Tag: Obamacare

Initial Health Exchange Enrollment Fails to Meet Projections

DrinkerBiddle

Since the state and federal health exchange marketplaces went live on October 1, 2013, approximately 106,185 people have either selected health plans or fully signed up and paid for coverage through these markets.  The first official reporting of these numbers from the Administration comes after weeks of congressional and public frustration and scrutiny over significant problems with the federal enrollment website, HealthCare.gov.  Original goals for enrollment extended into the millions by spring 2014, but in the weeks leading up to today’s announcement, the Administration sought to significantly lower expectations while promising to fix the enrollment website and help people obtain coverage.

The announcement came on the heels of a politically contentious four and a half hour hearing by the House Oversight and Government Reform Committee on challenges with the HealthCare.gov website.  During the hearing, White House Chief Technology Officer Todd Park testified before the committee and could not commit to the Administration having the website problems fixed by November 30, a promise other top Administration officials have been making since Health and Human Services (HHS) Secretary Kathleen Sebelius testified before Congress last month.

Enrollment levels within the exchanges are significant because low enrollment means that next year’s premiums will be higher, as costs are spread across a much smaller pool of individuals and individuals who have enrolled are more likely to be high utilizers of health care services.  Unless enrollment significantly increases by the March 31st deadline for open enrollment, one of the hallmark issues of the Obama Administration may fail to reach its goal of providing affordable health care to millions of uninsured Americans.

Article by:

Julie Scott Allen

Of:

Drinker Biddle & Reath LLP

Businesses Must Determine Whether the Pay-or-Play Provisions in the Affordable Care Act Apply

If you own a business, the following are important items regarding the Affordable Care Act, sometimes referred to as Obamacare, you need to know:

By March 1, 2013, employers must notify employees of the health insurance exchanges, including the employee’s right to purchase health insurance through a state insurance exchange.

In 2014, pursuant to an Internal Revenue Code provision, employers with 50 or more full-time equivalent employees will be subject to the “employer shared responsibility” standards. Employers who anticipate having 50 or more full-time equivalent employees in 2014 need to understand the pay-or-play requirements so they can decide if they want to offer health insurance and, if so, what the insurance covers.

For employers with 50 or more full-time equivalent employees in 2014, penalties apply if no health insurance is offered, or health insurance is offered but it does not have minimum essential health benefit coverage, and an employee obtains subsidized health insurance coverage from the state insurance exchanges that are supposed to be in place by 2014.

Interestingly, in 2014, penalties can apply even if an employer with 50 or more full-time equivalent employees offers health insurance which has minimum essential health benefit coverage. This occurs if such minimal essential health benefit coverage is not affordable or does not offer minimum value, and one or more employees obtains subsidized health insurance coverage from the state insurance exchanges that are supposed to be in place by 2014. Coverage is considered affordable if it costs an employee less than 9.5 percent of the employee’s annual household income. Generally, an employer’s group health plan will be considered to provide minimum value if the employer pays on average at least 60 percent of health care expenses while the employee pays on average 40 percent of health care expenses (through deductibles and copayments).

In addition to the potential penalties under the pay or play provisions, the IRS Code includes a tax on any failure of a group plan to meet the code’s requirements for group health plans. For example, if an employer has a group health plan that fails to provide preventive health care services when a plan requires it, then the amount of the tax is $100 per employee for each day in the non-compliance period. This can be a very large tax.

©2002-2012 Fowler White Boggs P.A.

Federal Government to Launch Multistate Health Insurance Plans

The National Law Review recently published an article by Nita Garg of Barnes & Thornburg LLP regarding Multi-State Health Insurance Plans:

 

 

Under multistate plans recently announced by the Obama administration, health insurance operated under contract with the federal government will be available to consumers in every state through state insurance exchanges mandated under the Affordable Care Act (ACA). While the White House has suggested that these plans will serve as a substitute for the government-run health insurance plan that was discussed, and rejected, during health care reform negotiations, existing insurers and developers of CO-OPs were taken by surprise at the announcement.

The impetus behind these plans is the belief that a government sponsored multistate plan will increase competition in health insurance markets, which tend to be geographically clustered.

In those states and regions in which a single insurer is dominant, the hope is that these plans may lead to competitive pricing where such competition would otherwise be difficult.

While proponents speak of these plans’ promise, others are concerned. The ACA provisions pertaining to these plans do not specify how these plans will comply, if at all, with requirements under various state laws. Generally, issues related to insurance regulation fall under the jurisdiction of state governments. Private insurers worry that if state laws would not apply, these multistate plans may have an unfair competitive advantage over other insurers who are subject to state-specific requirements.

While administration officials stated that for they past three months they have been reviewing rules to be issued soon (Pear, New York Times, Oct. 27, 2012), insurers have been without any regulatory guidance as of yet, and, as mentioned earlier, the ACA provisions have not provided much clarification on how these plans will operate. Given this lack of direction, insurers been unable to prepare for implementation of these plans. Speaking to Sarah Kliff of the Washington Post, John McDonough, a Harvard University School of Public Health professor who worked as a health policy adviser to Sen. Ted Kennedy, said that these plans have the potential to disrupt insurance markets, due to the rushed nature of these discussions. “It’s happened so fast, in a brief window, that there was not a lot of time for robust conversation,” he says. “The conversation was like, ‘this is a good idea, let’s cook something up.’ It was definitely not a thoughtful, nuanced conversation.”

© 2012 BARNES & THORNBURG LLP

Obamacare on Trial: A Book Review

The National Law Review recently published a book review by S. Merchant of The National Law Review / The National Law Forum LLC, the book title is “Obamacare on Trial” written by Einer Elhauge.


The National Law Review

Obamacare on Trial features a collection of essays analyzing Obamacare and its ensuing litigation written and compiled by Harvard Law School alumnus and professor Einer Elhauge.  The brainchild of President Obama and arguably one of the most contentious and groundbreaking developments in the U.S. healthcare system, the Patient Protection and Affordable Care Act (PPACA or Obamacare) serves as a hot topic in politics today. Rather than take a strong stance on the merits of the Act, Professor Elhauge instead examines and validates Obamacare within the scope of its constitutionality. Among other aspects, he focuses his essays on such hallmarks of constitutional law as originalism, Congress’ spending power and the Necessary and Proper Clause.

Bookended by a preface and excerpts from Chief Justice Roberts’ opinion from the Supreme Court decision holding Obamacare as constitutional, the essays, fourteen in total, have been previously published in such magazines as The New York Timesand The Atlantic.  Their substance has not been altered but Professor Elhauge does take the opportunity to ruminate on the justices’ decision, provide background on his research process or comment on the initial response he received in a postscript after each essay. Many of these essays start out with an opponent‘s critique of Obamacare followed by his meticulous dismantling of the argument using case precedent and historical analysis.

Perhaps the most notable aspect of the collection is that it is virtually devoid of partisan ideology or an overt political agenda—this is especially interesting considering Professor Elhauge served as Chairman of the Antitrust Advisory Committee to the Obama Campaign. Indeed Professor Elhauge has also gone on the record publicly stating his opposition to a policy mandating the purchase of health insurance. His essays clearly define his stance on Obamacare—that being that the Act is in fact permissible under case law precedent, history and constitutional text.

This is not to say that Professor Elhauge’s work ignores contemporary context or the modern political landscape. One of the most thought-provoking parts of his collection is his through analogy between Medicare and Obamacare, based on the premise that both are “mandate[s] to buy health insurance.” However, Professor Elhauge’s pièce derésistance consists of the laws enacted in 1790 and 1792 by the Founding Fathers along with Congress requiring shipowners and seaman respectively to purchase health insurance. Neither statute was mentioned during oral arguments and Professor Elhauge underscores his position that Obamacare is not unprecedented in light of these laws.

Another one of Professor Elhauge’s favorite arguments is the reframing of the central issue of whether Obamacare encroaches on individuals’ personal liberties. Professor Elhauge argues in an essay that since the status quo consists of the insured paying for the uninsured’s medical expenses, a mandate requiring the uninsured to purchase health insurance actually lifts the burden from the insured. Thus, the crux of the issue transforms into who should ultimately be responsible for his or her medical bills. He concludes by noting that this was yet another claim not previously raised during oral arguments by Obamacare supporters.

Professor Elhauge’s collection of essays applies his unfailing logic and reliance on constitutional history to defy Obamacare opponents’ use of formalism. In the course of a mere 126 pages, he comprehensively details and overcomes the challenges posed against Obamacare and justifies the Act against the backdrop of constitutional law and history. The good professor didn’t graduate first in his class at Harvard Law for nothing.

Copyright ©2012 National Law Forum, LLC

Analysis: U.S. Supreme Court Upholds the Affordable Care Act: Roberts Rules?

The National Law Review recently published an article by Meghan C. O’Connor and William O. Jackson of von Briesen & Roper, S.C. regarding The U.S. Supreme Court’s Healthcare Ruling:

Today, June 28, 2012, the U.S. Supreme Court issued its decision upholding thePatient Protection and Affordable Care Act of 2010 (the “ACA” or “Act”). The decision marks the culmination of a legal battle and public debate that began soon after the ACA was enacted. The Court upheld the individual mandate, perhaps the most controversial provision of the ACA, but limited the expansion of Medicaidunder the ACA. All provisions of the ACA will continue to be in effect, with some limits on the Medicaid expansion. In order to prevent a constitutional violation due to the Medicaid expansion portion of the ACA, the Court held that the Secretary of the Department of Health and Human Services (“Secretary”) is not permitted to apply §1396c of the Act to withdraw existing Medicaid funds to a state for failing to comply with the requirements set out in the expansion provisions. Though today’s decision will have far-reaching effects in political discourse, the Court emphasizes its deference to Congress and its sensitivity to its judicial role: “We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.”

Key points from decision:

  • Individual mandate not supported by Commerce Clause or Necessary and Proper Clause
  • Individual mandate must be construed as a tax, which is upheld under Congress’s taxing power
  • Expansion of Medicaid program constitutional, but HHS may not penalize states that choose not to participate in the expansion of Medicaid
  • Decision strikes a balance between principles of federalism and judicial restraint

I. Background

On March 23, 2010, President Obama signed the ACA into law. The 2700-page Act contained numerous provisions that, when implemented, would alter the health insurance and health care delivery systems in the United States more significantly than any federal law since the creation of the Medicare and Medicaid programs in 1965. Significant ACA provisions include the expansion of coverage under federal health care programs, such as Medicaid; the creation of new programs to integrate and reform health care delivery, such as the Medicare Shared Savings Program; and the minimum coverage provision at §1501 of the ACA that requires, with limited exceptions, individuals to maintain minimal essential health care coverage as of 2014 (commonly referred to as the “individual mandate”) or make a “shared responsibility payment”. After the enactment of the ACA, individuals, organizations, and 26 states brought suit against the federal government alleging, among other things, that the individual mandate and Medicaid expansion were unconstitutional. After multiple federal appeals court decisions with diverging opinions, the Supreme Court granted review.

This article will discuss the four main issues at play during the oral arguments, highlights of the Court’s decision, and implications of the Court’s decision.

II. The Issues At Play

In March 2012, the Supreme Court heard three days of oral arguments focusing on four issues: (1) whether the Court could even hear arguments about the constitutionality of the ACA; (2) whether the individual mandate was unconstitutional; (3) if so, whether the individual mandate, and potentially other provisions of the ACA, could be “severed” from the remaining portions; and (4) whether the Medicaid expansion provisions of the ACA were constitutional.

1. Could the Supreme Court Even Hear the Case?

Before the Court addressed the constitutionality of the individual mandate and Medicaid expansion, the Court determined that the Anti-Injunction Act (“AIA”) did not apply to the lawsuits challenging the ACA. Under the AIA, courts may not hear lawsuits that attempt to restrain the imposition or collection of a tax. If the AIA did apply to the ACA lawsuits, the Court would have been prevented from hearing the case until the parties had exhausted other remedies.

The Court held that the AIA did not prevent the Court from hearing the challenge to the individual mandate because the mandate is not a “tax” for purposes of the AIA. This decision is not surprising given that during oral argument, the Court expressed skepticism about whether the AIA applied to the case and whether the case could be considered an exception to the AIA.

Today’s decision is interesting in that it distinguishes between whether a law is a “tax” for purposes of Congress’s taxing power versus the Court’s jurisdiction under the AIA. The government argued that the mandate was not a tax for purposes of the AIA but that it was a tax for purposes of Congress’s constitutional authority. At oral argument, Justice Alito noted to the Solicitor General “[t]oday you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax.” Justice Scalia also questioned the Solicitor General regarding the labeling of the mandate as a “penalty” rather than a “tax”: “The President said it wasn’t a tax, didn’t he?”

Despite these exchanges, Chief Justice Roberts ultimately focused on whether Congress intended for the AIA to apply. The Court agreed with the government and held that Congress’s decision to describe the shared responsibility payment in §5000A(b)(a) as a “penalty” and not a “tax” demonstrates that Congress did not intend for the AIA to prohibit jurisdiction.

2. Is the Individual Mandate Constitutional?

The central issue in the case was whether Congress had the power under the Constitution to mandate that individuals purchase health insurance and assess a tax or penalty against those individuals who refuse or fail to purchase such insurance. As a general principle of the U.S. federalist system, the federal government may only pass laws under those powers that are enumerated in the Constitution, such as the Commerce Clause. All other powers remain with the individual states. The ACA lawsuits challenged the individual mandate as an unconstitutional use of the Commerce Clause.

The Court telegraphed its skepticism with the Commerce Clause justification during oral argument in March. The justices questioned whether the government was “creating commerce” and whether the penalty associated with the individual mandate was actually a proper exercise of the taxing power.

In a 5-4 decision (with Justices Ginsburg, Breyer, Sotomayor, and Kagan joining Chief Justice Roberts), the Court concluded that the individual mandate was constitutional and could be upheld under Congress’s taxing power as the imposition of a tax on those who do not have insurance. However, the individual mandate could not be sustained under the Commerce Clause or the Necessary and Proper Clause.

• “Creating” Commerce.

A key issue involved whether Congress was creating commerce by requiring individuals to purchase health insurance. During oral argument, Justice Kennedy questioned the government on whether it could “create” commerce by requiring an individual to perform an affirmative act and then regulate that act under the Commerce Clause. The government argued that health care is unique since nearly all persons will be in the health care market at some point, many times the choice to be in the market is uncontrollable and unpredictable, and the result of being uninsured shifts costs to the insured.

In today’s opinion, the Court emphasized that Congress’s broad power to regulate commerce “presupposes the existence of commercial activity to be regulated.” Roberts noted that the mandate creates activity to “compel individuals to become active in commerce by purchasing a product” rather than regulating existing commercial activity. Consequently, the individual mandate cannot be upheld under the Commerce Clause.

The dissent also rejected the use of the Commerce Clause to support the constitutionality of the individual mandate. Justice Scalia wrote “[t]he Federal Government can address whatever problems it wants but can bring to their solution only those powers that the Constitution confers, among which is the power to regulate commerce… Article I contains no whatever-it-takes-to-solve-a-national-problem power.”

• Necessary and Proper Clause.

The Court also assessed whether the individual mandate was constitutional under Congress’s power under the Necessary and Proper Clause because the mandate was integral to the guaranteed issue and community rating provisions of ACA. The Court rejected the government’s argument, concluding that this would give Congress the “extraordinary ability” to create the predicate necessary to the exercise of its power.

• Is the Individual Mandate Actually a Tax?

Despite holding that the Commerce Clause and the Necessary and Proper Clause do not support the constitutionality of the individual mandate, the Court found that the mandate could be sustained under Congress’s taxing power. The Court held that “Congress had the power to impose the exaction in §5000A under the taxing power, and that §5000A need not be read to do more than impose a tax. That is sufficient to sustain it.” Consequently, while the ACA’s description of the shared responsibility payment as a “penalty” and not a “tax” is “fatal” to the application of the AIA, Congress’s choice of words does not “control whether an exaction is within Congress’s constitutional power to tax.” Instead, the “mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS.”

The Court then offered a straightforward analysis of its taxing power: “[t]hose subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they many not lawfully do is not buy health insurance and not pay the resulting tax.”

Justices Ginsburg, Breyer, Sotomayor, and Kagan joined Justice Roberts’s majority opinion holding the mandate constitutional under Congress’s taxing power. The Court’s liberal justices would have held the individual mandate constitutional under the Commerce Clause as well, but avoided issuing a concurring opinion that would support a constitutional differentiation but make no practical difference in the implementation of ACA.

Justice Scalia’s dissent is also not surprising, as it echoes his comments at oral argument. The dissent notes, “[w]hat is absolutely clear… is that there are structural limits upon federal power—upon what it can prescribe with respect to private conduct… Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct…”

3. Is the Individual Mandate Severable from the Rest of the ACA?

When a statute or law is held unconstitutional, the Court may eliminate certain provisions of the statute (severing it) or strike the entire statute. At issue with regard to the severability issue was whether other ACA provisions could and/or should be severed from the individual mandate provision if the individual mandate was found unconstitutional. Since the individual mandate was found constitutional, the Court did not address the severability of other ACA provisions.

4. Is Medicaid Expansion Under the ACA Constitutional?

Perhaps the most unexpected component of today’s decision is the limitation imposed on the ACA’s Medicaid expansion. Medicaid funds medical care for needy individuals through a federal and state partnership under which the federal government provides matching funds to states that agree to comply with federal requirements. Congress may change Medicaid requirements, and participating states must amend state Medicaid plans to comply with changes in federal law. Under the ACA, Congress expanded Medicaid eligibility to certain individuals under age 65 who do not receive Medicare and who have an income up to 133% of the federal poverty level. The ACA requires states to provide limited Medicaid coverage to these newly eligible individuals beginning in 2014. Funding of the expansion will not follow traditional matching guidelines; instead 100% of the expansion will be paid for by the federal government through 2016, with the federal share decreasing to 90% by 2020.

Congress’s authority under the Constitution includes spending funds, and setting conditions on the spending of those funds, in order to promote the general welfare. However, Congress’s spending power is limited such that it cannot use the power to compel states to adopt federal policies. At issue was whether the ACA unconstitutionally compels states to expand Medicaid by making expansion of Medicaid eligibility a requirement for receipt of federal Medicaid funds despite increased federal funding to subsidize the expansion.

The majority concluded that the Medicaid expansion is constitutional. However, the Court held that it would be an unconstitutional expansion of Congress’s authority under the Spending Clause for the federal government to withhold Medicaid funding to the states for non-compliance with the ACA’s expansion provisions. Writing for the Court, Chief Justice Roberts noted that “Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”

Rather than invalidate the Medicaid expansion in its entirety, the Court adopted a more limited remedy of severing the penalty provisions from the ACA. Section 1396c gives the Secretary the authority to withhold all further Medicaid payments to the state if the Secretary determines the state is out of compliance with any Medicaid requirement, including those contained in the expansion. The Court ruled that the Secretary could not use this section to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. However, §1396c remains applicable to the existing Medicaid program, and it could be used by the Secretary to withdraw funds provided under the ACA if a state that has chosen to participate in the expansion fails to comply with the requirements of the ACA.

III. Impact of the Decision

Whether denominated as a mandate or a tax, the Court’s validation of Section 1501 avoids much of the uncertainty that would have resulted if the ACA was struck down. Providers may proceed, for now, with the assumption that the ACA will reduce the burden of providing care to uninsured and underinsured individuals. The Court’s ruling also relieves providers of the need to re-think, or undo, other operational and strategic planning that was implemented under the ACA, such as the move away from fee-for-service to value-based and quality-based reimbursement in an accountable care environment; bundling; bonuses; incentives for various ACA initiatives in areas such as electronic medical records, public health, preventive care, and others; physician quality reporting initiatives; requirements for tax-exempt hospitals such as community health needs assessments, financial assistance, and billing and collection policies; and many other areas of the ACA that might have collapsed with the whole ACA house of cards if the ACA had been struck down in its entirety. Hospital stocks surged ahead on the initial news of the Court’s decision while insurance company stocks fell, suggesting the market’s assessment of the winners and losers from the case.

From a constitutional law perspective, the path taken by the Court in reaching its decision is extremely important. On the one hand, the Court’s conclusion that the individual mandate could not be justified under either the Commerce Clause or the Necessary and Proper Clause confirms that the Court will continue to police the boundaries of Congressional power in a federalist system. Congress may have the power to regulate commerce – what people do – but it does not have the power tocompel commerce – what people do not do. In a similar vein, the Court concluded that the Medicaid penalty provisions ran counter to the nation’s “system of federalism” as Congress improperly went beyond pressure to compulsion.

On the other hand, in upholding the individual mandate under Congress’s power under the Taxing Clause (even notwithstanding statements by the President and the Congress that this was not a tax), the Court gave deference to Congress in searching for any reasonable construction of the law in order to save the ACA from unconstitutionality. The Court also found the means to preserve the expansion of Medicaid by severing only the penalty provisions. In so doing, the Chief Justice remained true to his philosophy of judicial restraint rather than judicial activism, placing himself firmly in the company of Justice Oliver Wendell Holmes, Jr. and Justice Felix Frankfurter.

The Medicaid ruling is significant for states – and for providers. This means that each state will have the ability to determine whether or not to accept the Medicaid expansion terms, without the risk of losing all of its Medicaid programs should the state decide not to agree with expanded eligibility requirements. The ACA was structured so that most everyone had health care coverage – either through employer-provided plans, insurance purchased by individuals, or government-provided programs. The ACA expanded eligibility for Medicaid to provide health care for poor persons who do not have employer-sponsored insurance and who would be unable to pay for their own health insurance. If a state declines to enact the expansion, there will be a gap. The size of the gap—or the number of uninsured individuals—will depend on how eligibility standards are set. For providers, this likely translates into uncompensated care.

In Wisconsin, Medicaid eligibility has been more expansive than required by the federal government. Therefore, the question about what carrots and sticks apply to the Wisconsin Medicaid program is not clearly answered in the decision. This will likely be the subject of consideration and potential debate as the Wisconsin legislature develops the next biennial budget.

Perhaps the greatest impact from the ACA decision will be felt in the upcoming elections. The Court’s characterization of the individual mandate as a “tax” will shape the political debates in the months to come. House Speaker John Boehner, presidential candidate Mitt Romney, and their supporters have already vowed to repeal the ACA following the decision, using the ACA “tax” as their rallying cry. As a result, some uncertainty will remain through and beyond the fall as elected officials sort out what provisions should remain and what should be modified or eliminated. Some of the provisions have proven popular with voters; other provisions have not. And, absent a Republican sweep in November, a total repeal of the Act is not likely. Nonetheless, Wisconsin Governor Scott Walker indicated that the state would not take action to implement provisions of the ACA until after the November elections and that he is counting on the next president and Congress to repeal it.

©2012 von Briesen & Roper, s.c

Employer Group Health Plans and the Constitutionality of the ACA

Focus turns to completing 2012 and 2013 compliance tasks following the U.S. Supreme Court’s decision.

Today, the U.S. Supreme Court ruled that virtually the entire Patient Protection and Affordable Care Act of 2010 (ACA) is constitutional (with the exception of a Medicaid issue that is not directly relevant to employers), validating the full range of past, present, and future ACA requirements. Employers now must continue to press ahead with 2012 and 2013 ACA compliance requirements, particularly if these tasks were placed on a back burner awaiting the decision.

The Decision

Writing for a 5-4 majority in National Federation of Independent Business et al. v. Sebelius, Chief Justice John G. Roberts, Jr., found that the individual mandate in the ACA is a permissible exercise of Congress’s taxing authority, stating that “[t]he Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax.” Chief Justice Roberts also wrote that “because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” Chief Justice Roberts was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, Stephen G. Breyer, and Elena Kagan. Justices Antonin Scalia, Anthony M. Kennedy, Clarence Thomas, and Samuel Anthony Alito, Jr., dissented.

Next Steps for Employers

Now that the ACA has been upheld, employer group health plans must focus on a number of pressing tasks for 2012 and 2013 compliance with the ACA. In the coming weeks and months, employers should do the following:

  • Determine whether they are appropriately aggregating group health plan valuation data in order to support 2012 Form W-2 reporting.
  • Prepare to receive, and properly distribute or apply, any Medical Loss Ratio rebates associated with 2011 insured health coverage.
  • Finalize Summary of Benefits and Coverage material for inclusion in the 2013 Open Enrollment package.
  • Complete updates to Summary Plan Descriptions and plan documents to capture and describe the 2011 and 2012 ACA changes to their plan design.
  • Reflect the 2013 plan year $2,500 cap on salary deferral contributions into healthcare spending accounts in 2013 Open Enrollment material, payroll processes, and administration systems.
  • Understand and begin to determine the patient-centered outcomes trust fund fees due in July 2013.
  • Begin to identify whether their group health plans are both affordable and available to full-time employees in order to avoid any shared responsibility penalty in 2014.
  • Prepare for audits associated with their participation in the Early Retiree Reinsurance Program, if applicable.
  • Review possible design changes to retiree drug programs to reflect the change in Medicare Part D subsidy taxation rules.
  • Review future plan design changes to blunt the balance sheet impact of the 2018 Cadillac Tax.

Implications

While the Supreme Court decision is an important milestone in the federal debate over expanding healthcare coverage, it likely represents just the first in a series of future federal discussions and actions in the coming months and years.

The federal debate now moves to the November election cycle. The ACA no doubt will play a large role in the upcoming elections, but it is premature to expect any quick legislative reversals to ACA provisions, as any changes would require a significant shift in power.

In the interim, employer group health plans should continue to examine and implement those ACA requirements that will be effective in 2012, 2013, and later years into the design and operation of their group health plans.

We will release future LawFlashes and hold webinars as further guidance becomes available.

Copyright © 2012 by Morgan, Lewis & Bockius LLP

U.S. Supreme Court’s Affordable Care Act Decision: Impacts on Life Sciences

The National Law Review recently published an article by Robyn S. Shapiro of Drinker Biddle & Reath LLP, regarding the U.S. Supreme Court’s Affordable Care Act Decision:

The June 28, 2012 U.S. Supreme Court decision upholding the Patient Protection and Affordable Care Act (“Act”) impacts the life sciences industry in a number of ways, including impacts on innovation and compliance initiatives by medical device, pharmaceutical, and biotechnology companies.

Innovation

A number of provisions in the Act provide incentives and resources for product innovation.  First, it is expected that more than 30 million Americans will obtain health care coverage on account of the Act.  A bigger pool of Americans with health coverage to pay for treatment will yield growth in pharmaceutical sales and, perhaps, the ability to charge higher drug prices, which, in turn, could spur innovation.  In addition, the Act created the Therapeutic Discovery Project Program, through which $1 billion in new therapeutic discovery project grants and tax credits will be awarded.  In 2010, 2,923 companies specializing in biotechnology and medical research in 47 states and the District of Columbia received awards under the grant program.  Firms can opt to receive either a grant or a tax credit under the program, which allows both profitable companies and start-ups that are not yet profitable to benefit.  A third measure in the Act likely to have a positive impact on innovation is a provision that gives biotech companies a dozen years of exclusive rights to the data underpinning their products.

On the other hand, the ruling leaves intact a 2.3% excise tax on medical devices, which is estimated to cost the industry $20 billion over the next 10 years, and which manufacturers fear will burden innovation.  On the other hand, some believe that, as in the case of pharmaceutical manufacturers, expansion of health care coverage will increase the demand for medical devices and offset the effect of the tax.

The Supreme Court ruling affects not only the speed but also the direction of life sciences product innovation.  PricewaterhouseCoopers[1] has identified five broad pillars of medical technology innovation: financial incentives (such as reimbursement for adoption of new technologies), resources for innovation (such as academic medical centers), a supportive regulatory system, demanding and price-insensitive patients, and a supportive investment community of venture capitalists and other investors.  Various provisions in the Act promote the development of more cost-effective ways of delivering care, including a measure that calls for more real-world evidence of a new drug’s superiority over other treatments in order to qualify for reimbursement.  Such provisions may spur more definitive product innovation, as opposed to production of “me too” drugs and new devices that make only modest improvements to existing products.

Compliance

Certain provisions in the Act impact compliance initiatives in the life sciences industry.  The Act includes “Sunshine Provisions,” which require pharmaceutical and medical device manufacturers to track and report payments and other transfers of value greater than $10 to physicians and teaching hospitals.  While under prior laws improper industry-provider relationships primarily were uncovered by whistleblowers and government investigations, the Sunshine Provisions place the onus on life sciences manufacturers to disclose their relationships with providers, for review by others.  This enhanced transparency and data accessibility could result in sharper scrutiny by enforcement agencies of information about improper relationships and violations of fraud and abuse laws.  Moreover, other provisions in the Act enhance the government’s ability to pursue violations of existing fraud and abuse laws–e.g., revisions to the intent requirement of the Anti-Kickback Statute; and strengthening of fraud enforcement tools through changes to the False Claims Act, civil monetary penalty laws, sentencing guidelines and exclusion authority, and dedication of $250 million for fraud and abuse enforcement.  These changes will require life sciences companies to carefully structure and manage relationships with providers, and ensure that their compliance initiatives include efficient and effective operating procedures for tracking and reporting payments, educating and training sales and research personnel, and auditing and monitoring provider relationships.

[1] PricewaterhouseCoopers, Medical Technology Innovation Scoreboard: the Race for Global Leadership, January 2011.

©2012 Drinker Biddle & Reath LLP

Supreme Court Upholds ACA, Including the Individual Mandate

The National Law Review recently featured an article by Meghan C. O’Connor of von Briesen & Roper, S.C. regarding The Supreme Courts Recent Ruling on ObamaCare:

This morning, June 28, 2012, the U.S. Supreme Court issued its opinion in theAffordable Care Act (ACA) cases. The individual mandate, requiring the purchase of health insurance, was held constitutional under Congress’ taxing power. The Court did not address the severability issue as to whether other ACA provisions are unconstitutional because the mandate survived. However, the Court did address Medicaid expansion, holding that the expansion is constitutional as long as states would lose only new federal funds – rather than all funding – for failing to comply with the new Medicaid requirements.

Stay tuned for a full summary of the Court’s decision as well as the potential effect of the decision on providers.

©2012 von Briesen & Roper, s.c

Slogans versus substance in the battle over ObamaCare's future: ANALYSIS

An article regarding ObamaCare written by Wendell Potter of the Center for Public Integrity recently appeared in The National Law Review:

Cries of ‘Hands off my health care’ mask the benefits of the Affordable Care Act

Hands off my health care!

Remember those words from the health care reform debate of two years ago? I’m confident we’ll be seeing them on protest signs in Washington again this week as the Supreme Court hears arguments on the constitutionality of the Affordable Care Act. And we’ll see them again when the protest campaigns shift into high gear this summer.

One of the rules of effective communications is to keep it simple. In attacking something you don’t like, use as few words as possible, and make sure those words pack an emotional wallop. That’s why lies about “death panels” and a “government takeover” of health care have been so potent. Unfortunately for those advocating reform, it’s far more challenging to explain and defend a law as complicated as the Affordable Care Act.

Maybe, then, supporters of the law should co-opt the “hands off” slogan and make it their own. That would require adding just a few more words here and there to make clear what would be lost if the law is repealed, gutted or declared unconstitutional.

Here’s are some suggestions:

“Hands off my health care! Granny doesn’t need her meds all year anyway!”

The Affordable Care Act is closing the despised and even deadly “doughnut hole” in the Medicare prescription drug program, which was designed in 2003 largely by lobbyists for insurance and pharmaceutical companies who were more interested in protecting their companies’ profits than helping seniors stay alive. The way the law was cobbled together, Medicare beneficiaries get prescription drug coverage only up to a certain amount. When they reach that limit, they fall into the “doughnut hole” and have to pay about $4,000 out of their own pockets for their prescriptions before coverage resumes. As a consequence, many people stop taking their medications because they don’t have the money to pay for them. And many of them die. The Affordable Care Act has already shrunk that gap and will close it completely in 2020.

“Hands off my health care! Who cares if insurers refuse to cover sick kids?”

Before the Affordable Care Act, insurance companies routinely refused to insure children who were born with disabilities or who developed life-threatening illnesses like diabetes or cancer. It was perfectly legal for them to refuse to sell coverage to anyone — even children— who had what insurers call a “pre-existing condition.” The reform law already requires insurers to cover all kids, regardless of health status. It will apply to the rest of us in 2014.

“Hands off my health care! My 24-year-old daughter can just stay uninsured!”

Insurers have long had a policy of kicking young adults off their parents’ policies when they turn 23. Many of these young folks don’t have the money to buy coverage on their own—and a lot of them can’t buy it at all because of, you guessed it, pre-existing conditions. That’s why young people comprise the biggest segment of the uninsured population. Because the Affordable Care Act allows parents to keep dependents on their policies until they turn 26, an estimated 2.5 million young people had become insured again as of the end of last year.

“Hands off my health care! If I lose my coverage because I lose my job, so be it!”

Millions of Americans fall into the ranks of the uninsured every year when they get laid off. That’s one reason the number of people without coverage swelled to 50 million during the recession. Many of them can’t afford to buy insurance on their own and many of them have—you guessed right again—pre-existing conditions and can’t buy it at any price. Starting in 2014, not only will the Affordable Care Act prohibit insurers from refusing to sell coverage to people of any age because of their medical history, it will also provide subsidies to low-income individuals and families to help them buy insurance.

“Hands off my health care! It’s not my problem if your insurance company dumps you when you get sick!”

To avoid paying claims, insurers for years have cancelled the coverage of policyholders when they got sick. A former nurse in Texas testified before Congress in 2009 about getting a cancellation notice from her insurer the day before she was to have a mastectomy because she had failed to note on her application for coverage that she had been treated for acne. The Affordable Care Act makes it illegal for insurers to cancel policies for any reason other than fraud or failure to pay premiums.

“Hands off my health care!” Maybe we ought to think that through a little bit more before we take to the streets with those words on our placards. Insurers who profited from the way things used to be will laugh all the way to the bank if you start waving those signs, but you and people you love might live to regret it. On the plus side, at least for the special interests, you probably won’t live as long.

Slogans versus substance in the battle over ObamaCare's future

Signs from a Tea Party protest in St. Paul, Minn.Flickr Creative Commons/Fibonacci Blue

Reprinted by Permission © 2012, The Center for Public Integrity®