Transcript Update on Health Care Reform Sherry P. Porter 500 West Jefferson Street Suite 2800 Louisville, KY 40202 (502) 562-7560

Update on
Health Care Reform
Sherry P. Porter
500 West Jefferson Street
Suite 2800
Louisville, KY 40202
(502) 562-7560
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.
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)
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/PLAW111publ152/pdf/PLAW-111publ152.pdf
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.
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 what’s in it” - Nancy Pelosi
Affordable Care Act’s Expanded Coverage
Affordable Care Act’s Expanded Coverage
Expanded Healthcare Coverage
Two Decisions Face State Government
 Expand Medicaid?
 Create health benefit
exchange?
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
Medicaid Expansion
Map:
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
Nationwide Health Insurance Exchanges
Exchanges
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
. . . .
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.
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.
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
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
“Grandfathered” Plans
 Plans that existed on March 23, 2010 are exempt from
some of the law’s 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
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
Delayed until 2015
Employer “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.
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 (<30 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
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
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
employee’s required contribution is more than
9.5% of the employee’s household income and
the employee’s household income is under
400% of FPL
Penalties for Insufficient or
Unaffordable Coverage
 The penalty for inadequate
coverage is $3,000 per year for
every employee who opts out of
the employer’s 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
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
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
AT&T Analysis
2009 Medical Costs
for 283,000 Employees:
$2.4 billion
Penalties if workers
uninsured:
$600 million
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)
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
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 antidiscrimination provision won’t likely be enforced in
2014
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.)
Retaliation Protections for Employees &
Whistleblowers
 Employees may not be subjected to retaliation for:
 Reporting violations of the ACA’s 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 employer’s ACA-evasive conduct be
compliant?
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
How Are We Going To Pay
For This? Cont.
In 2014, annual fee on plans based
on an insurer’s net premiums (selfinsured plans exempt)
Industry fees
Adjust payments to Medicare
providers
Reduce special payments to
hospitals
Employee and individual penalties
Tanning bed taxes
Legal Challenges to ACA
NFIB v. Sebelius, Sec’y of HHS
(decided 6/28/12)
NIFB’s 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 ACA’s enforcement that
threatens loss of Medicaid funding if
States don’t expand (5 to 4)
Sustains ACA’s “offer” of enhanced
Medicaid funding if States do expand (5
to 4)
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
Legal Challenges to ACA:
Contraception “Mandate”
Numerous challenges
Churches/denominational
hierarchies
Religious-affiliated, non-profit/taxexempt employers
For-profit businesses with owners
having strong religious objections
Religious Objections to:
abortifacients & anticontraception meds
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
Other Interesting Legal Challenges
 Pacific Legal Foundation’s Challenge
to the ACA as a violation of the
Constitution’s “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. Beshear’s establishing by executive
order an exchange for Ky.
Health Care Reform is Here to Stay
President Obama ReElected
ACA (mostly) upheld in
the Supreme Court
More than 30 attempts to
repeal all or part of the
law in Congress have
failed
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-detail/the-latest-on-theaffordable-care-act
 http://wyattfirm.com/news-publications-civic-detail/encouraging-healthcare-competition-through-the-aca
 http://wyattfirm.com/news-publications-civic-detail/managing-the-acasincreased-demand-for-health-care-services
 http://wyattfirm.com/uploads/178/doc/ACA_What%20Employers%20Ne
ed%20to%20Know%20Before%202014000000.pdf
 Margaret Levi’s book on the Affordable Care Act, The Impact of
Health Care Reform on Kentucky Employers, is available at the
Kychamber.com/bookstore
Questions?
THANK YOU!
Sherry P. Porter
Wyatt, Tarrant & Combs, LLP
500 West Jefferson Street,
Suite 2800
Louisville, KY 40202
(502) 562-7560