gain accreditation. And the grace period policy is modified to ensure that qualified health plans can provide seamless coverage without being left paying all the bills.

Eligibility

The Exchange final rule establishes a streamlined, coordinated, and web-based system through which an individual may apply for and receive a determination of eligibility for enrollment in a qualified health plan through the Exchange and for insurance affordability programs. This means that no matter how an application is submitted or which program receives the application, an individual will use the same application and receive a consistent eligibility determination, without the need to submit information to multiple programs. This consumer-focused approach will facilitate the enrollment of millions of Americans into affordable, high quality coverage while minimizing the administrative burden on states, individuals, and health plans, HHS explained.

Eligibility Determinations. Exchanges will use final-rule provided standards and processes and a single, streamlined application to determine whether consumers are eligible for all available programs so that consumers do not have to guess for what programs they are eligible. Consumers will be able to easily notify the Exchange of any changes that might affect their eligibility, including marriage, divorce, or a job change. Exchanges will make it easy for consumers to keep their coverage year to year through a simple eligibility redetermination process.

Simple Verification of Data. To reduce paperwork and red tape for consumers, Exchanges must rely on existing electronic sources of data to the maximum extent possible to verify relevant information, while ensuring high levels of privacy and security protection for consumers. For the majority of applicants, an automated electronic data matching process should eliminate the need for paper documentation, HHS asserts.

Coordinating across Programs. Exchanges will coordinate with Medicaid, CHIP, and the Basic Health Program, where applicable, to ensure that an applicant experiences a seamless eligibility and enrollment process regardless of where he or she submits an application.

New Options for States. In response to comments, the final rule provides two ways for Exchanges to interact with Medicaid agencies when making eligibility determinations: Exchanges, following state-established Medicaid rules, can conduct eligibility determinations for Medicaid and for advance payment of premium tax credits; or the Exchange will make the preliminary eligibility assessment and turn it over to the state Medicaid agency, if applicable, for final determination, within certain parameters. In addition, a state-based Exchange may determine eligibility for advance payments of the premium tax credit and cost-sharing reductions or it could be approved if HHS makes determinations for these functions. These approaches continue the commitment to facilitating enrollment in the appropriate insurance affordability program without delay.

Enrollment

Once the Exchange determines an individual eligible, it will use a streamlined, simple and integrated system to ensure that an eligible individual successfully enroll in the health coverage that best fits their needs. The enrollment process outlined in the final rule is geared toward consumers and will use websites and toll-free call centers, among other tools, to help people enroll in coverage. Exchanges will enable consumers to learn about the varieties of coverage provided in the market and to make informed choices about the coverage available on the Exchange. To improve the performance of this system, Exchanges may adopt varied options for the design of their website. Exchanges also may decide whether to use the single application that will be made available or design one on their own that is comparable. As with the eligibility determination process, the enrollment must meet high standards for privacy and security of personal information.

The final rule also provides standards for Exchanges to build partnerships with and award grants to entities known as “Navigators” who will reach out to employers and employees, consumers, and self-employed individuals to:

• Conduct public education activities to raise awareness about qualified health plans
• Distribute fair and impartial information about enrollment in qualified health plans, premium tax credits, and cost-sharing reductions
• Assist consumers in selecting qualified health plans
• Provide referrals to an applicable consumer assistance program or ombudsman in the case of grievances, complaints, or questions regarding health plans or coverage
• Provide information in a manner that is culturally and linguistically appropriate
• Exchanges will award grants to Navigators.  The final rule directs states to choose at least two Navigator organizations, one of which must be a community or consumer-focused non-profit organization.

SHOP Exchanges

Beginning in 2014, Exchanges will operate a SHOP. The SHOP will provide small employers with new ways to offer employee health coverage, better information, easier administration, and access to tax credits that make coverage more affordable.

As described in the final rule, the SHOP will allow employers to choose the level of coverage they will offer and offer the employees choices of all qualified health plans within that level of coverage. This allows employees a choice among plans and can select the one that best fits 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. SHOP Exchanges also will allow employers to select a single plan to offer its employee, as is typically done currently. In addition, minimum participation rules may be met through coverage in any SHOP plan, not a single one.

Exchanges have flexibility in deciding how a SHOP is structured as follows:

• Size of small businesses that can participate in SHOP. Until 2016, states can set the size of the small group market at either one to 50 or one to 100 employees. In 2016, employers with between one and 100 employees can participate in a SHOP. And, starting in 2017, states have the option to let businesses with more than 100 employees buy large group coverage through the SHOP.
• Structure of choices for small businesses. Exchanges can choose to offer employers additional ways to provide coverage, including allowing their employees to choose any plan in all levels of coverage or a traditional “employer choice” offer of a single plan.

Starting in 2014, small employers purchasing coverage through a 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.

Comment. Several provisions being issued as interim final in the final rule are open to further public comment. This includes the new flexibility for the eligibility process. Public comments on the interim final rule provisions are due no later than 45 days after the Federal Register publication date of March 27 (Friday, May 11) and may be submitted electronically through http://www.regulations.gov. In commenting, refer to CMS–9989–F.

The final rule is effective 60 days after the March 27 publication date in the Federal Register (Monday, May 28). For more information, contact Alissa DeBoy at (301) 492-4428, for general information and matters related to part 155; Michelle Strollo at (301) 492-4429, for matters related to part 155 subparts D and E; Pete Nakahata at (202) 680-9049, for matters related to part 156; or Rex Cowdry at (301) 492-4387, for matters related to part 155 subpart H and part 157.

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

Early Retiree Reimbursement Program Benefited 13 Million Retiree Medical Plan Participants In 2010-11

As of Jan. 20, 2012, the Early Retiree Reinsurance Program (ERRP) has provided $4.73 billion in reinsurance payments to more than 2,800 employers and other sponsors of retiree plans, with an average cumulative reimbursement per plan sponsor of approximately $189,700, according to the Centers for Medicare and Medicaid Services (CMS).

At this time, CMS reported, the ERRP has received requests for reimbursement that exceed the $5 billion in funding appropriated. Therefore, reimbursement requests which exceed the program's $5 billion will now be held in the order of receipt, pending the availability of funds that may become available as a result of overpayment recoupment activities. CMS will continue to report the status of payments to plan sponsors periodically. In December 2011, the CMS had announced that because the ERRP allocated funds were nearly exhausted, it would deny health care claims incurred after Dec. 31, 2011.

Initial results from a recent survey to gauge plan sponsors' experience with ERRP funds indicated the following:

• Plan sponsors provided health coverage to 19.1 million plan participants.
• Of these plan participants, 13 million have already benefited, either directly or indirectly, from the ERRP program, as their health plan sponsors have already begun applying the ERRP funds received to offset the plan's increased costs, plan participants' costs, or both.
• For plan sponsors that purchased health insurance directly from a carrier to cover their workers and early retirees, ERRP funds reduced the increase in sponsor-paid premium costs by up to 27 percent.
• ERRP not only provided immediate relief to plan sponsors but also provided a bridge to 2014, as survey responses indicated that:
• Fifty-six percent of responding plan sponsors have used ERRP reimbursements to date. Of these plans sponsors already using funds, 15 percent reported that they have spent some, but not all of their funding.
• Forty-four percent of survey respondents indicated that they will apply all of their reimbursements to the 2012 or 2013 plan year.
• Based on survey respondents that indicated that they have not spent all of their ERRP funding, it can be concluded that at least $615 million in ERRP funds of survey respondents will be applied in 2012 or later.
• The impact of ERRP funds received can be significant, CMS noted. Some survey respondents reported that ERRP reimbursement has been used to offset some (as much as 50 percent) of the premium that would otherwise have been charged to enrollees or offset some (up to 100 percent) of the annual increases in the plan sponsors' fully-insured premium costs.

"This initial snapshot analysis of reimbursement requests shows that ERRP funds are helping to relieve the high costs of care of patients with serious health conditions, with a large proportion of the reimbursements for claims related to chronic and high-cost conditions such as heart disease, cancer, respiratory disorders, arthritis, and diabetes," CMS observed. "The funds provided relief from costs of care received from institutional providers, such as hospitals. The largest portion of submitted costs was for items and services delivered in institutional settings, such as hospitals and ambulatory surgery centers."

The survey included responses from 859 plan sponsors, representing 28 percent of those that received funding in 2010 and 2011, and 55 percent of funds disbursed. For more information on the CMS report, Early Retiree Reinsurance Program Status Update, February 2012, visit http://cciio.cms.gov/.

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

HHS proposes AV calculator for qualified health plans

The Department of Health and Human Services (HHS) has issued a bulletin to provide information and solicit comments on the regulatory approach that it plans to propose to define actuarial value (AV) for qualified health plans (QHPs) and other non-grandfathered coverage in the individual and small group markets under section 1302(d)(2) of the Patient Protection and Affordable Care Act (ACA). AV is a measure of the percentage of expected health care costs a health plan will cover. AV is calculated based on the cost-sharing provisions for a set of benefits.

The bulletin addresses the:

• calculation of actuarial value,
• operational method for AV calculation using standard data,
• de minimis variation standards, and
• treatment of health savings accounts (HSA) and health reimbursement arrangements (HRA) in calculating AV.

Levels of coverage. The bulletin explains that the ACA requires issuers offering non-grandfathered health plans inside and outside of the Affordable Insurance Exchange (Exchange) in the individual and small group markets to assure that any offered plan meet distinct levels of coverage specified in ACA Sec. 1302, called “metal tiers”— bronze, silver, gold, or platinum. Under the statute, each metal tier corresponds to an AV, calculated based on cost-sharing features. The expression of AV as a metal tier will allow consumers to easily compare plans based on cost-sharing features, according to the bulletin.

ACA Sec. 1302(d)(2) directs the HHS Secretary to issue regulations on the calculation of AV and its application to the metal tiers. Pursuant to ACA Sec. 1302(d)(1):

• a bronze plan is required to have an AV of 60 percent;
• a silver plan, 70 percent;
• a gold plan, 80 percent; and
• a platinum plan, 90 percent.

ACA Sec. 1302(d)(2) also provides that a plan’s AV must be based on the provision of the EHB to a standard population without regard to the actual population to which a plan provides benefits. The law does not specify the definition of a standard population or a methodology for calculating a standard population.

Calculation of actuarial value. The bulletin indicates that HHS intends to propose using a standard data set for AV calculations for QHPs and non-grandfathered health plans in the individual and small group markets, for which HHS would develop a national standard population. To promote state flexibility and account for variation in prices, utilization, and benefits across states, HHS intends to propose an option that would permit states to develop state standard populations based on state claims data.

Operational method for AV calculation using standard data. HHS intends to develop a publicly available AV calculator that plans would use to determine AV. The calculator would be developed using a set of claims data weighted to reflect the expected standard population in the individual and small group markets for the year of enrollment. Plans would input information on cost-sharing parameters.

According to the bulletin, both the logic and the tables of aggregated data used to develop the calculator would be made public to maximize transparency. The calculator method ensures a consistent set of assumptions and methods in AV calculation, maximizing comparability for consumers since plans with the same cost-sharing design would have the same AV.

De minimis variation standards. HHS also intends to propose a de minimis variation of +/− 2 percentage points in AV (e.g., a silver plan could have a value from 68 percent to 72 percent) so issuers have the flexibility to set cost-sharing rates that are simple and competitive while ensuring consumers can compare plans of similar generosity.

Treatment of HSAs and HRAs in calculating actuarial value. The bulletin also notes that HHS intends to propose that, for purposes of calculating the AV of an employer health benefit plan, the annual employer contribution to the employee’s HSA associated with a qualifying HDHP and the amount made available for the first time in a given year under an HRA that is linked to an employer health benefit plan shall be considered part of the benefit design of the health plan.

In calculating the AV of the combined HDHP and HSA or combined employer health benefit plan and HRA, the calculation would assume that the employer contribution to the HSA or HRA is used by the employee to pay for cost-sharing. Accordingly, these amounts would be credited to the numerator of the AV calculation. The bulletin explains that this means the AV calculator would include any current year HSA contributions and amounts first made available under an HRA as an input into the calculator that can be used to determine the AV of an employer health benefit plan.

The bulletin notes that the method used to evaluate the HSA or HRA impact on health plan AV has no bearing on the opportunity of employers to offer HSAs or HRAs, or the tax treatment of HSA contributions or amounts made available under an HRA.

IRS will defer guidance on ACA individual mandate until after Supreme Court’s decision, Chief Counsel says

Guidance on the individual mandate under the Patient Protection and Affordable Care Act (ACA) will wait until after the Supreme Court hands down a decision, IRS Chief Counsel William J. Wilkins said on March 2 in Washington, D.C., at the Federal Bar Association Section on Taxation’s 36th Annual Tax Law Conference.

The ACA generally requires individuals to make a shared responsibility payment if they do not have minimum essential health care coverage for themselves and their dependents. The shared responsibility payment is scheduled to apply beginning in 2014.

Since enactment of the ACA, several states have challenged the law’s requirement that individuals carry minimum essential coverage. The Supreme Court agreed to hear the challenges in Florida v. United States Department of Health and Human Services. The Supreme Court has scheduled oral arguments for March 26-28. The Court is expected to announce its decision in June.

Wilkins said that the IRS will hold off issuing issue guidance on the individual shared responsibility payment pending the Supreme Court’s decision. However, the Service is moving forward with ACA guidance for employers and also on the ACA health insurance premium assistance tax credit, Wilkins said.

Can Congress make us buy something? Most Americans don’t think so

Do you think the requirement in the Patient Protection and Affordable Care Act that every American must buy health insurance or pay a fine violates the Constitution? If so, you’re not alone. A recent USA Today/Gallup poll found that 72% of Americans think the requirement is unconstitutional.

In a just a few weeks (on March 26 to be exact), the Supreme Court will hear oral arguments on this issue in HHS v. Florida (No. 11-398). It’s clear the Justices have their work cut out for them. This could be one of the Court’s most significant rulings on the Constitution’s Commerce Clause in decades.

Government says constitutional. On the one hand, the government argues that Congress has broad power under the Commerce Clause to enact economic regulation. Many of the Supreme Court’s cases support this argument. One in particular illustrates the breadth of that power. In Wickard v. Filburn, the Court found the federal government could regulate the production of wheat on a private farm. Somehow poor Mr. Filburn affected interstate commerce by exceeding the government’s wheat production limits even though he was growing the wheat for his own consumption and didn’t sell it.

That decision and its effect on subsequent Commerce Clause cases dominated for decades until the Court put some limits on the government’s power in United States v. Lopez. In that case, the Court found the government did not have the power under the Commerce Clause to regulate the carrying of handguns in school zones.

States say not. On the other hand, the states (some of the respondents in the Florida case) agree with the 72% of Americans in the USA Today/Gallup poll that think the requirement to buy insurance is unconstitutional. The states argue that the power to regulate commerce does not include the power to make individuals enter into commerce.

The states acknowledge that the government can regulate existing commerce. But they find no support in case law or the Constitution for the proposition that the government can make individuals buy things. While the Constitution explicitly grants Congress the power to establish, constitute, raise, coin, or otherwise bring things into existence, it does not give Congress the power to establish interstate commerce, according to the states.

Decision in June. While polls are interesting and it’s fun to discuss and debate the intricacies of our beloved Constitution, we have to wait until at least June for the Supreme Court’s decision. The outcome, whichever way it goes, is sure to impact not only future jurisprudence, but also our wallets and our lives.

Blunt Amendment dies in Senate

Health and Human Services (HHS) Secretary Kathleen Sebelius issued a statement on Wednesday, February 29 criticizing a proposal that was, until recently, being considered in the Senate (S.1467, the Respect for Rights of Conscience Act of 2011). The Blunt Amendment, as the proposal was known, would have amended the Patient Protection and Affordable Care Act (ACA) to allow even employers that have no religious affiliation to exclude coverage of any health service in health plans offered to their workers. It’s important to note that language of the proposal wasn't limited to contraception or to any particular preventive service. The measure was defeated in the Senate on Thursday, March 1, by 51-48.
Sebelius had warned that, under the proposed amendment to the ACA, any employer could restrict access to any health service it claims to have an objection to. Specifically, the proposal states “that nothing in PPACA shall be construed to authorize a health plan to require a provider to provide, participate in, or refer for a specific item or service contrary to the provider's religious beliefs or moral convictions. Prohibits a health plan from being considered to have failed to provide timely or other access to items or services or to fulfill any other requirement under PPACA because it has respected the rights of conscience of such a provider.”

So, under the Blunt Amendment, providers would not have to claim that they oppose a service only on religious grounds. General moral convictions would be sufficient.. It’s not difficult to imagine how far health insurance providers could have taken this amendment, claiming that the provision of a range of pricey services conflicts with its general moral convictions for a variety of reasons. Republican presidential candidates Rick Santorum and Mitt Romney had both expressed support for the Blunt Amendment.

In her statement, Sebelius characterized the Blunt Amendment as “dangerous and wrong,” adding that, “The Obama administration believes that decisions about medical care should be made by a woman and her doctor, not a woman and her boss.”

Sebelius also points out that, in February 2012, HHS reported that over 20 million American women in private health insurance plans have already gained access to at least one free preventive service because of the ACA.

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