American Health Care Act – House Passes ACA Replacement Bill

american health care actOn May 4, 2017, House Republicans passed the latest version of the American Health Care Act (AHCA), which repeals most of the Affordable Care Act (ACA) taxes including the employer and individual mandate penalties.  No Democratic representatives voted for the bill, which narrowly passed with a vote of 217-213.  The Senate will now take up the “repeal and replace” task started by House Republicans.

Large employers should continue efforts to comply with the ACA, including maintaining appropriate records to comply with the Form 1095-C and Form 1094-C reporting requirements for 2017, until legislation is enacted.  Any developments regarding the repeal, replacement or amendment of the ACA will be reported in For Your Benefit.

© Copyright 2017 Armstrong Teasdale LLP. All rights reserved

Trump Administration Takes First Steps to Support Healthcare Exchanges, but Key Questions Remain

healthcare exchangesIn an effort to stabilize the Exchanges and encourage issuer participation, the Centers for Medicare & Medicaid Services (CMS) recently extended the federal Exchange application and rate filing deadlines and published a proposed rule affecting the individual health insurance market and the Exchanges. While issuers will likely see these actions as encouraging signs of the Trump administration’s willingness to support the Exchanges, these actions do not resolve the political uncertainty regarding the Affordable Care Act’s fate or whether cost-sharing reductions will be funded for 2018. These outstanding questions will likely be a key factor in Exchange stability going forward.

In Depth

On February 17, 2017, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule in the Federal Register outlining a series of proposals intended to stabilize the individual health insurance market and the Exchanges created by the Affordable Care Act (ACA). Comments on the proposed rule are due to CMS on March 7, 2017.

On the same day as the proposed rule was published, CMS announced that it was extending the federal Exchange application and rate filing deadlines with the apparent goal of ensuring that the proposed rule changes could be finalized and taken into account when issuers make Exchange participation and rate decisions for 2018. Although issuers are likely to support the proposed rule and delayed federal filing deadlines, it is not clear what effect these changes will have since they do not resolve the ongoing uncertainty regarding the fate of the ACA repeal effort in Congress and federal funding of cost-sharing reductions in 2018.

CMS believes that the proposed “changes are urgently needed to stabilize markets, to incentivize issuers to enter or remain in the market and to ensure premium stability and consumer choice.” The agency’s urgency is underscored by recent reports that Humana would exit the Exchanges entirely for 2018 and other companies have publicly stated that they are uncertain about the extent of their participation in 2018. Looking just at states using healthcare.gov, there are 960 counties with only one issuer in 2017. Additional issuer defections for 2018 would increase the odds that certain counties will have no issuers participating on the Exchange. This would result in residents of such counties being unable to utilize premium or cost-sharing subsidies for which they otherwise qualify.

The proposed rule addresses long-standing issuer concerns about special enrollment periods and perceived gaming of the 90-day grace period available to enrollees receiving premium subsidies. Looking beyond the specific proposals, the proposed rule is significant for the simple fact that it is the Trump administration’s first concrete step to support and stabilize the Exchange market. This likely provides a measure of relief for industry stakeholders that were unsure whether Republicans would be willing to support the Exchanges, which were a key focus of Republican opposition to the ACA. There had been mixed signals during the Trump administration’s first weeks about how it would approach ACA implementation. President Trump issued an executive order his first day in office directing the Secretary of Health and Human Services (HHS) and other agencies to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of” ACA requirements, creating uncertainty regarding how this broad directive would be implemented. In addition, the administration reportedly pulled back on advertising healthcare.gov during the final weekend of open enrollment, leading some to speculate that the Trump administration would be less supportive of Exchange stability than the Obama administration. In the proposed rule, however, CMS tries to make clear that it shares issuers’ goals of “improv[ing] the risk pool and promot[ing] stability in the individual market.”

The question remains whether the proposed changes (and the directional signal of Trump administration support) are sufficient to achieve their stated policy goals. That question is significantly influenced by the status of the ongoing legislative process seeking to quickly repeal the ACA. Although CMS has in this proposed rule endorsed the goal of Exchange market stability in anticipation of CY 2018 open enrollment proceeding as planned, a Republican-led Congress and the Trump administration have continued to signal their commitment to repeal the ACA. Even with the recent delay in Exchange product and rate filing deadlines, the political process (and the related uncertainty about the ACA’s fate) may not be resolved by the time issuers need to begin developing their rates and making decisions on CY 2018 participation. The proposed rule also does not resolve lingering questions related to Exchange funding, such as the availability of cost-sharing reductions for 2018, that will likely be a key factor in Exchange stability going forward.

Summary of Proposed Rule Changes

The proposed rule changes are largely designed to close potential avenues of adverse selection and improve the overall risk pool by encouraging healthier individuals to enroll in coverage.

Open Enrollment

CMS proposes shortening the 2018 open enrollment period from November 1, 2017, through January 1, 2018, to November 1 through December 15, 2017. CMS originally proposed that the shortened open enrollment period would be effective for the 2019 open enrollment period, but the agency is now proposing to move this up by one year. CMS expects that this change would improve the risk pool by reducing enrollments late in the open enrollment period spurred by an applicant’s recent discovery of a need to access health care services. This policy would also increase premium payments to plans, as more enrollees would begin the year’s coverage in January instead of February.

CMS likely would need to extensively market the shortened enrollment period to ensure public awareness. It remains to be seen whether the Trump administration is comfortable with such a commitment to marketing the program given the pull back on marketing efforts for the end of CY 2017 open enrollment.

Special Enrollment

CMS proposes a series of limitations on special enrollment periods intended to reduce adverse selection. Previously, issuers had complained that many healthy individuals were forgoing coverage until they were sick, taking advantage of lax special enrollment period rules to enroll in coverage only when it was needed.

To limit gaming, CMS proposes to expand an enrollment verification pilot program for states using healthcare.gov, planned to begin in summer 2017. CMS proposes that applicants enrolling in coverage under a special enrollment period would have their enrollment pended until they provide documentation that they actually qualify for the special enrollment period. Where providing and processing documentation would result in a delay in coverage after the requested coverage effective date, this policy would result in retroactive coverage. As such, where verification results in a delay in coverage of two months or more, CMS proposes to permit enrollees to request a later effective date.

Guaranteed Availability

CMS also proposes to reinterpret the “guaranteed availability” standard, which requires health plans in the individual market to sell coverage to any willing buyer during open or special enrollment periods. CMS proposes to create an exception to guaranteed availability for individuals with unpaid premiums due to the issuer from which the individual is seeking to purchase new coverage. In part, this proposal seems to address issuers’ concern that some individuals have taken advantage of generous grace periods to discontinue premium payment towards the end of a benefit year only to reenroll with the same plan for the next benefit year. Individuals could still enroll in coverage without coming due on unpaid premium amounts by enrolling with a different issuer (if there is more than one issuer participating in the service area).

Accepting Comments on Continuous Coverage Proposals

CMS requests comments on potential policies it could implement to promote continuous coverage, but the agency is not proposing any specific policies at this time. A continuous coverage requirement is a central feature of many Republican ACA replacement proposals as an alternative to the ACA’s individual mandate. The ACA’s statutory guaranteed availability protections are broad, so adoption of a generally applicable continuous coverage requirement would likely require a legislative change. This is, however, a signal that CMS, under HHS Secretary Price and congressional Republicans, is considering similar policy solutions.

De Minimis Variation

CMS proposes to expand the definition of de minimis variation, the amount by which a qualified health plan’s (QHP’s) actuarial value may vary from the statutorily mandated value. CMS proposes to increase the amount of permissible variation to -4/+2 percentage points from the +/-2 percentage points currently permitted. CMS argues that this policy will promote market stability by permitting plans to maintain the same plan design year over year. CMS additionally argues that this policy may promote competition and put downward pressure on premiums, encouraging healthier individuals to participate in the plan.

Network Adequacy

CMS also proposes to defer to states with respect to network adequacy for Exchange plans in federally facilitated Exchange (FFE) and state-based Exchange states. In past years, CMS has proactively verified that QHPs in FFE states have an “adequate” network of providers. Through such reviews, CMS has enforced “maximum time and distance standards” requiring, for at least 90 percent of enrollees, that certain types of providers be within a specified distance and travel time. These quantitative standards mirrored the Medicare Advantage program requirements. CMS proposes to discontinue its analysis of QHP time and distance, instead deferring to state regulators and accrediting bodies.

Network adequacy requirements vary significantly across states, so this change will affect issuers differently. While the National Association of Insurance Commissioners has adopted a new Health Benefit Plan Network Access and Adequacy Model Act, it has not been adopted in any states and defers to individual states to set applicable time and distance standards. Thus, CMS’s deferral of network adequacy to states may permit narrower networks than under CMS’s quantitative standards.

Executive Order on Significant Regulatory Actions

Also of note is CMS’s approach to President Trump’s recent executive order, which requires that any “significant regulatory actions that [impose] costs” be offset through the elimination of costs associated with at least two prior rules. The proposed rule offers an early opportunity to examine how the administration will implement this executive order. CMS determined that the proposed rule “is not a significant regulatory action that imposes cost” under the recent executive order. The basis for this finding appears to be CMS’s belief that the proposed rule results in a net cost reduction. Thus, while CMS characterized the rule as “significant” for creating separate costs and benefits that exceed $100 million, the net cost reduction allows the agency to avoid eliminating two rules. Industry stakeholders should continue to monitor how CMS implements President Trump’s recent executive order.

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© 2017 McDermott Will & Emery

Extension of 2015 Affordable Care Act Reporting Deadlines

On December 28, 2015, the Internal Revenue Service issued Notice 2016-4 extending the deadline for information reporting requirements under the Patient Protection and Affordable Care Act (the “ACA”). The reporting requirements are intended to assist the IRS in application of ACA penalties and were two-fold: an initial disclosure to the employee and a final report to the IRS. These requirements were to be satisfied by the filing of Form 1095 (with different filings under Form 1095-B or 1095-C dependent on the type of insurance arrangement sponsored by the employer). The deadline for furnishing the form to the employee had been set for February 1, 2016. The deadline for filing Form 1095 with the IRS was to be February 29 for non-electronic filers and March 31 for all employers who are “electronic filers” (filing greater than 250 single 1095 forms).

Notice 2016-4 has now extended those deadlines as follows:

New deadline for furnishing Form 1095 to employees: March 31, 2016.

New deadline for filing Form 1095 with the Service:

Non-electronic filers: May 31, 2016.

Electronic filers: June 30, 2016.

© 2015 Dinsmore & Shohl LLP. All rights reserved.

Going Before a Higher Power – Nuns Take on Obamacare

On Nov. 6, 2015, the U.S. Supreme Court agreed to hear the appeals of several religious employers challenging the contraceptive mandate under the Patient Protection and Affordable Care Act (ACA).  The court will consolidate seven cases, the most prominent of which was brought by the Little Sisters of the Poor, an order of Catholic nuns who dedicate their lives to helping the elderly poor.  The other employers include several Catholic dioceses, a religious non-profit group and several Christian colleges.

The contraception mandate requires religious employers who object to providing contraceptive services to notify the government of their objection, which transfers the responsibility of providing those services to the employer’s insurer.  The petitioners argue that this procedure violates the Religious Freedom Restoration Act because it effectively forces the employer’s health plan to cover services the employer finds objectionable.  They argue that the government has less restrictive means available to provide these services.

The consolidation of these seven cases is particularly interesting because the employers have varied insurance arrangements.  While some of the employers are insured by large insurance carriers, others are self-insured, or have “church plans” as defined by ERISA.  It is unclear whether these different arrangements will affect the outcomes for the particular employers.

The court is expected to hear oral argument in the case in March 2016.

© 2015 BARNES & THORNBURG LLP

False Claims Act: Do You Really Have Just 60 Days to Repay?

One of your employees informs you of a potential overpayment from Medicare. Do you really only have 60 days from that point to determine if it is indeed an overpayment and repay it?

The Patient Protection and Affordable Care Act of 2010 requires that a person who receives an overpayment of Medicare or Medicaid funds report and return the overpayment within 60 days of the “date on which the overpayment was identified,”  and makes the failure to do so a violation of the False Claims Act. 42 U.S.C. 1320a-7k(d)((2)-(3)(emphasis added). However, Congress didn’t define what it means toidentify a false claim.

On August 3, 2015, the United States District Court for the Southern District of New York issued the first  federal court decision addressing when an overpayment should be considered to be “identified” for purposes of determining whether there has been a False Claims Act violation.

The ruling came in the case of Kane v. Healthfirst, et al. and U.S. v. Continuum Health Partners Inc. et al., in which Continuum Health Partners Inc. “ which operated and coordinated a network of non-profit hospitals “ was accused of failing to make timely repayment of identified overpayments.

The potential false claim was first brought to the defendants’ attention in September, 2010 by New York State auditors. An employee of Continuum subsequently provided a preliminary list of potential overpayments to management in February, 2011. He was fired four days later and subsequently filed a whistle-blower action. It wasn’t until the government issued a Civil Investigative Demand in June, 2012 that Continuum reimbursed the government for a large number of claims. Continuum did not return all of the overpayments to the government until May, 2013 approximately two years after the initial internal email.

According to the ruling, approximately half of the February, 2011 preliminary list of overpayments did, in fact, constitute overpayments. The Continuum defendants had argued that the 60-day period began only after the overpayment was “classified with certainty.” The court, however, sided with the government and found that the 60-day clock starts when a person is “put on notice” that a claim may be overpaid.

The court tempered its ruling, though, by stating that a false claims violation occurs only when the “obligation is knowingly concealed or knowingly and improperly avoided or decreased.” Further, the court stated that “prosecutorial discretion would counsel against” an enforcement action in a situation involving “well intentioned” providers working with “reasonable haste” to rectify the issue. In such a case, the healthcare provider wouldn’t have acted with the “reckless disregard, deliberate ignorance, or actual knowledge” required to support a false claims case.

While the decision didn’t provide bright lines and identify exactly when that 60-day clock starts, one of the key takeaways is that once a potential overpayment is identified, a health care provider must take prompt action and follow through with a thorough internal review process to determine whether an overpayment truly exists. Then, it must make repayments to the extent required.

© Copyright 2015 Armstrong Teasdale LLP. All rights reserved

Affordable Care Act Reporting Penalties Significantly Increased

On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act (the Act) into law. In addition to containing several revenue offsets, the Act significantly increased penalties for incorrect information returns, including those required by the Affordable Care Act (ACA).

The Internal Revenue Service (IRS) may impose penalties for both failing to file and filing incorrect or incomplete information returns and/or payee statements after the due dates for such forms pursuant to Internal Revenue Code Section 6721 and 6722. These penalty provisions apply to a variety of information reporting requirements including Forms W-2 and 1099, and now more recently to Forms 1094-B, 1095-B, 1094-C, and 1095-C relating to compliance with the ACA.

Below we have summarized a few of the notable penalty changes made by the Act.

Description Old Penalty Amount New Penalty Amount
Penalty for filing incorrect returns (per return) $100 $250
Penalty for incorrect returns if corrected within 30 days (per return) $30 $50
Penalty for incorrect returns if corrected by August 1
(per return)
$60 $100
Penalty for intentionally disregarding to file timely and correct returns $250 $500
Maximum penalty per calendar year $1,500,000 $3,000,000
Maximum penalty per calendar year if corrected within 30 days

$250,000

$500,000

Maximum penalty per calendar year if corrected by August 1

$500,000

$1,500,000

Keep in mind that the final ACA regulations provide that penalties will not be imposed on entities that show they made good faith efforts to comply with the reporting requirements for 2015. The IRS has indicated that anuntimely filed form will not meet the good faith requirement. Should the requirements regarding ACA reporting not be met due to good faith requirements, the penalties may be still be waived if the failure was due toreasonable cause.

Because the penalties for incorrect forms are applied with respect to each incorrect form, it may be advisable, where possible, to take advantage of the combined form reporting where authorized. For example, an employer may use one Form 1094-C to transmit all Forms 1095-C rather than multiple Forms 1094-C.

In summary, employers should be aware that larger fines now exist for failures in reporting and the penalties apply to each incomplete or incorrect form. For example, intentionally incorrect information with respect to one employee could result in a penalty of $500 for both the Form 1095-C filed with the IRS and the Form 1095-C provided to the employee, for a total of $1,000 for that one employee. Furthermore, it is important to file all forms in a timely manner to show good faith under the ACA transition rule for 2015 Forms.

© 2015 McDermott Will & Emery

How Does the King v. Burwell Decision Affect the Affordable Care Act?

The Supreme Court handed the Obama administration a key victory, upholding the tax credits that allow many low-income Americans to purchase health care insurance in states where the federal government is running the insurance marketplace. These tax credits, available to Americans with household incomes between 100% and 400% of the federal poverty line, operate as a form of premium assistance that subsidizes the purchase of health insurance.

The petitioners in King v. Burwell, No. 14-114 (U.S. June 25, 2015), challenged a ruling from the Internal Revenue Service (IRS) and claimed that a phrase in the Affordable Care Act (ACA) indicating that the subsidies are only available to consumers buying insurance in a state-run exchange prohibited the federal government from providing tax credits where states have not established their own exchanges. Arguing that the text of the law should be read literally, they challenged an IRS regulation that makes these tax credits available regardless of whether the exchange is run by a state or the federal government.

But the Supreme Court sided with the Obama administration in its 6-3 decision, emphasizing that language allowing tax credits for health insurance purchased on “an Exchange established by the State” must be interpreted in context and within the larger statutory scheme. Chief Justice Roberts, who authored the majority opinion, wrote that the phrase “an Exchange established by the State” was ambiguous, and therefore required the Court to look to the broader structure of the law. He wrote that the larger statutory scheme required the Court to reject the petitioners’ interpretation, which would have destabilized the individual insurance market and would create the exact same “death spirals” of rising premiums and declining availability of insurance that the law was crafted to avoid. In passing the law, he added, Congress sought “to improve health insurance markets, not to destroy them.”

The Supreme Court’s analysis went a step beyond the traditional framework used by courts to review agency actions. This two-step analysis, first announced in Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and widely known as the Chevrontwo-step, first considers whether the statutory language is clear—and if it is, the inquiry ends there. But if the language of the law is silent or ambiguous, a court next considers whether the agency’s interpretation of the statute is reasonable, granting considerable deference to the agency’s interpretation. Because the tax credits under the ACA are central to the reforms created by the law, Chief Justice Roberts explained, Congress would not have delegated such an important question to any agency, and especially not to the IRS, which lacks expertise in crafting health insurance policy. He wrote that in this case, the task of determining the correct reading of the statute belonged to the Court.

For most providers and companies involved in the health care system, the result of this decision means business as usual. But the decisive victory for the law today means that the ACA is here to stay, and will have a permanent effect on how patients access care. Insurers and providers still must overcome hurdles to achieve affordable premiums and provide improved care for patients across the country. And as more laws are sorted out in the courts, the Supreme Court’s reliance on context in interpreting the statute today could set an important precedent of emphasizing the purpose of major legislation when analyzing its trickier provisions.

© 2015 Foley & Lardner LLP