ACA decision: some Friday thoughts

Ok, we’ve all had a day to digest more fully the decision in National Federation of Independent Business v. Sebelius.  Here are some additional questions (and possible answers) that come to mind.

How many dissenting opinions were there?

As we said yesterday, there were two opinions labeled in their entirety as dissents. However, Justice Ginsburg’s opinion of course dissented in part from the judgment, both with respect to the Commerce Clause, and with respect to the Medicaid expansion.

What’s the immediate impact of the decision on employers?

“Since the Supreme Court found the entire healthcare law constitutional, it should now be ‘business as usual’ from an employer’s standpoint,” according to Benjamin Lupin, director of compliance for Corporate Synergies Group, LLC. However, what that actually means can vary, depending on whether the employer has been taking an active role in complying with the law through 2011 and 2012. For those who have, “there shouldn't be much to be concerned with based upon the Court's ruling,” he said. “If, however, an employer was waiting for the Court’s decision before taking the actions needed to comply with the law, the time is now to ‘get into gear’ and think about 2012 requirements and the approaching 2013 and 2014 requirements.”

“For 2012, this means that employers will need to make sure that they are issuing summaries of benefits and coverage (SBCs) after September of 2012 and continuing to gather information to report on 2012 W-2s,” he explained. “Employers will also need to make sure their ERISA plan documents are in order. In addition, contributions to FSA accounts will be limited to $2,500 in 2013, and employers will need to prepare for the upcoming release of the state exchanges for review in 2013 and implementation in 2014, and will need to decide whether or not they will ‘pay or play’ moving forward.”

Lupin also cautions that although the ruling permits actions to continue (or begin) to be taken by employers to become compliant with the ACA, “we are still in the early stages of the implementation of this law.” The November election results and future regulations implementing the law will continue to give employers much to think about and plan for during the next several years. “Since we now know that the law is constitutional, it becomes vital for all employers to ensure compliance with the law,” he advised. “There are sure to be audits by the government to make sure that the law is being followed (and to raise revenue) and no employer wants to end up on the front page because of a failure to comply with the law.”

Are you still struggling to understand the Court’s discussion of the Medicaid expansion issue?

Here's a good explanation, courtesy of our colleagues at health.wolterskluwerlb.com:

“[T]he issue at hand was whether Congress exceeded its authority to require states to expand their Medicaid coverage to qualifying individuals as defined by PPACA. Specifically, by 2014, states would have to cover all individuals under the age of 65 with income below 133 percent of the federal poverty limit. Furthermore, everyone with Medicaid coverage would be entitled to an essential health benefit package.

“The federal government would cover 100 percent of the costs of this expansion through 2016; after that, federal assistance would gradually decrease until it reached 90 percent. Compliance with this expansion was governed by funding; states that chose not to expand their Medicaid rolls would obviously not receive the funding for expansion and would lose their former funding, forcing them to fund their Medicaid program on their own.

“In March, the states argued that this requirement exceeds Congress’s authority under the Spending Clause which grants Congress the power to pay the debts and provide for the general welfare of the states. This allows Congress to grant funds to the states and impose appropriate conditions on those funds to ensure they are properly spent.

“Previous Supreme Court cases have limited this power, however, typically when the Court has found that the program commandeers a State’s legislation or administration for a federal purpose or when Congress is using financial incentives to exert power that could be seen as undue influence. State officials must be responsible for deciding to accept or refuse federal funding without being forced.

“In this case, the Supreme Court found that Congress cannot threaten to terminate other significant independent grants of money (the original Medicaid funding) as a means of pressuring states to accept a policy change (the expansion of Medicaid). Specifically, the termination of all Medicaid funding was not “relatively mild encouragement” to expand a state Medicaid program to meet the needs of an entire population. States must be free to decline participation in the new program without losing their current level of funding.

“Furthermore, Congress can offer new funds under PPACA to expand availability, but they cannot withdraw any existing funding. Although Congress assumed that all states would participate in the expanded program, the Supreme Court found that even if they did not, the expanded coverage program can continue on a state by state basis. Failure of all the states to participate does not invalidate the entire portion of PPACA.”

How do you reconcile the Court’s characterization of the mandate as a “tax” with its decision that the Anti-Injunction Act, which prevents premature judicial review of the “collection of any tax” did not prevent the Court from hearing the case at this time?

Well, the dissenters don’t think you can: “Having found that [the mandate] is not [an exercise of Congress’s taxing power], we have no difficulty in deciding that these suits” are not precluded by the Anti-Injunction Act.

In his opinion, the Chief Justice states: “The Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.”

What’s the best rebuttal to the “if they can make you buy insurance, they can make you buy broccoli” argument?

We offer no definitive answers, but instead leave you with this one example, which comes to us courtesy of Justice Ginsburg’s opinion, who cross-references to this quote from Robert Bork: “Judges and lawyers live on the slippery slope of analogies; they are not supposed to ski it to the bottom.”

 

Supreme Court upholds ACA individual mandate in 5-4 vote

In a 5-4 ruling, the Supreme Court has held the individual mandate provision of the Affordable Care Act to be constitutional, but not as a valid exercise of Congress’s power under the Constitution to regulate interstate commerce. Instead, the mandate, codified as Sec. 5000A of the Internal Revenue Code, is upheld as within Congress’s power under the Taxing Clause. Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan to reach this result.

Because the five justices agreed to uphold the mandate, they did not need to reach the severability issue.

Commerce clause battle

In the short term, the Court’s ruling in National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012), decides the fate of the Affordable Care Act (at least until November). Those taking the longer view might come to see the debate over the individual mandate as the latest battle in the Court’s long-running dispute over the power of Congress to enact sweeping legislation via its Commerce Clause authority.

Ginsburg opinion. Only four justices (Ginsburg, Breyer, Sotomayor, and Kagan) saw the mandate as an appropriate use by Congress of its commerce power.  Speaking for this group, Justice Ginsburg began by noting that Congress enacted the ACA in part to address a national problem: the burden placed upon the national health-care market by the large number (50 million in 2009) of uninsured Americans. Given the difficulty those with preexisting conditions have in acquiring health insurance in the private market, the so-called “guaranteed issue” and “community rating” provisions contained with the ACA play a key role in addressing this problem. However, in order to avoid an adverse selection problem for insurers, Congress also created the individual mandate.

Reviewing the line of Commerce Clause precedents set by the Supreme Court since the mid-1930s, Ginsburg explained that the Court must presume a statute under review to be constitutional and must strike it down “only on a ‘plain showing’ that Congress acted irrationally.”  In her view, Congress had a rational basis for concluding that the “uninsured, as a class, substantially affect interstate commerce,” thus requiring a national remedy.  Having found such a rational basis for legislative action, the Court’s analysis under the Commerce Clause should end.

Roberts opinion. The Chief Justice rejected the view of the left-leaning Justices and enunciated his own view, which is that the individual mandate fails under the Commerce Clause.  (In turn, the four dissenting justices penned a separate opinion regarding the mandate’s failure to pass muster under the Commerce Clause.)

Certainly, Roberts noted, the Constitution gives Congress the power to “regulate Commerce.” But, rather than regulate existing commercial activity, the mandate compels individuals to “become [the Chief Justice emphasized] active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.” Permitting Congress to regulate individuals precisely “because [the Chief’s emphasis] they are doing nothing would open a new and potentially vast domain to congressional authority.”

He rejected the argument that a health care mandate is permissible because eventually everyone will participate in the health care market. Everyone, Roberts noted, will likely participate in many types of markets, including, for example, the one for food (such as broccoli), but that mere fact does not authorize Congress to direct them to purchase products in a given market today. “Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States,” Roberts said.  Thus a law like the individual mandate will not pass muster under the Commerce Clause.

Necessary and Proper clause

In addition, Roberts continued, the mandate cannot be upheld under the Necessary and Proper Clause as an essential component of the health insurance reforms. Prior cases upholding laws under this clause “involved exercises of authority derivative of, and in service to, a granted power,” wrote Justice Roberts. “The individual mandate, by con­trast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enu­merated power.”

“Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a ‘necessary and proper’ component of the insurance re¬forms,” Justice Roberts concluded.

Taxing power

The Chief Justice then turned to the argument that the mandate could be upheld as authorized by Congress’s Article I power to “lay and collect Taxes.”  As noted above, he found this argument to be persuasive, as did the left-leaning Justices. “Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the se­vere burden that taxation — especially taxation motivated by a regulatory purpose — can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.”

Although under the ACA the mandate was characterized as a “penalty,” and not a tax, Congress’s power to impose the requirement stems from its authority to tax. The mandate may thus be reasonably characterized as a tax, and is therefore permitted by the Constitution.

Dissents

There were two dissents. Writing jointly in a 65-page opinion (Justice Kennedy read excerpts from the bench as the opinion was announced), Justices Scalia, Kennedy, Alito and Thomas explained their view that Congress exceeded its Commerce Clause authority when it enacted the individual mandate. Further, the mandate did not fall within Congress’s taxing power under the Constitution.

Having determined the mandate to be invalid, the dissenters then proceeded to hold that severability is not possible: the entire ACA is invalid.

Justice Thomas also wrote a brief, separate dissent, which no other Justice joined.

Other holdings

The Court also concluded as a threshold matter that the Anti-Injunction Act did not bar the suit. In addition, the provisions expanding Medicaid have been narrowed, but not invalidated.

(We’ll have more on the dissents and the other holdings in tomorrow’s post.)

What’s next for ACA

As of now: up and running. Except for the curtailment of the Medicaid expansion, all provisions of the ACA remain intact after the High Court’s ruling. This includes the market reforms already in effect (e.g., adult child coverage; phase-in of annual/lifetime limits; and the requirements for preventive care), as well as the reporting and disclosure requirements already rolled out by the regulatory agencies (e.g., the new appeals process and the Summary of Benefits and Coverage requirements--compliance with the latter must begin no later than September 23, 2012).

In addition, the regulatory agencies presumably will continue to get ready for implementation of provisions not effective until 2014: finalizing the requirements for the essential benefit package, continuing to work on the nondiscrimination rules, etc…

Also still alive at this point is the requirement that States have up and running by 2014 a health benefit exchange that will allow those seeking health coverage to compare qualified plans and choose the one that works best for them. Fewer than 20 States to date have established an exchange: many were waiting for the ruling from the High Court.

November election.  However, it’s not likely that States that have resisted enacting the legislation necessary to create an Exchange will rush to do so now. Instead, they may await the outcome of the next test for the Affordable Care Act. It’s scheduled for November 6, 2012.

Supreme Court: ACA individual mandate is constitutional

In a 5-4 ruling, the Supreme Court has held the individual mandate provision of the Affordable Care Act to be constitutional, but not as a valid exercise of Congress’s power under the Constitution to regulate interstate commerce. Instead, the mandate, codified as Sec. 5000A of the Internal Revenue Code, is upheld as within Congress’s power under the Taxing Clause. Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan to reach this result.

In addition, the provisions expanding Medicaid have been narrowed, but not invalidated. The remainder of the ACA, including all reforms of the individual and group insurance markets, remains intact.

It’s a complicated decision, with multiple concurrences and dissents. We’ll provide in-depth analysis of the ruling later today.

Wanted in 2020: Five million more health care workers

Demand for healthcare will grow twice as fast as the national economy over the next eight years, creating 5.6 million new jobs, according to a study released last week by the Georgetown University Center on Education and the Workforce. Work in the healthcare industry is supported by people in a host of related jobs, such as hospital accountants, pharmaceutical sales representatives, doctor's office secretaries and the like. If you include all of these behind-the-scenes players, the healthcare industry will grow from 15.6 million jobs in 2010 to 19.8 million jobs in 2020 — 13 percent of all jobs. By 2020 we will be spending 1 out of every 5 dollars we earn on healthcare.

The demand for postsecondary education in healthcare will grow faster than in any other field except in the so-called "STEM" occupations (Science, Technology, Engineering, and Mathematics) and in Education-related jobs, the study shows. A total of 82 percent of those 5.6 million new healthcare jobs — 4.6 million — will require postsecondary education and training.

"In healthcare, there are really two labor markets: professional and support," said Anthony P. Carnevale, the Center's director and the report's lead author. Professional jobs demand postsecondary training and advanced degrees while support jobs demand high school and some college. There is "minimal mobility" between the two, he added, "and the pay gap is enormous: The average professional worker makes 2.5 times as much as the average support worker."


Among the study's other findings:



---Healthcare successfully competes for science and engineering talent. Because healthcare, science, and technology fields tend to require similar skills, healthcare programs at the associate and bachelor's level are often an appealing alternative for science and engineering students.


---Though healthcare and STEM skills are similar, healthcare reflects distinctly different work interests and values. People in healthcare jobs tend to value forming social bonds, while people who gravitate to STEM occupations place a greater emphasis on achievement and independence.


---Upskilling in nursing is growing especially fast. In 1980, 37 percent of entry-level registered nurses had at least an associate's degree; by 2008, that figure had increased to 80 percent.

---Rising bachelor degree requirements in nursing is crowding out disadvantaged minorities. A total of 51 percent of White nurses under 40 years old have bachelor's degrees, compared to only 46 percent of Hispanics and 44 percent of African American nurses.


---Healthcare has the largest number and proportion of foreign-born and foreign-trained workers in the U.S. Among healthcare workers 22 percent are foreign born, compared to 13 percent of all workers nationally. Most foreign-born nurses come from the Philippines, India and China.


---Of all occupations, doctors and physicians are the highest income earners in the country and tend to come from mostly affluent backgrounds.


For more information, go to http://cew.georgetown.edu/.

Supreme Court agrees to hear an ERISA health benefits case for 2012-2013 term

While all eyes were focused this morning on whether the U.S. Supreme Court would issue its widely-anticipated ruling on the constitutionality of the Patient Protection and Affordable Care Act (PPACA), lost amidst all the hubbub is the fact that the Court agreed to hear another health benefits-related case during the next term. In legal parlance, the Court “granted cert” in the U.S. Airways v. McCutchen case.

The issue presented is whether the U.S. Court of Appeals for the Third Circuit correctly held, in conflict with several other circuits, that equitable relief under ERISA Sec. 502(a)(3), available to health benefits plan administrators, can be limited by equitable defenses, such as unjust enrichment. According to the Third Circuit, these equitable defenses can override express plan terms that would otherwise allow for full reimbursement from beneficiaries.

In this case, after a health plan participant was injured in a car accident, the health plan paid $66,866 in medical benefits on his behalf. After a lawsuit, the participant recovered $110,000. However, once attorney’s fees were taken out, the participant received less than $66,000, which is less than the amount the participant was required to repay to the health plan, leaving him worse off than if he had not sued at all.

A decision in this case is expected during the Court’s next term, which starts in October, 2012.

Still waiting: no Supreme Court decision on ACA today

The Supreme Court did not announce its ruling on the Affordable Care Act today. The decision is expected to be released on Thursday of this week.

HHS claims 3 million young adults covered due to ACA

A report released last week by the Department of Health and Human Services says that 3.1 million young adults have gained health insurance because of the Affordable Care Act. As a result of the health care law, the proportion of insured adults ages 19 through 25 has increased to nearly 75 percent.

The ACA requires insurers to allow young adults to remain on their parents' family plans until their 26th birthday, even if they move away from home or graduate from school.

"Because of the health care law, more than 3 million more young adults have health insurance," said HHS Secretary Kathleen Sebelius in a press release. "This policy doesn't just give young adults and their families peace of mind, it also gives them freedom. It means that as they begin their careers, they will be free to make choices based on what they want to do, not on where they can get health insurance."

A similar report released in December 2011 showed that 2.5 million young adults who would otherwise have been uninsured had gained coverage through June 2011. Using the most recent information on insurance coverage from the National Health Interview Survey conducted by the National Center for Health Statistics, the latest report shows that from September 2010 to December 2011 the percentage of adults ages 19 through 25 with insurance coverage increased from 64.4 percent to 74.8 percent. That translates to 3.1 million young adults with coverage.

A recent private report found the number of  young adults newly insured as a result of the law to be even higher. In any event, analysts expect the young adult dependent coverage option to remain a feature of many private plans, regardless of the nature of the Supreme Court's ruling on the health care law.

IRS clarifies rules on health FSA contribution limits under ACA

Although there are currently no dollar limits on health FSA contributions, the Patient Protection and Affordable Care Act (PPACA) requires companies to limit pre-tax health flexible spending account (FSA) contributions to no more than $2,500 per calendar year. This law change is slated to take effect for “taxable years beginning after December 31, 2012.”


Many employers with non-calendar year FSAs, however, were fearful that they needed to act now to implement this limit, believing the $2,500 limit to be tied to the participant’s tax year, which is almost always the calendar year. However, these companies can now breathe a sigh of relief as the IRS has clarified the effective date of the $2,500 FSA limit. The reference to “taxable year” in the $2,500 limit rules refers to the plan year of the cafeteria plan, not the participant’s tax year, the IRS says, as this is the period for which salary-reduction elections are made.

Plan amendments required by end of 2014

In Notice 2012-40, the IRS has clarified that the $2,500 FSA limit does not apply for plan years that begin before 2013. In fact, the IRS indicates that employers may adopt any required plan amendments to reflect the $2,500 limit (or any lower limit specified in the plan) at any time through the end of the 2014 calendar year. An amendment to conform a plan to the $2,500 limit that is adopted on or before December 31, 2014, may be made effective retroactively, as long as the cafeteria plan is being operated in accordance with the plan limit rules for plan years beginning after December 31, 2012.
Relief for mistaken excess contributions

If one or more employees are erroneously allowed to make an FSA contribution of more than $2,500, the IRS is providing relief for relief if these excessive contributions are due to a reasonable mistake by the employer (or the employer’s agent) and not to willful neglect. This relief is available only if contributions exceeding the $2,500 limit are corrected, that is, paid to the employee and reported as wages on the employee’s W-2.

Special situations to note

In the case of an FSA providing a grace period (which may be up to two months and 15 days), unused salary-reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.

If a plan has a short plan year, one with fewer than 12 months, which begins after 2012, the $2,500 limit must be prorated based on the number of months in that short plan year.

Finally, in Notice 2012-40, the IRS has clarified that the statutory limit of $2,500 does not apply to flex credits, contributions available under other types of FSAs, health savings accounts, or health reimbursement arrangements, or to salary reduction contributions to cafeteria plans that are used to pay an employee's share of health coverage premiums. In other words, the $2,500 limit applies only to salary reduction contributions under a health FSA, the IRS says.

Benefits decision makers doubt their ability to comply with key upcoming ACA regulations

Any day now, the U.S. Supreme Court is expected to issue its decision on the constitutionality of the Patient Protection and Affordable Care Act (ACA). However, an ADP Research Institute survey offers an interesting look at what human resources and benefits decision makers are feeling about their confidence in their ability to comply with health reform provisions.

According to the ADP Research Institute survey, a significant number of HR and benefits decision makers at U.S. companies of all sizes expressed a lack of confidence that their organizations clearly understand their new responsibilities under the requirements of the ACA. The study also found that preparedness for key upcoming ACA regulations varies greatly across different sized companies.

Largest firms most confident. The ADP survey of more than 800 HR and benefits decision makers in U.S. organizations of all sizes found that decision makers at small businesses (1-49 employees) were the most vocal in confirming their belief that the U.S. health care landscape is undergoing profound change (64 percent). However, 52 percent of their counterparts at midsized (50-999 employees) and large (1000+ employees) organizations hold the same view.

“The ADP Research Institute’s recent survey clearly shows that confusion and lack of preparedness surrounding ACA provisions is a widespread issue for U.S. companies of every size, although small and midsized companies seem particularly challenged,” said Jan Siegmund, Chief Strategy Officer of ADP. “For example, our study shows that half or more of small and midsized companies are unprepared to meet the newly-required summary of benefits and coverage required by the ACA.”

Findings on specific ACA provisions. According to the ADP Research Institute survey, just 40 percent of respondents from large organizations are very confident about their understanding of employer requirements under the ACA, while even fewer respondents in small companies (20 percent) and midsized companies (17 percent) expressed that same level of confidence. Moreover, a majority of human resources and benefits decision makers at small and midsized companies (67 percent and 62 percent respectively) indicated they are unaware of the upcoming employee notification requirement about public exchanges. Thirty-two percent of survey respondents from large organizations indicated a similar lack of awareness.

In terms of being ready to provide the newly required summary of benefits and coverage, 66 percent of large companies, 50 percent of midsized companies and just 31 percent of small businesses say they are prepared.

SBC coverage example calculator released under ACA

Under the Patient Protection and Affordable Care Act (ACA), starting September 23, 2012, group health plans and health issuers are required to meet the reporting and disclosure requirements of Public Health Service Act (PHSA) Sec. 2715, namely, to provide a summary of benefits and coverage (SBC) that accurately describes the benefits and coverage under the applicable plan or coverage. The SBC is required to include 12 content elements, and one of these elements is coverage examples that illustrate benefits provided under the plan or coverage for common benefits scenarios (such as pregnancy and chronic medical conditions).

On June 5, the Center for Consumer Information and Insurance Oversight (CCIIO) provided health insurance plans and issuers with a coverage example calculator on its website. The calculator is for plans and issuers to use as a safe harbor for the first year of applicability to complete the coverage examples in a streamlined fashion. This tool is intended to provide plans and issuers with time to develop accurate methods to populate the coverage examples treatment tables in the SBC template. However, the CCIIO noted that because this approach will be less accurate, it is being allowed as a transitional tool for the first year of applicability. Plans and issuers will be required to provide comprehensive coverage examples that are based on the coverage information specific to the benefit package no later than January 1, 2014.

The calculator allows plans and issuers to input a number of elements about the benefit package, such as information on the plan's cost-sharing, deductibles, and coverage limits for several benefit categories. Calculator inputs generally are expected to coincide with the data fields used to populate the front portion of the SBC template.

Most Employers Working To Make Their Health Insurance Benefit Plans ACA Compliant, Pending Supreme Court Ruling

Most single employers and corporations (86 percent) will or are likely to continue to provide health coverage to their employees in 2014, the year when most of the provisions of the Patient Protection and Affordable Care Act (ACA) take effect, according to the International Foundation of Employee Benefit Plans’ Health Care Reform: 2012 Employer Actions Update survey. The survey focuses on the most important issues raised by the ACA facing employers this year. Topics addressed include employer concerns regarding plan design and funding, methods for communicating with employees, grandfathered plan status, reactions to health insurance exchanges and the potential impact on health care benefit costs.

“These employers recognize that offering health care coverage is an important benefit that helps retain current employees, attract future talent, and increase employee satisfaction,” said Michael Wilson, chief executive officer at the International Foundation.

“Employers are redesigning their health plans to remain in compliance [with the ACA] and to curb anticipated costs,” added Julie Stich, director of research at the International Foundation. “The research told us that increasing participants’ share of premium costs is the most common technique, followed by increasing in-network deductibles and out-of-pocket limits.”

The research showed that only 1 percent of the respondents will definitely not provide coverage to all full-time employees in 2014. Among the 54 percent of employers that did not state that they will definitely continue to provide coverage to all full-time employees in 2014, the most likely cause for discontinuing coverage would be the cost of providing coverage becoming too expensive (45.1 percent).

Highlights of the survey follow.

Responses To Health Reform

• Nearly half of employers (47.2 percent) are focused on making their plans compliant with ACA requirements. Just under 40 percent are focused on beginning to develop tactics to deal with the implications of reform and 37.3 percent are developing a multiyear approach. Slightly fewer than one-third are taking a “wait and see” stance.
• Organizations with a “wait and see” attitude are waiting for the following events before they make further plans for implementation: the Supreme Court decision on the ACA challenge (80.7 percent), further regulatory guidance (62.4 percent), and the outcome of the 2012 presidential and congressional elections (52.1 percent).
• Respondent employers communicate with employees regarding the ACA mostly through annual enrollment materials (81.1 percent of employers), e-mails to employees (34.8 percent), the company website (24.1 percent), and special written communication pieces (22.9 percent).

Cost Implications

• Nearly half of all employers (47.2 percent) have conducted an analysis to determine how the ACA will affect their health care plan costs. The majority (69.6 percent) of organizations expect the ACA will raise their costs in 2012 as follows: 25.6 percent by 1 percent to 2 percent and 19.8 percent by 3 percent to 4 percent. Employers that have not conducted an analysis of plan costs are slightly more likely to estimate cost increases, the International Foundation noted.
• Extending coverage to adult children until age 26 was listed as the top cost driver among provisions already in place (38.7 percent), while the nondeductible excise tax on high-cost health plans beginning in 2018 would be the top cost driver in the future (19.6 percent). Consequently, some 14 percent of respondents have already started to redesign their primary health plan to avoid triggering the 2018 excise tax.
• Approximately 14 percent of responding employers anticipate making a change (most by adding stop-loss insurance) in their funding approach for their primary medical plan due to changes imposed by the ACA.

Cost Management Initiatives

• Increasing participants’ share of premium costs is the most common technique used to address cost increases caused by health reform (used by 23.1 percent of respondents). In the next two years, 20.1 percent of employers plan to increase employees’ share of dependent coverage cost.
• In addition, 33.4 percent of surveyed organizations either have conducted dependent eligibility audits or plan to do so in the next two years, and another 29.5 percent have analyzed or plan to analyze claims.
• One-third of respondents (33.2 percent) are considering offering the increased wellness incentives allowed beginning in 2014.

Health Insurance Exchanges

• Among respondents considering using the exchanges in 2014, more are likely to direct only some employees to the exchanges and continue to provide coverage for others as opposed to dropping coverage for all employees.
• Approximately one-third of respondents said that the most likely reason they would drop coverage would be that other organizations in their industry or their geographic area are discontinuing coverage (27.5 percent and 4.8 percent, respectively).
• Among organizations that will definitely continue to provide coverage, respondents overwhelmingly chose the following three reasons for doing so: to retain current employees and to attract future talent (55.4 percent each), and to maintain or increase employee satisfaction/loyalty (53.5 percent).

Grandfathered Plans

• The primary health plan of more than one-third of responding organizations (34.3 percent) is a grandfathered plan. However, 46. 9 percent of employers with a grandfathered plan anticipate their plan will lose grandfathered status in 2014 or earlier.
• For respondents, the top advantages of being grandfathered are the exemptions from the following requirements: to provide coverage for preventive care with no cost sharing or annual limits (29.6 percent), implementation of the appeals process (29.6 percent), and providing the essential benefits (28.9 percent).

For more information, visit www.ifebp.org.

6.6 Million Young Adults Might Have Been Uninsured In 2011 If Not For Health Reform

In 2011, 13.7 million young adults ages 19 to 25 stayed on or joined their parents’ health plans, including 6.6 million who likely would not have been able to do so before the Patient Protection and Affordable Care Act (ACA) was enacted, according to a new report from the Commonwealth Fund.

However, not all young adults have parents with health plans they can join, and many still experience gaps in coverage and face medical bill problems and medical debt. Nearly two of five (39 percent) young adults ages 19 to 29 went without health insurance at some time in 2011, and more than one-third (36 percent) had medical bill problems or were paying off medical debt.

The report, Young, Uninsured and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act Is Helping, found that 13.7 million young adults stayed on or joined their parent’s health plans from November 2010 to November 2011, with about half of those likely gaining coverage because of the provision in the ACA requiring that health plans that include dependent coverage insure children until age 26.


Young adults in low-income households were most at risk for remaining uninsured. Seventy percent of young adults with incomes under 133 percent of poverty ($14,484 for a single person) had a gap in coverage in 2011, more than three times the rate of those with incomes over 400 percent of poverty ($43,560 for a single person). Only 17 percent of young adults ages 19 to 25 in low-income families stayed on or joined their parents’ plans, compared with 69 percent of young adults in the highest income households. Young adults over 25 cannot take advantage of the early provision.

“While the ACA has already provided a new source of coverage for millions of young adults at risk of being uninsured, more help is needed for those left behind,” said Sara Collins, vice president at Commonwealth Fund. “The ACA’s major insurance provisions slated for 2014, including expanded Medicaid and subsidized private plans through state insurance exchanges, will provide nearly all young adults across the income spectrum with affordable and comprehensive health plans.”

Many Accumulate Medical Debt; Delay Needed Care

More than one-third of all young adults ages 19 to 29 are coping with medical bill burdens just at the beginning of their working lives, the report found. Of those who reported problems with medical bills or debt, many faced serious financial consequences such as using all of their savings (43 percent), being unable to make student loan or tuition payments (32 percent), delaying education or career plans (31 percent), or being unable to pay for necessities such as food, heat, or rent (28 percent). Those who were uninsured or had a gap in coverage were at greatest risk: 51 percent of young adults who were uninsured when surveyed and 44 percent with a gap in coverage during the year had a medical bill problem or medical debt.

The amount of medical debt was often substantial. One-quarter of young adults who were paying off medical debt owed $4,000 or more, and 15 percent reported $8,000 or more in debt. Among those with a gap in coverage during the year who were paying off debt, 31 percent had $4,000 or more of medical debt, 21 percent had $8,000 or more, and 11 percent had $10,000 or more.
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Regardless of whether or not they had insurance, many young adults skipped or delayed getting needed health care because of cost. Forty-one percent of young adults said they did not fill a prescription; skipped a medical test, treatment, or follow-up visit recommended by a doctor; did not go to a doctor when sick; or did not get needed specialist care because of cost. Those who were uninsured or who had a gap in coverage were at greatest risk: 60 percent of young adults who were uninsured when surveyed and 56 percent of those who had an insurance gap during the year did not get needed care because of cost, compared with 29 percent of young adults who were insured all year.

While 85 percent of young adults with continuous insurance coverage reported having a regular doctor or place of care, that rate fell to 72 percent for those with gaps in coverage during the year and to 38 percent for those without insurance at the time of the survey. Similarly, rates of preventive care, including weight and blood pressure checks, were lower for those with any coverage gaps and continued to drop for young adults without insurance.

Timely use of dental care also varied depending on whether young adults had insurance. Young adults who were continuously insured under a plan that included dental coverage had the highest rates of dental care: 76 percent had had a dental check-up in the past year. Only 54 percent of those who had a gap in their insurance coverage in the past year and just 28 percent of those who were uninsured at the time of the survey had had a dental exam.

Affordability A Major Barrier

Young adults are likely to enroll in health plans in large numbers when new affordable options become available under the ACA in 2014, the Commonwealth Fund found. In addition to millions of young adults enrolling in their parents’ policies over the past year, nearly two-thirds of working young adults ages 19 to 29 who were eligible for coverage through their jobs enrolled in their employers’ health plans. The main reasons for not taking up employer coverage included being covered under a parent’s or spouse’s policy or not being able to afford the coverage. Just 6 percent of young adults said they did not need coverage.

“Clearly, young adults recognize the value of health insurance that provides protection against burdensome medical debt and access to needed health care,” said Commonwealth Fund President Karen Davis. “The Affordable Care Act will provide all Americans with affordable coverage, and help young adults achieve healthy, productive, and financially secure futures.”

The Commonwealth Fund Health Insurance Tracking Survey of Young Adults, 2011, was conducted online between November 4 and November 24, 2011, and includes responses from 1,863 respondents ages 19 to 29. For more information, visit http://www.commonwealthfund.org.

U.S. Companies Think ACA Will Be Partially Overturned, IFEBP Finds

American employers believe that the Supreme Court will overturn the individual mandate in the Patient Protection and Affordable Care Act (ACA), but will allow different provisions to remain in the law, according to the International Foundation of Employee Benefit Plans' Supreme Court Affordable Care Act Survey.

In anticipation of the Supreme Court's ruling on the ACA, the International Foundation in early May surveyed plan administrators, trustees, and organizational representatives from single-employers/corporations, multiemployer trust funds and public/governmental employers and received 1,027 responses. The respondents represent a comprehensive range of organizations with respect to size and region, providing a wide ranging look into how American employers view the ACA, the International Foundation said.


While 66 percent of the respondents think the individual mandate will be struck down but other pieces of reform will be kept intact, the remaining one-third is split between those who think the entire law will remain intact (19 percent) and those who think the entire law will be thrown out (15 percent).

"While the Foundation recognizes that reaching a consensus on the ACA among our membership would be difficult, it's clear that our members agree that steps must be taken to address the access to quality, affordable health care in America,"said Michael Wilson, chief executive officer of the International Foundation.

When asked which provisions of the law they would like to be reinstated through new legislation if the Supreme Court were to throw out the health care reform law, organizations and workers agreed on two of their respective top three choices: extending coverage of adult children to the age of 26 and requiring the elimination of pre-existing condition exclusions.

The top provisions of ACA that organizations would like to remain are:

• ability to offer increased wellness incentives (33 percent);
• required elimination of pre-existing condition exclusions (23 percent); and
• required coverage of adult children up to age 26 (22 percent).

The top provisions of ACA that representatives say workers would like to remain are:

• required coverage of adult children up to age 26 (59 percent),
• required elimination of pre-existing condition exclusions (34 percent), and
• no cost sharing for preventive care (32 percent).

Members said they are monitoring the Supreme Court closely, but 45 percent are in a "wait and see" mode. Three in five organizations are following the Supreme Court decision extremely or very closely and fewer than two percent say they are not monitoring the case at all. Two types of organizations, those with fewer than 50 workers or more than 10,000 workers, are paying the closest attention to the Supreme Court decision.

Many organizations are noticing a slight increase in anxiety among workers due to the ACA and the Supreme Court decision. More than two in five respondents believe the ACA and the Supreme Court hearings are increasing their workers' anxiety, while close to half have not noticed changes in workers' anxiety. Smaller organizations are more likely to say their workers are experiencing anxiety regarding ACA and the Supreme Court decisions.

For more information, visit http://www.ifebp.org.

Issues of Contraception and Reproductive Procedures at the Forefront in Missouri, Federal Courts

The Missouri House of Representatives approved legislation allowing health care workers to refuse to provide contraception or carry out procedures that violate their religious or ethical beliefs. The bill states that "notwithstanding any other provision of law to the contrary" employers and health plan providers and sponsors cannot be forced to provide coverage for abortion, contraception, or sterilization procedures "if such items or procedures are contrary to the religious beliefs or moral convictions of such employee or person."

Under the bill, S. 749, doctors, nurses and other medical workers could not be disciplined or discriminated against for their refusal to participate in abortions, embryonic stem-cell research, or other procedures. Following the 117-37 vote in favor of the legislation, it heads back to the senate. The senate must then either accept the house version or request negotiations. 

On a similar vein, a judicial response will likely be forthcoming on the question of a provision in the Patient Protection and Affordable Care Act (ACA) that requires employers to provide insurance coverage for contraception for their employees.  Last week, 43 Catholic groups, including the archdioceses of Washington, D.C., and New York and prominent Catholic universities, filed 12 lawsuits in U.S. District Courts throughout the country challenging the requirement. The religious groups claim that the requirement to provide such coverage would cause these employers to take actions counter to the teachings of their church. Although under the law, some religious employers are exempt, others like the parties to this suit do not fall within the exemption.  

Many Small Employers Ineligible for Affordable Care Act Tax Credit

Although up to 4 million small employers may have been eligible to claim the Small Employer Health Insurance Tax Credit in 2010, only 170,300 small employers actually claimed the credit, according to a recent report from the Government Accountability Office (GAO). The report, Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity, http://www.gao.gov/products/GAO-12-549 noted that few small employers took advantage of the credit because most do not offer health insurance. According to the report, employers, tax preparers and brokers explained that the tax credit, alone, was not enough of an incentive for small businesses to begin offering insurance.

The tax credit, created by the Patient Protection and Affordable Care Act (ACA), allows a credit of up to 35 percent of premium costs for small employers who offered health insurance. Under the provision, an eligible small employer may claim a tax credit if it makes nonelective contributions that pay for at least one-half of the cost of health insurance premiums for the coverage of its participating employees.

Aside from these issues, eligible small employers failed to claim the credits because of complex rules on full-time equivalents (FTEs) and average wages. Others declined to take advantage of the tax credit citing the amount of time needed to calculate the credit deterred claims.

To remedy these issues, the GAO recommended that the IRS improve instructions to examiners working on the credit and analyze results from examinations of credit claimants and use those results to identify and address any errors. 

New Jersey Governor Vetoes Health Insurance Exchange

Last week, New Jersey Governor, Chris Christie, a Republican, became the second governor to veto a state law that would have created a health insurance exchange in the state. States are required under the Patient Protection and Affordable Care Act (ACA) to create such exchanges as online marketplaces for residents and small businesses to buy health insurance. 


Christie joins the governor of New Mexico in vetoing such a bill. Four other states have notified the Department of Health and Human Services that they will not create such exchanges.

Christie noted that the Supreme Court is currently considering the constitutionality of the ACA, and explained that he vetoed the bill because the exchange was “premature” and could impose “unnecessary obligations upon the state’s citizens.”  

Ultimately, the practical effect of Christie’s veto is limited. Under the ACA states that do not make progress toward establishing an exchange by January 2013 invite action by the federal government. States without health care exchanges will have to pay to set up an exchange, but the federal government will take over the administrative operations. On the other hand, regardless of the outcome of the Supreme Court’s decision, some states may wait to take action on exchanges until the outcome of the Presidential election in November. If the Republicans gain control of both the presidency and Congress, the Act may be repealed or this requirement may be significantly altered.


Not all states are taking this tack on the issue of exchanges. Governors of 11 states and District of Columbia have approved legislation to establish exchanges in their states. New York Governor Andrew Cuomo established an exchange by executive order and the Governor of Kentucky announced that he would do the same if the Court upholds the ACA.  Two states, Massachusetts and Utah, currently have operational exchanges.

Today’s the day . . . your MLR report is due to HHS

Ahhh, June 1^st. It’s a lovely day. It’s a Friday, and the official start of summer is just a few weeks away. But is there something else going on today? It’s not a holiday or my birthday (if it’s yours, Happy Birthday!). 

Oh, that’s right! June 1 is the date the medical loss ratio (MLR) annual report is due to the Department of Health and Human Services (HHS). If this reporting requirement applies to you (and it does if you are an insurer offering group or individual health insurance or if you are a group health plan (but not if you are a self-funded plan)), you’d better stop reading this and get cracking on filling out the reporting form. Here’s a handy link to the 58 pages of instructions.

Note that “mini-med” plans (policies that have a total annual limit of $250,000 or less) and expatriate plans must submit quarterly filings. In addition, an issuer of only excepted benefits is not subject to the MLR filing requirements, according to Q&As issued last week.

Yes, it's due today! If you were hoping for an extension of the June 1 deadline, you're out of luck. The Centers for Medicare & Medicaid Services (CMS) confirmed earlier this week in

Technical Guidance (CCIIO 2012—004) that the June 1 deadline will not be extended.

What has to be reported? In case you’ve forgotten, Public Health Service Act (PHSA) Sec. 2718, as added by the Patient Protection and Affordable Care Act (ACA), requires health insurers offering group or individual insurance coverage and group health plans to provide annual reports concerning the proportion of premiums that go to providing benefits. The report must identify the ratio of the incurred loss (or incurred claims) plus the loss adjustment expense (or change in contract reserves) to earned premiums. Issuers and plans must provide annual rebates of excess costs to their enrollees.

The report must include the percentage of total premium revenue that such coverage expends on the following:

1.      reimbursement for clinical services,

2.      activities that improve health care quality,

3.      all other non-claims costs, including an explanation of the nature of such costs, and

4.      federal and state taxes and licensing or regulatory fees.

What’s the MLR? Under PHSA Sec. 2718, minimum loss ratios are established for large group plans, small group plans, and individual plans. The minimum loss ratio for large group plans (plans with 101 or more employees) is 85%, or a higher percentage if a state requires it. The minimum loss ratio for individuals and small group plans (plans with 100 or fewer employees) is 80%, or a higher percentage if a state requires it.

What if I don’t comply? I’m just the messenger, but you should know that HHS regulations provide for the imposition of civil monetary penalties if an issuer fails to comply with these reporting and rebate requirements. The civil monetary penalties provide for a penalty for each violation of $100 per entity, per day, per individual affected by the violation.

Why are you still reading this? I just told you about the possible penalties for noncompliance, so you better get to work! If you need help, click here and here for prior posts on MLR rules. If you’re not responsible for filling out an MLR annual report and you’d rather read about the rebate you might receive, click here instead.