CCIIO updates state exchange information

The Center for Consumer Information & Insurance Oversight (CCIIO) has released an assortment of updates with regard to the new state exchanges to be implemented under the Patient Protection and Affordable Care Act (ACA).

First, six Level One Exchange Establishment grant awards, totaling more than $181 million, have just been awarded to Illinois, Nevada, Oregon, South Dakota and Tennessee. This brings the total of Exchange-related grants provided to states over the last two years to more than $1 billion. The grants are designed to provide one year of funding to states that have begun the process of building their Exchanges.

A Level Two Establishment grant has also been awarded, for the first time, to the State of Washington. Level Two grants are provided to states that are further along in building their Exchange and offers funding over multiple years.*

For those of you wondering how much has been given to each state, and what each plans to do with its funds, there is a state-by-state breakdown of grant awards
detailing what each state plans to do with its Exchange funding, at a new map tool on HealthCare.gov - www.healthcare.gov/news/factsheets/2011/05/exchanges05232011a.html. Details such as the award amount, administrator, application due date, and level of funding are available, once you click on the map provided.

Next, guidance has also been issued in the form of a 45-page draft Exchange Blueprint, (under “Affordable Insurance Exchanges”, then “Forms” at http://cciio.cms.gov/resources/other/index.html#hie). States may use the Blueprint to demonstrate how their Affordable Insurance Exchange will work to offer a wide range of competitively priced private health insurance options. The Blueprint clarifies that states wanting to either operate state-based exchanges or participate in state partnership exchanges for 2014 must first declare the type of exchange model they intend to pursue through an Exchange Declaration Letter, and must complete an Exchange Application, details of which are provided in the Blueprint. The HHS will then review and potentially approve or conditionally approve the exchange no later than January 1, 2013, so it can begin offering coverage on January 1, 2014.

Consumers in every state are to have access to coverage through an Affordable Insurance Exchange by Jan. 1, 2014, advises the CCIIO. If a state decides not to operate an Exchange for its residents, the Department of Health and Human Services (HHS) will operate a Federally-facilitated Exchange (FFE). Guidance describing how HHS will consult with a variety of stakeholders to implement an FFE, where necessary, how states can partner with HHS to implement selected functions in an FFE, and key policies organized by Exchange function can be found at a document entitled “General Guidance on Federally-facilitated Exchanges” at http://cciio.cms.gov/resources/regulations/index.html#hie (under “Affordable Insurance Exchanges”, then “Guidance”).
The HHS has scheduled some implementation forums in the coming months to work with states and stakeholders on their exchange questions, and it also plans to engage in consultation with Tribes, Tribal Governments, and Tribal Organizations on how exchanges can serve their populations.

Upcoming forums include Regional Implementation Forums in Washington, DC (July 18), Chicago (August 2), Denver (August 10), and Atlanta (August 15) and Tribal Consultations in Washington, DC (July 26), Anchorage (August 7), and Denver (August 9).

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


* In 2010, 49 states and the District of Columbia received Exchange Planning grants totaling more than $54 million; in 2011, seven states received more than $249 million in Early Innovator grants; and to date, 34 states and the District of Columbia have received more than $856 million in Establishment grants, says the CCIIO. Exchange grants can be applied for through the end of 2014, although the funds are available for use beyond 2014.

What’s so special about November 10?

If November 10 is your birthday, then it’s a special day for you each year. But for those of us keeping an eye on the status of health care reform, November 10 this year is special for another reason.

During a private conference this Thursday, November 10, the U.S. Supreme Court will consider five petitions related to the Patient Protection and Affordable Care Act (ACA) and the Health Care and Education Reconciliation Act of 2010.

The petitions to be considered are:

1. Thomas More Law Center v. Obama, et al. (No. 11-117),
2. National Federation of Independent Business, et al., v. Sebelius (No. 11-393),
3. HHS v. Florida, et al. (No.11-398),
4. Florida, et al., v. HHS (No. 11-400), and
5. Liberty University v. Geithner (No. 11-438).

A sixth petition not yet distributed to the Justices is Commonwealth of Virginia v. Kathleen Sebelius (No. 11-420). (In my next post on Wednesday, I'll discuss the government's response to that petition and the likelihood the Court will review it. If you enjoy reading about whether or not a state can sue our government (and I know you do!), be sure to come back and visit this blog on Wednesday.)

Lower courts in disagreement. You may recall that the Eleventh Circuit Court of Appeals found that the minimum coverage provision of the ACA is unconstitutional while the Sixth Circuit found the provision to be constitutional. Due to this split of authority in the lower courts, the Supreme Court is expected to decide to review at least one of the cases regarding the provision’s constitutionality. One legal expert, Professor Brad Joondeph, who writes the aca litigation blog, puts the likelihood of the Supreme Court granting review on this issue at 99%. “If there is a constellation of factors that guarantees certiorari, this is it,” according to Joondeph.

(I’m no expert on matters involving the Supreme Court. But I’ll go out on a limb and say the chances of the Supreme Court deciding to review one of the cases are much better than the chances were of the St. Louis Cardinals winning the World Series this year. One Vegas bookie had the odds at 999 to one. Way to go Cards!)

When will we know? The Court could issue an order granting review on the same day of the conference, November 10, or on Monday, November 14, when it issues its regularly scheduled list of orders. (November 11 is another special day, Veterans Day, but because it’s a federal holiday, we won’t hear from the Court on Friday.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Close To A Million Young Adults Have Insurance Through Health Reform

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

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

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

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

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

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

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

Not yet a subscriber to Wolters Kluwer Law & Business? A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

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Access To Employer-Sponsored Health Insurance Continues To Decline

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

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

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

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

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

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

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

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

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

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

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

Uninsured Could Be Down To 5%

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

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

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

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

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

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

Not yet a subscriber to Wolters Kluwer Law & Business? A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Already a subscriber to Wolters Kluwer Law & Business? Get this additional information on health care plan the uninsured:

Access To Employer-Sponsored Health Insurance Continues To Decline

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

Determining What’s Affordable Under Health Reform

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

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

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

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

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

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

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

Proposed Safe Harbor

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

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

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

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

In particular, IRS seeks comments on the following issues:

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

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

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

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

Not yet a subscriber to Wolters Kluwer Law & Business? A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Already a subscriber to Wolters Kluwer Law & Business? Get this additional information on health care plan affordability and the employer’s responsibility:

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

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

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

Duplication Looms For Employers With Benefits Summary Proposed Rules

By March 23, 2012, both insured and self-funded plans should have available a summary of benefits and coverage (SBC) that "accurately describes the benefits and coverage under the applicable plan or coverage." The SBC and related rules are Part of Public Health Service Act Sec. 2715, as added by the Patient Protection and Affordable Care Act.

On Aug. 22, the Department of Labor's Employee Benefits Security Administration (EBSA), the Internal Revenue Service, and the Department of Health and Human Services issued proposed rules to help construct the SBC.

Employers and administrators that already provide summary plan descriptions are understandably concerned about the duplications and additional costs associated with elements of the new SBC requirement ‑ including a uniform glossary and coverage facts labels.

The new proposed rules acknowledge these concerns and ask for comments on whether the SBC should be allowed to be provided within an SPD if the SBC is intact and prominently displayed at the beginning of the SPD (for example, immediately after a cover page and table of contents), and if the timing requirements for providing the SBC (described in paragraph (a) of the proposed regulations) are satisfied.

Comments also are requested on ways the SBC might be coordinated with other group health plan disclosure materials (for example, application and open season materials).

What’s In The Rules

The proposed regulations provide rules implementing Patient Protection and Affordable Care Act (ACA) provisions that would ensure consumers have access to two forms that will help them understand and evaluate their health insurance choices. These forms include:

• an easy to understand Summary of Benefits and Coverage; and


• a uniform glossary of terms commonly used in health insurance coverage, such as "deductible" and "co-pay".

The proposed summary form and glossary were developed through a public process led by the National Association of Insurance Commissioners (NAIC) and a working group composed of stakeholders, including representatives of health insurance-related consumer advocacy organizations, health insurers, health care professionals, patient advocates that include those representing individuals with limited English proficiency, and other qualified individuals. The August 22 guidance proposes to adopt the recommendations submitted by the NAIC as a result of that process.

Summary Of Benefits And Coverage

Under the proposed rules, insurance companies and group health plans will provide consumers with a concise document detailing, in plain language, simple and consistent information about health plan benefits and coverage. The proposed regulations contain standards designed to ensure that the Summary of Benefits and Coverage will help consumers better understand the coverage they have and, for the first time, allow them to easily compare different coverage options. It will summarize the key features of the plan or coverage, such as the covered benefits, cost-sharing provisions, and coverage limitations and exceptions. People will receive the summary when shopping for coverage, enrolling in coverage, at each new plan year, and within seven days of requesting a copy from their health insurance issuer or group health plan.

The Summary of Benefits and Coverage will include a new, standardized health plan comparison tool for consumers known as "coverage examples," much like the nutrition facts label required for packaged foods, the EBSA said. The coverage examples would illustrate what proportion of care expenses a health insurance policy or plan would cover for three common benefits scenarios—having a baby, treating breast cancer, and managing diabetes. Using clear standards and guidelines provided by the Center for Consumer Information and Insurance Oversight (CCIIO) in consultation with the National Guideline Clearinghouse, plans and insurers will simulate claims processing for each scenario so consumers can see an illustration of the coverage they get for their premium dollars under a plan. Additional scenarios may be added in the future. The examples will help consumers understand and compare their share of the costs of care under a particular plan and see how valuable the health plan will be at times when they need the coverage.

With the information provided in the Summary of Benefits and Coverage, as well as the specific illustrations of how this coverage will work, consumers can find the best coverage for themselves and their families—and employers can find the best coverage for their business and their employees.

Uniform Glossary Of Terms

Under the proposed regulations, consumers will have a new tool to help them understand some of the jargon that makes it impossible to figure out what is covered and how one insurance plan stacks up compared to another, the EBSA noted. To allow apples-to-apples comparison, terms would be the same across all plans. Insurance companies and group health plans will be required to make available upon request a uniform glossary of terms commonly used in health insurance coverage such as "deductible" and "co-pay." To help ensure the document is easily accessible for consumers, HHS and the DOL also will post the glossary on the new health care reform website, http://www.HealthCare.gov and http://www.dol.gov/ebsa/healthreform/.

Accessing Information

The proposed regulations specify that, beginning on March 23, 2012, all health insurance issuers and group health plans will provide the Summary of Benefits and Coverage and the uniform glossary to consumers, as follows.

Information when shopping for coverage. An issuer or health plan will automatically provide a Summary of Benefits and Coverage to a consumer prior to enrolling in coverage and 30 days prior to reissuance or renewal of their health coverage, so they are informed about the coverage they have.

Information when coverage changes. Individuals enrolled in a health plan must be notified of any significant changes to the terms of coverage reflected in the Summary of Benefits and Coverage at least 60 days prior to the effective date of the change.

Information on demand. A shopper or person enrolled in coverage can request a copy of the Summary of Benefits and Coverage and must receive it within seven days. The uniform glossary will also be made available upon request, as well as in a link provided in the coverage label by the plan or insurance company.

Use of Information Technology and reducing burden on employers and insurers. The Summary of Benefits and Coverage may be provided to consumers in electronic form. Thus, a plan or issuer might post the Summary of Benefits and Coverage on its website or on HealthCare.gov, or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals.

Click here to send comments on the proposed rules.  When the comment page opens, select “Proposed Rule” as Document Type and “RIN 1210-AB52” as Keyword or ID.  You will then be able to send comments to the EBSA, CMS, or the IRS.

Not yet a subscriber to Wolters Kluwer Law & Business? A comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.

Already a subscriber to Wolters Kluwer Law & Business? Get this recent health reform guidance:

• Text, Proposed Rule, Health Reform Health Insurance Premium Tax Credit


• Explanations of the premium tax credit


• News, DOL, HHS, IRS Issue Proposed Standards, Forms For Health Care Plan Information


• Text, Proposed Rule, Summary Of Benefits And Coverage Under Health Reform


• News, ERRP Reimbursement Levels Increased

Health program spending linked to preventable death declines

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

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

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

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

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

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

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

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

Hidden Costs Of Health Care And The CLASS Act

Individuals in the United States spend $363 billion more on health care than is traditionally reported by the Centers for Medicare and Medicaid Services, according to a new Deloitte report.

More than half of that additional spending (55%) was for the estimated value of supervisory care, or care given by unpaid relatives and friends.

The connection to health care reform? Sec. 8002(a)(1) of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148), as I explain below.

ACA Sec. 8002(a)(1) added Title XXXII to the Public Health Service Act (PHSA) to establish the Community Living Assistance Services and Supports (CLASS) Program,

a new national, voluntary, consumer-funded insurance program, the CLASS Program, will help participants who have significant functional limitations to pay for assistive services and devices to allow them to continue to live in their homes or in a community setting. Employers may elect to deduct CLASS premiums from employees' paychecks.

The CLASS Act is an employer-based program meant in part to take the place of private long-term care insurance, which few people currently have. Employers must choose to enroll in the program, and employees can opt out if they wish.

The CLASS program would address those additional costs identified in the Deloitte report as “supervisory care.” However HHS Secretary Kathleen Sebelius already has acknowledged CLASS program funding difficulties. In addition, at a recent House hearing, HHS Assistant Secretary for Aging Kathy Greenlee said, “We are committing to making reforms to the program so that we can hit the financial targets,”  Ms. Greenlee added that HHS would not implement the program without those changes

So here is the dilemma: a substantial part of consumers’ increasing health cost burden is now and will continue to be long term care expenses (remember, baby boomers are just hitting normal retirement age). The CLASS program appears to address that problem, but even before it is implemented, the common wisdom is that the program is financially flawed.

What to do? Republicans want to eliminate the program, Democrats want to make it financially sound.

What do you think?

More on That Deloitte Study

Typically, national health expenditures are based on the CMS’s National Health Expenditure Accounts (NHEA), which totaled $2.467 trillion for 2009. Deloitte's study, developed in collaboration with Oxford Economics, adopted a broad view of health care expenditures which includes both direct and indirect costs, as well as items such as functional foods and nutritional supplements, complementary and alternative medicine (CAM) goods and services, and the imputed value of unpaid supervisory care provided to sick people by family and friends. The study also used data from a phone survey of 1,008 adult U.S. consumers conducted by Harris Interactive in September-October 2010.

The additional $363 billion is 14.7% more than the NHEA figures. Demonstrating the significance of the amount consumers now spend on health care, the additional costs captured in the new Deloitte study support an increase in consumer discretionary spending on health care from 16.2%, for items traditionally reported by the government, to 19.9%, which surpasses housing and utility costs at 18.8%.

High Costs Of Supervisory Care

More than half of the spending (55%) in these ancillary areas was for the estimated value of supervisory care, or care given by unpaid relatives and friends. Supplemental expenditures included complementary and alternative medicine (CAM) practitioners (8%) and products (1%), functional foods and other nutritional products, vitamin and mineral supplements (15%), health publications (1%), ambulance services (3%), other ambulatory care, such as blood banks, some health promotion programs (6%), mental health services (8%), homes for the elderly (4%), and weight loss facilities (1%).

"It has been one year since the passage of health care reform, and our report sheds new light on the hidden costs of health care, and how these costs can add up significantly to billions of dollars and can even eclipse housing as a household expense," said Paul Keckley, executive director, Deloitte Center for Health Solutions. "Our study explores the financial context for the decisions consumers - not simply patients - make about how they spend their money on health care, which will only increase in importance as health care reform continues to take hold."

The Deloitte report, The Hidden Costs of U.S. Health Care for Consumers: A Comprehensive Analysis, was conducted by Deloitte's Center for Health Solutions and Center for Financial Services to gauge the total costs consumers spend out of their own pockets on health care products and services, beyond what is typically paid by insurers and other government sources, such as Medicare and Medicaid.

"The ability of the U.S. economy to recover will be affected in part by how much consumers have in their pockets to spend," said Andrew Freeman, executive director of the Deloitte Center for Financial Services. "This reveals a tremendous burden on the average consumer."

Additional findings in the report:

• According to the Deloitte study, the total 2009 U.S. per capita expenditures were $9,217; professional services (29%) and hospital care (27%) were the biggest categories.


• The estimated value of supervisory care ($199 billion) is significantly higher than total spending on nursing homes ($144 billion) and total spending on home health care ($72 billion), and was only somewhat less than prescription drug expenditures ($246 billion).


• Approximately 70% of spending on nutrition industry items was directed towards functional foods, a category which includes such items as enriched cereals, breads, sports drinks, bars, fortified snack foods, baby foods and prepared meals.


• Seniors account for 36% ($1.01 trillion) of total health care expenditures, but are only 13% of the population.


• Nearly 83% of the $2.83 trillion 2009 U.S. health expenditures were attributed to those with family incomes of $100,000 or less, who make up 89% of the total population.


• One in five (21%) adults surveyed said they paid a medical bill late in the last 12 months.


• A total of 27% of adults estimate that 5% or less of their household budget is spent on health care; 17% said 26% or more is spent on health care.


• A majority (80%) of adults surveyed said they would use generic medicines, seek free advice from a pharmacist or other medical professional (70%), and use technology (61%) if it would save money for health care.


• Approximately 43% would visit a retail clinic, and one in five (20%) would visit another country for more affordable medical care.


• And, 26% would skip a medical test or screening, skip a visit to the dentist or doctor altogether (26%), or skip refilling a prescription (22%) to save money on health care.

"Our study suggests that as the U.S. economy struggles to rebound and consumers continue to be stretched to pay their bills, they are confronted with difficult choices, such as paying for health care instead of other household expenses," added Mr. Keckley. "Many consumers are turning to alternative and over-the-counter products, switching to generic medicines, or even skipping the doctor or visiting a retail clinic instead to save money. Health care organizations looking to address these unmet consumer needs should consider their strategy to expand their focus to include alternative products and services outside of the confines of the traditional health care sector."

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

Health Reform Repeal, Defund Efforts Begin; CBO Says Repeal Will Increase Deficit By $145 Billion

On Jan. 5, the first day of the 112^th Congress, Representatives introduced ten bills to repeal or defund the Patient Protection and Affordable Care Act (ACA). The House is expected to vote on one of the repeal bills next week week, H.R. 2, Repealing the Job-Killing Health Care Law Act, sponsored by Rep. Eric Cantor (Va.).

Senate Majority Leader Harry Reid (Nev.) already has noted that the health reform law will not be repealed, given the Democratic majority in the Senate.

Nonetheless, the philosophical battle regarding health reform has begun.  As noted in the title of H.R. 2, Republicans are attacking the potential job losses among small employers once the individual mandate takes effect in 2014. The Democrats are likely to use, at least in part, the argument that repeal would increase the deficit and do nothing to reduce the uninsured.

In response to the expected vote next week, the Congressional Budget Office on Jan. 6 released a preliminary analysis of H.R. 2, which describes “the effects that repealing [ACA] and the relevant provisions of the Reconciliation Act would have on federal budget deficits, the federal government’s budgetary commitment to health care, the number of people with health insurance, and health insurance premiums in the private market.”

As a result of changes in direct spending and revenues, CBO expects that enacting H.R. 2 would probably increase federal budget deficits over the 2012–2019 period by a total of roughly $145 billion, plus or minus the effects of technical and economic changes that CBO will include in the forthcoming estimate. Adding two more years (through 2021) brings the projected increase in deficits to something in the vicinity of $230 billion, plus or minus the effects of technical and economic changes.

New House Speaker Rep. John Boehner (Ohio) has repudiated the forecast of the CBO, saying that its analysts had relied on flawed assumptions they had been provided by Democrats. "CBO is entitled to their opinion," said Mr. Boehner. In general, CBO final budgetary analyses of legislation are accepted by Congress as the official predictor of budgetary effects.

The CBO projections do not include any potential savings in discretionary spending, which is governed by annual appropriation acts. By CBO’s estimates, repeal of the health care legislation would probably reduce the appropriations needed by the Internal Revenue Service by between $5 billion and $10 billion over 10 years. Similar savings would accrue to the Department of Health and Human Services.

Under H.R. 2, about 32 million fewer nonelderly people would have health insurance in 2019, leaving a total of about 54 million nonelderly people uninsured, according to the CBO. The share of legal nonelderly residents with insurance coverage in 2019 would be about 83%, compared with a projected share of 94% under current law.

Effects On Health Insurance Premiums

According to the CBO analysis, if H.R. 2 was enacted, premiums for health insurance in the individual market would be somewhat lower than under current law, mostly because the average insurance policy in this market would cover a smaller share of enrollees’ costs for health care and a slightly narrower range of benefits. Although premiums in the individual market would be lower, on average, under H.R. 2 than under current law, “Many individuals would end up paying more for health insurance—because under current law, the majority of enrollees purchasing coverage in that market would receive subsidies via the insurance exchanges, and H.R. 2 would eliminate those subsidies,” writes the CBO.

Premiums for employment-based coverage obtained through large employers would be slightly higher under H.R. 2 than under current law. In addition, according to the CBO, “Premiums for employment-based coverage obtained through small employers might be slightly higher or slightly lower (reflecting uncertainty about the impact of the enacted legislation on premiums in that market).”

Repeal Or Defund Proposals

These are the repeal or defunding bills introduced on Jan. 5.

H.R.2: Repealing the Job-Killing Health Care Law Act. Sponsor: Eric Cantor (Va.). Referred to the Committee on Energy and Commerce, and the Committees on Education and the Workforce, Ways and Means, the Judiciary, Natural Resources, Rules, House Administration, and Appropriations.

H.R.21: To amend the Internal Revenue Code of 1986 to repeal the mandate that individuals purchase health insurance. Sponsor: Scott Garrett (N.J.). Referred to the House Committee on Ways and Means.

H.R.38: To rescind funds appropriated to the Health Insurance Reform Implementation Fund under the Health Care and Education Reconciliation Act of 2010.Sponsor: John Fleming, (La.). Referred to the House Committee on Energy and Commerce.

H.R.105: To repeal the Patient Protection and Affordable Care Act and related health-care provisions and to enact in its place incentives to encourage health insurance coverage, and for other purposes. Sponsor: Dan Burton (Ind.). Referred to the Committee on Energy and Commerce, and the Committees on the Budget, Education and the Workforce, Natural Resources, House Administration, Ways and Means, the Judiciary, Rules, Appropriations, and Oversight and Government Reform.

H.R.118: To amend the Patient Protection and Affordable Care Act to permit a State to elect not to establish an American Health Benefit Exchange. Sponsor: John Fleming (La.). Referred to the House Committee on Energy and Commerce.

H.R.119: To prohibit the hiring of additional employees by the Internal Revenue Service to implement, administer, or enforce health insurance reform. Sponsor: John Fleming, (La.). Referred to the House Committee on Ways and Means.

H.R.127: To deauthorize appropriation of funds to carry out the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.Sponsor: Tom Graves (Ga.). Referred to the Committee on Energy and Commerce, and the Committees on Ways and Means, Education and the Workforce, the Judiciary, Natural Resources, and House Administration.

H.R.141: To repeal the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.Sponsor: Steve King (Iowa). Referred to the Committee on Energy and Commerce, and the Committees on Ways and Means, Education and the Workforce, the Judiciary, Natural Resources, House Administration, Rules, and Appropriations.

H.R.145: To repeal the Patient Protection and Affordable Care Act (Public Law 111-148) and related health-care provisions. Sponsor: Connie Mack (Fla.). Referred to the Committee on Energy and Commerce, and the Committees on Ways and Means, Education and the Workforce, the Judiciary, Natural Resources, House Administration, Rules, and Appropriations.

H.R.154: To prohibit the use of funds for implementation or enforcement of any Federal mandate to purchase health insurance. Sponsor: Ted Poe (Texas).Referred to House committee. Status: Referred to the House Committee on Energy and Commerce.

H.R.191: To amend the Patient Protection and Affordable Care Act to establish a public health insurance option. Sponsor: Lynn C. Woolsey (Cal.). Referred to the House Committee on Energy and Commerce.

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

In 2011, Implementation And Repeal Will Battle For The Fate Of Health Care Reform

Polar opposites, the effective implementation of health care reform and its wholesale repeal or funding blockade, will dominate the landscape of the Patient Protection and Affordable Care Act in 2011.

In other words, health reform will continue to expand its reach even as the courts and Congress debate the validity of the law.

Repeal, Defund

Several lower courts have begun the inevitable journey of health reform to the Supreme Court, which likely will not end until 2011 or 2012; and Republicans in the House of Representatives have scheduled a January 12 vote on repeal of the ACA, a certainty to pass in the Republican-led House and fail in the Democratic-controlled Senate.

Some analysts have predicted a difficult road in even a partial repeal or defunding efforts. Meanwhile, dozens of health reform provisions already have taken effect or will take effect this year, including those for the following (see also here, here, and here).

• Grandfathered plans


• Coverage for adult children


• Nondiscrimination rules for insured health plans


• Preventive care services


• Lifetime and annual limits


• Minimum loss ratios


• Preexisting condition exclusions


• Claims appeals processes


• Early retiree reinsurance program


• Benefits summary standards


• Expanding patient selection of providers


• Reviews of premium increases


• Small employer health insurance credit 


• Automatic health plan enrollment


• Nursing mother breaks


• Health care Internet portal


• W-2 health coverage disclosure


• Small employer “simple cafeteria plans”


• Over-the-counter medicines not reimbursable through HSAs & HRAs


• Increased excise tax on HSA & HRA non-medical distributions

More detailed information on the health reform provisions taking effect in 2010 and later are available to Wolters Kluwer Law and Business subscribers here.

Recent Guidance

And just in the two weeks since Health Reform Talk took a holiday break, the following implementing guidance has been issued

Health Reform Nondiscrimination Requirements Delayed. The application of the new nondiscrimination requirements in the Patient Protection and Affordable Care Act (ACA) have been delayed, according to IRS Notice 2011-1.

Under Public Health Service Act Sec. 2716 (as added by the ACA), new insured group health plans and plans that are not grandfathered must comply with the IRC Sec. 105(h) nondiscrimination requirements, including rules that the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate. In addition, the benefits provided under the plan may not discriminate in favor of participants who are highly compensated. Notice 2011-1 notes that “because regulatory guidance is essential to the operation of the statutory provisions,” the Treasury Department and the IRS, as well as the Departments of Labor and Health and Human Services have determined that compliance with Sec. 2716 “should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued under Sec. 2716.”

IRS Offers New Guidance On FSA And HRA Debit Cards. The Internal Revenue Service has issued new guidance in IRS Notice 2011-5 allowing the continued use of health flexible spending arrangement (FSA) and health reimbursement arrangement (HRA) debit cards for the purchase of prescribed over-the-counter medicines and drugs.

Information Sought On Value-Based Health Plans. Federal agencies are seeking additional information regarding specific examples and best practices of value-based insurance design (VBID) for recommended preventive services under the Public Health Service Act Sec. 2713, as added by the Patient Protection and Affordable Care Act (ACA). In addition, the agencies seek information on data used to support and inform VBID benefit design, measurement, and evaluation in the context of recommended preventive services.

The Internal Revenue Service, the Department of Labor’s Employee Benefits Security Administration (EBSA), and the Department of Health and Human Services’ Office of Consumer Information and Insurance Oversight sought the information in a request for information issued jointly in the Dec. 28, 2010, Federal Register.

HHS Issues New and Updated Guidance On Early Retiree Reinsurance Program. The Department of Health and Human Services’ Early Retiree Reinsurance Program (ERRP) Center has published new and revised questions and answers for plan sponsors, including the questions and answers on the application for the program, costs and reimbursements, early retiree issues, and price concessions and cost adjustments.

DOL, HHS, Treasury Answer More Questions On Health Reform, Mental Health Parity. On December 22, the Department of Labor's Employee Benefit Security Administration (EBSA), the Department of Health and Human Services (HHS), and the Treasury Department (the Departments) released the fifth set of frequently asked questions about the Patient Protection and Affordable Care Act (ACA). The FAQs also addressed some issues related to the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA).

DOL Requests Comments On Nursing Mother Provision Of Health Reform. The Patient Protection and Affordable Care Act (ACA) amended the Fair Labor Standards Act (FLSA) to require employers with more than 50 employees to provide reasonable break time and a place for nursing mothers to express breast milk for up to one year after the child's birth. This provision became effective when the ACA was signed into law on March 23, 2010. While the Department of Labor's Wage and Hour Division has issued a fact sheet on the provision, entitled Break Time for Nursing Mothers.  Under the FSLA, the DOL has requested comments on the provision before formulating further guidance. The request for information was published in the December 21 Federal Register.

HHS Proposes A Health Insurance Rate Increase Review Program Required By ACA. A new proposed rule from the Department of Health and Human Services' (HHS) Office of Consumer Information and Insurance Oversight (OCIIO) would establish a rate review program to ensure that all rate increases that meet or exceed an established threshold are reviewed by a state or the HHS to determine whether the rate increases are unreasonable. This requirement is included in Sec. 2794 of the Public Health Service Act, as enacted in the Patient Protection and Affordable Care Act (ACA), relating to the disclosure and review of unreasonable premium increases. Beginning in 2014, the ACA empowers states to exclude from the new health insurance exchanges health plans that show a pattern of excessive or unjustified premium increases. The rule was published in the December 23 Federal Register.

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

Health Reform Law Is Amended (A Tiny, Tiny Bit)

It’s not much of a change, but Congress has passed its first amendment to the Patient Protection and Affordable Act (ACA) since President Barack Obama signed it in March 2010.

Forget about the calls for wholesale repeal—even provisions Republicans and Democrats agreed should be changed remain in the law (more about that later). But on December 8 and 9, the Senate and the House of Representatives passed the Medicare and Medicaid Extenders Act of 2010, which in part extends current Medicare payment rates through Dec. 31, 2011. Under the current "sustainable growth rate" (SGR) formula, Medicare physician payment rates were scheduled to be reduced by 25% on January 1, 2011.

Congress has provided temporary relief (also known as the “doc fix”) from these Medicare reductions every year since 2003.

The estimated cost of the provision to extend Medicare payment rates until 2012 is $14.9 billion over ten years—here is where the health reform law comes into play. The cost of the extension will be paid for by a change in the refundable tax credit formula in the ACA.

Under IRC Sec. 36B as added by the ACA, certain taxpayers who purchase qualified health plans through state exchanges are entitled to a refundable income tax credit equal to the premium assistance credit amount, starting in 2014. The premium assistance credit applies to tax years ending after December 31, 2013.

Under the law, if an individual’s income turns out to be higher than the amount that was used to calculate the advanced premium tax credit, the individual must return part or all of the excess payment to the government. Originally, the amount repaid by the individual was limited to $250 for individuals and $400 for families for those at or below 400% of the Federal Poverty Level (FPL)

H.R. 4994 provision increases the existing limits of $250 and $400, and replaces the across-the-board structure with a scaled structure that starts with lower limits for those with lower incomes. For those with incomes less than 200% of FPL, the new limit would be $600.  For those with incomes of at least 450% but less than 500% of FPL, the limit on the payback would be $3,500.

Estimated savings from this minor change? More than $19 billion.

Oh, that provision that everyone wants changed? It went down in defeat late in November. There were at least two proposals to repeal Form 1099 reporting requirements for small businesses that were included in health reform. The Form 1099 requirements, signed into law as part of the PPACA, mandate that all businesses file a return for payments to vendors in excess of $600 beginning in 2012. The measure is estimated to raise some $19 billion over 10 years to help offset the cost of health care reform.

Small businesses strongly opposed the provision, claiming the excessive paperwork is too burdensome. President Obama had earlier signaled that he would support changes to the Form 1099 rules, and the provision had wide support among both Republicans Democrats.

The differences in the provision that got changed and the one that did not?  Money—the amendment to the doc fix is paid for by increasing fees to taxpayers—thus the change in health reform does not cost the federal government any money. The burdensome 1099 reporting repeal had no offsetting revenue and could not overcome that fiscal hurdle.

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

Feds Battle For Hearts And Minds

Feds Battle For Hearts And Minds

The federal government continues the battle for the hearts and minds of health care consumers in a new report stressing Medicare savings due to the Patient Protection and Affordable Care Act.

Average Medicare beneficiary savings in traditional (fee for service) Medicare will be approximately $3,500 over the next ten years because of changes made by the Patient Protection and Affordable Care Act (ACA), according to a report released on Nov. 4 by the Department of Health and Human Services. Beneficiaries who have high prescription drug spending will save much more – as much as $12,300 over the next 10 years. In comparison, Medicare beneficiaries with low drug costs will save an average of $2,400 over 10 years.

(HHS previously released a statement by Don Berwick, administrator of the Centers for Medicare and Medicaid Services, that beneficiaries in the Medicare Advantage program would have an average reduction in cost of 1% for 2011.)

The analysis on traditional Medicare, released by the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE), shows that the ACA helps lower costs for those on Medicare by slowing the growth of cost-sharing in Medicare. Closing the Part D coverage gap known as the “donut hole” will produce the greatest cost savings. Already, more than 1.8 million seniors and people with disabilities who have reached the donut hole in 2010 received a one-time $250 rebate check, and checks will continue to be distributed to those who enter the donut hole this year, according to the report. Next year, people in the donut hole will receive 50% discounts on covered brand name Part D prescription drugs. Also starting next year, seniors and people with disabilities on Medicare will have access to a number of recommended preventive services and annual wellness visits at no additional cost. 

Although all seniors and people with disabilities in Medicare are likely to see savings, the savings will be greatest for those with costly medical conditions or high prescription drug costs, according to the report. Total savings per beneficiary enrolled in traditional Medicare are estimated to be $86 in 2011, rising to $649 in 2020. For a beneficiary with spending in the donut hole, estimated savings increase from $553 in 2011 to $2,217 in 2020.

According to HHS Secretary Kathleen Sebelius, “The Affordable Care Act makes Medicare stronger and reduces the burden of health care costs on some of our most vulnerable citizens. The law improves benefits for seniors and people with beneficiaries who rely on Medicare and ensures that Medicare will be there for current and future generations by extending the life of the Medicare Trust Fund. These benefits and savings are only possible with the continued implementation of the Affordable Care Act.”

The entire HHS report is available here.

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

The estimate saving for years 2010 through 2020 are as follows according to the HHS report:

 

Table 1. Estimated Affordable Care Act Annual Savings

per FFS Medicare Beneficiary

	Beneficiaries Not Reaching the Donut Hole	Beneficiaries Reaching the Donut Hole	All Fee For Service Beneficiaries
2010	-$6	$244	$23
2011	$27	$553	$86
2012	$92	$654	$154
2013	$134	$766	$203
2014	$168	$901	$247
2015	$212	$1,048	$300
2016	$261	$1,216	$361
2017	$310	$1,428	$427
2018	$354	$1,654	$490
2019	$405	$1,910	$564
2020	$462	$2,217	$649