Update on Health Care Reform

1
Update on Health Care Reform

• Sherry P. Porter
• 500 West Jefferson Street
• Suite 2800
• Louisville, KY 40202
• [phone]

2
Disclaimer

• The information in the following slides
  represents only an overview of the law, and is
  not intended to cover all the fine points with
  respect to any particular portion of the law or
  its application to any particular person.
  Accordingly, it is not intended to be legal
  advice, which should always be obtained in direct
  consultation with an attorney.

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Backdrop of Health Care Reform

• The U.S. has 47.9 million people who are
  completely uninsured and another 25 million
  people who are inadequately insured
• More than three-quarters of the uninsured are in
  a working family
• Medicare projected to be bankrupt by 2016
• Healthcare spending as percentage of gross
  domestic product in U.S. is almost twice that of
  most other countries. If continues at same rate,
  the Congressional Budget Office (CBO) projects it
  will be close to 100 of GDP by 2082

Source Kaiser Family Foundation, Health
Coverage the Uninsured, www.kff.org (last
visited 3-30-13)
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History of Health Care Reform

• On March 23, 2010, the Patient Protection and
  Affordable Care Act was signed by President
  Barack Obama
• Amended by the Health Care and Education
  Reconciliation Act one week later.
• Jointly called the Affordable Care Act.

Public Law 111-148, available from Government
Printing Office (GPO) at http//www.gpo.gov/fdsys
/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf
Public Law 111-152, available from GPO at
http//www.gpo.gov/fdsys/pkg/PLAW-111publ152/pdf/P
LAW-111publ152.pdf
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Goals of ACA

• Three overriding goals
• Expanding the population of Americans covered by
  health insurance and/or public health care
  coverage,
• improving the health care delivery system, and
• controlling the rising cost of health care.
• The CBO estimates the new health reform law will
  provide coverage to an additional 32 million
  people when fully implemented in 2019.

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Making Law is Like . . .

• 2,500 Pages
• More than 500,000 words
• Phasing in over 10 years
• Thousands of regulatory decisions left for the
  future
• We have to pass the bill so you can find out
  whats in it -- Nancy Pelosi

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Affordable Care Acts Expanded Coverage
8
Affordable Care Acts Expanded Coverage
9
Expanded Healthcare Coverage
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Two Decisions Face State Government

• Expand Medicaid?
• Create health benefit exchange?

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Medicaid Expansion

• ACA expands Medicaid to all non-Medicare eligible
  individuals under age 65 (children, pregnant
  women, parents, and adults without dependent
  children) with incomes up to 133 FPL (actually
  138)
• All newly eligible adults will be guaranteed a
  benchmark benefit package that meets the
  essential health benefits available through the
  Exchanges
• Supreme Court ruling gave states option whether
  to expand Medicaid, but States mixed on whether
  will expand

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Medicaid Expansion

• Map

13
Health Insurance Exchange

• State can create exchange or default to federal
  exchange
• Each state can create an American Health Benefit
  Exchange and a Small Business Health Options
  Program (SHOP) Exchange for individuals and small
  businesses
• States must establish an office of health
  insurance consumer assistance or an ombudsman
  program to serve as an advocate for people with
  private coverage in the individual and small
  group markets
• Federal grants available

14
Nationwide Health Insurance Exchanges

• Exchanges

15
Individual Requirements under ACA

• U.S. citizens and legal residents must have
  qualifying health coverage. Called the
  Individual Mandate
• Individual Mandate upheld by the Supreme Court
  and, after most recent election, is here to stay
• Must maintain minimum essential coverage
• There are some exceptions
• low income
• required contribution for self-only coverage for
  a calendar year exceeds 8 of household income
• hardship
• religious exemption
• . . . .

16
Penalties Under Individual Mandate

• Those without coverage pay a tax penalty of the
  greater of
• Flat Dollar Amount (95 in 2014, 325 in 2015,
  and 695 in 2016 and adjusted for inflation after
  that, up to a maximum of three times that amount
  per family)
• Percentage of Household Income (1 of household
  income in 2014, 2 in 2015, and 2.5 thereafter)
• The penalty for noncompliance cannot exceed what
  it would have cost to obtain insurance.

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Individual Subsidies

• Limited availability of premium credits and
  cost-sharing subsidies through the Exchanges to
  U.S. citizens and legal immigrants who meet
  income limits
• Premium and cost-sharing credits are available to
  those with income between 133-400 of the federal
  poverty level
• Premium credits may be used to purchase insurance
  through the Exchanges.
• Set on a sliding scale based on income.

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Easier for Individuals to Obtain and Keep
Coverage

• Dependents covered until their 26th birthday
• No discrimination based on health status
• Guaranteed issue
• No pre-existing condition exclusions
• Limited rescissions
• Eligibility waiting periods longer than 90 days
  prohibited
• Reviews on premiums charged

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Additional Services Covered by Plans

• Full coverage for certain preventative care
• E.g., high blood pressure, diabetes and
  cholesterol screenings, routine immunizations,
  and evidence-based preventive care and screenings
  for women
• Abolishes annual and lifetime coverage caps for
  medical care

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Grandfathered Plans

• Plans that existed on March 23, 2010 are exempt
  from some of the laws consumer protections.
• Can lose grandfathered status if
• Eliminates all or substantially all benefits to
  diagnose or treat a particular condition
• Increases participant's percentage cost-sharing
  requirement
• Increases co-payments by more than certain
  amounts
• In order to maintain such status, plans must
  continually disclose to participants that it
  believes it is a grandfathered plan and keep
  documentation of this

21
Medical Loss Ratios (MLRs)

• Insurers must spend a certain percentage of
  premium dollars on eligible expenses instead of
  overhead or profits to shareholders
• Otherwise, it must pay a rebate
• An incentive to health insurers to either keep
  premiums low or increase coverage

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Delayed until 2015Employer Pay or Play Mandates

• General Rule.
• The ACA imposes penalties on applicable large
  employers who
• fail to offer minimum essential coverage to 95
  of their full time employees or
• provide coverage that is either
• insufficient (i.e., the employer pays less than
  60 of the cost), or
• unaffordable
• resulting in employees choosing their own
  coverage and receiving government subsidies.

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What Is an Applicable Large Employer?

• 50 or more full time equivalent employees
• Full time is defined as 30 or more hours per week
• To calculate total FTEs, add the following
• All employees who works at least 30 hours per
  week (full time) PLUS
• Total number of hours worked in a month by part
  time employees (lt30 hours per week) divided by
  120.
• If 50 or more FTEs, then must offer coverage, but
  only to full time employees
• If less than 50 FTEs, then no obligation to offer
  coverage
• Tip Retain documentation of calculations

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Penalties for No Coverage

• An applicable large employer who offers no health
  coverage will be subject to a penalty equal to
  2,000 per year per employee after the first 30
  employees

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Penalties for Insufficient or Unaffordable
Coverage

• Insufficient Coverage means employer does not pay
  at least 60 of the total allowed cost under the
  plan
• Unaffordable Coverage means the employees
  required contribution is more than 9.5 of the
  employees household income and the employees
  household income is under 400 of FPL

26
Penalties for Insufficient or Unaffordable
Coverage

• The penalty for inadequate coverage is 3,000 per
  year for every employee who opts out of the
  employers plan and gets government subsidized
  coverage under the exchange plan subject to a
  cap.

The cap The total penalty for the employer
cannot exceed the overall penalty that would
apply if the employer offered no coverage at all
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Variable Employees

• Do not have to offer coverage to
• Seasonal employees
• Temps
• Leased employees
• Most issues arise with variable hour employees
• Measurement (Look Back) Period
• between 3 and 12 months
• defined by employer
• Stability Period
• at least 6 months
• cannot be shorter than Measurement Period
• Administrative Period
• optional 90-day time out after the Measurement
  Period

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Important Points Regarding Penalties

• There is no penalty for these failures if you are
  not a large employer
• The penalties are not tax deductible
• Employer will be notified if any of its employees
  are determined to be eligible for premium
  assistance or cost sharing reduction

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ATT Analysis

• 2009 Medical Costs
• for 283,000 Employees
• 2.4 billion
• Penalties if workers
• uninsured
• 600 million

31
90-Day Waiting Periods

• ACA says no more than 90 days before an
  individual is eligible to be covered for benefit
  under group health insurance (employee can choose
  to wait more than 90 days)

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Model Notices

• Employers must provide notice of health insurance
  marketplace by October 1, 2013 (within 14 days
  for new hires)
• Sample notices from Department of Labor
• Cannot just print and send to employees need
  specific employer information on notice
• COBRA notice also revised
• Available on DOL website

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Non-Discrimination

• Health plan cannot favor highly-compensated
  employees
• Penalties
• Inadvertent Violations The employer is subject
  to an excise tax of 100 per non-highly paid
  employee per day. Calculated for each day the
  plan fails testing. Cap of the lesser of
  500,000 or 10 of the premium for the prior plan
  year
• Willful Violations Excise taxes plus additional
  civil penalties
• Enforcement for self-insured plans by DOL
• However, regulations defining such
  discrimination have not been released thus,
  this particular anti-discrimination provision
  wont likely be enforced in 2014

34
Employer Subsidies

• Small Business Tax Credit (25 or fewer employees)
• Certain small employers were eligible for tax
  credit if they contribute at least 50 toward
  their employees health insurance.
• Available for small businesses that are both
  for-profit (35 credit) and non-profit (25
  credit).
• NOTE Due to the sequester, effective 3/1/13,
  small businesses, tax exempt under IRC 45R,
  will have an 8.7 reduction in their refundable
  small business tax credit through at least
  9/30/13.
• Smaller employers can participate in State
  Exchanges. Once eligible, employer remains
  eligible regardless of number of employees.
  (After 2017, states may permit larger employers
  in exchanges.)

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Retaliation Protections for Employees
Whistleblowers

• Employees may not be subjected to retaliation
  for
• Reporting violations of the ACAs consumer
  protections, or cooperating in investigation or
  prosecution of such violations
• Note it could be an employer or insurer that
  violates this protection
• Receiving premium tax credits that expose their
  employer to tax assessments for failing to
  provide affordable or sufficient health coverage
• A violation of these non-discrimination,
  anti-retaliation provisions are treated as
  violative of the FLSA
• Employee complaints must be brought within 180
  days before OSHA
• Query will employers ACA-evasive conduct be
  compliant?  

36
How Are We Going To Pay For This?

• Increase Medicare payroll tax for incomes that
  exceed 200,000/250,000
• 40 excise tax on Cadillac plans (exceeds
  10,200 / 27,500)
• Reduce Medicare Advantage overpayments
• Reduce Medicaid drug cost
• Increase Medicare premiums for the wealthy

37
How Are We Going To Pay For This? Cont.

• In 2014, annual fee on plans based on an
  insurers net premiums (self-insured plans
  exempt)
• Industry fees
• Adjust payments to Medicare providers
• Reduce special payments to hospitals
• Employee and individual penalties
• Tanning bed taxes

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Legal Challenges to ACA

• NFIB v. Sebelius, Secy of HHS(decided 6/28/12)
• NIFBs Bottom Line ACA is mostly constitutional
• Individual Mandate Upheld (5 to 4)
• Taxing power sustains it (5 to 4)
• Interstate commerce does not (4 of 9)
• Only unconstitutional part - coercive Medicaid
  expansion (7 to 2)
• Remedy (fractured opinions)
• Strikes ACAs enforcement that threatens loss of
  Medicaid funding if States dont expand (5 to 4)
• Sustains ACAs offer of enhanced Medicaid
  funding if States do expand (5 to 4)

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Legal Challenges to ACA Tax Subsidy Challenges
in States Refusing to Set up an Exchange

• Loophole in ACA
• Challenge to Federal Tax Subsidies for
  individuals purchasing coverage in federally run
  Exchanges
• Could go to the SCOTUS in 2014 not likely until
  2015
• Result not likely to cause repeal of the law

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Legal Challenges to ACA Contraception Mandate

• Numerous challenges
• Churches/denominational hierarchies
• Religious-affiliated, non-profit/tax-exempt
  employers
• For-profit businesses with owners having strong
  religious objections
• Religious Objections to abortifacients
  anti-contraception meds

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Legal Challenges to ACA Contraception Mandate
Cont.

• New Regulations accommodate churches
  religious-affiliated employers
• Catholic Bishops still dissatisfied
• New Regulations do not accommodate for-profit
  businesses
• Will likely go to SCOTUS, but maybe not before
  2015
• If successful, result not likely to strike the
  law, only carve out religious objector exemption

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Other Interesting Legal Challenges

• Pacific Legal Foundations Challenge to the ACA
  as a violation of the Constitutions
  Origination Clause
• The guts of the ACA were constructed in the
  Senate, and substituted for a House bill (HR
  3590) related to other topics
• Origination clause requires tax bills to
  start in the House

• Kentucky Health Benefit Exchange New Tea
  Party challenge to Gov. Beshears establishing
  by executive order an exchange for Ky.

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Health Care Reform is Here to Stay

• President Obama Re-Elected
• ACA (mostly) upheld in the Supreme Court
• More than 30 attempts to repeal all or part of
  the law in Congress have failed

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Additional Resources

• Business Lexington articles on the Affordable
  Care Act by Doug McSwain and Business First
  article by Sherry Porter
• http//wyattfirm.com/news-publications-civic-detai
  l/the-latest-on-the-affordable-care-act
• http//wyattfirm.com/news-publications-civic-detai
  l/encouraging-health-care-competition-through-the-
  aca
• http//wyattfirm.com/news-publications-civic-detai
  l/managing-the-acas-increased-demand-for-health-ca
  re-services
• http//wyattfirm.com/uploads/178/doc/ACA_What20Em
  ployers20Need20to20Know20Before202014000000.p
  df
• Margaret Levis book on the Affordable Care Act,
  The Impact of Health Care Reform on Kentucky
  Employers, is available at the Kychamber.com/books
  tore

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Questions?
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THANK YOU!

• Sherry P. Porter
• Wyatt, Tarrant Combs, LLP
• 500 West Jefferson Street, Suite 2800
• Louisville, KY 40202
• [phone]