Category Archives: Single Payer Health Systems

Texas Court ACA Ruling: 5 Takeaways

If you are in the benefits business you have already heard about a December 14, 2018 ruling by a federal trial court judge in Texas, that the entirety of the Affordable Care Act is unconstitutional.  The following 5 takeaway points put the ruling into context and provide some indications of where things could head from here.

1.  For now, the ACA remains in effect.

The ruling did not stop the government, via “injunction,” from continuing to enforce the ACA as it currently stands. Instead it reached a legal conclusion (holding) that (a) the individual mandate (which imposed a tax on individuals who failed to secure coverage) was integral to the whole ACA (“the ACA keystone”), that (b) the individual mandate was constitutional because it fell within Congress’s power to levy taxes (as determined by the Supreme Court in NFIB v. Sebelius), and that (c) the reduction of the tax imposed under the individual mandate to $0 (via the 2017 Tax Cut and Jobs Act) rendered the individual mandate, and hence the entire ACA, unconstitutional.  The Departments of Health and Human Services (“HHS”) and the IRS were defendants in the Texas court case, supporting the ACA, and following the ruling the Trump Administration issued a statement that HHS “will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision.” As one consequence, applicable large employers (ALEs) must continue to comply with employer shared responsibility rules (both offers of coverage, and ACA reporting due in early 2019).

2.  The ruling is not the last word on the ACA’s fate.

As mentioned the ruling is at the trial court level in the federal court system.  It almost certainly will be appealed to the Fifth Circuit Court of Appeals and then possibly to the Supreme Court. Legal scholar Nicholas Bagley has opined that the Fifth Circuit Court may have little patience for the court’s holding.  The appeals process could take months, in any event.

3.  The ruling creates uncertainty re: the ACA’s fate.

The ACA has survived two Supreme Court challenges, plus two years of full control of Congress and the White House by its most severe opponents. It had seemed to reach safe ground in recent months; indeed, some ACA concepts such as no pre-existing condition exclusions and coverage of dependents to age 26 had broad appeal in the mid-term elections, including among some Republicans. With the Texas court’s ruling, the ACA’s fate is back in watch and wait mode.  Resolution of the uncertainty will have to await completion of the legal processes described in Point No. 2.  Generally speaking, uncertainty is not good for employers, insurers, or the general economy, so eyes will be on how these sectors react in the wake of the ruling.

4.  The political landscape has changed since the last time the ACA’s constitutionality was in question.

As mentioned, some ACA provisions now appear to be “baked in” to the public’s concept of government entitlements.  Unlike in prior years, elected officials are now loathe to align themselves with the law’s total repeal. (Even the HHS notice regarding continued enforcement of the ACA expressly mentioned the ban on pre-existing condition exclusions.) So reaction to the ruling from known ACA foes has been measured, if made at all.  Prior legal setbacks for the ACA have become political footballs, but  public debate over the issues hopefully will have a more civil tone, this time around.

5.  As the ACA’s fate hangs in the balance, more radical health care reform proposals are just around the corner.

Some of the newly empowered Democratic winners of the mid-term elections are entering Washington, D.C. with ideas for health care reform that go far beyond what the ACA accomplished, including single payer systems.  Single payer systems, including, for instance, a major expansion of the Medicaid program, would disrupt the nexus between healthcare and employment that exists for many Americans.  These concepts first got broad national attention in the last presidential campaign and you can expect buzz around them to increase as the next presidential election in 2020 approaches.

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Filed under Affordable Care Act, Employer Shared Responsibility, Post-Election ACA, PPACA, Pre-Existing Condition Exclusion, Single Payer Health Systems, Tax Cuts and Jobs Act

5 Things California Employers Should Know About the Current State of Health Care Reform

by Amy Evans, HIP, President, Colibri Insurance Services and Christine P. Roberts, Mullen & Henzell L.L.P.

There is still a lot of debate going on at the federal and state levels about health care reform. In Washington, D.C., the Senate is working on a second round of revisions to the American Health Care Act (AHCA), but there is lack of alignment within the Republican party about the new plan, and the current administration is now occupied by other items. At the state level, a Senate bill proposing a state-wide single-payer health care system is making its way through the legislature and generating a lot of conversation about a complete overhaul of health care financing and delivery. With all of the uncertainty and political noise, it can be difficult for employers to know where to put their attention and resources. Here are five things California employers should know about the current state of health care reform.

1) California is leading the discussion about single-payer. California Senate Bill 562 is currently making its way through the state legislation. If enacted, SB 562 would eliminate the private health insurance system in California, including health insurance carriers, health insurance brokers and employer-sponsored health insurance benefits. It would replace them with a state-run, “single-payer” system called the Healthy California program, which would be governed by a 9-member executive board, and guided by a 22-member public advisory committee. At this juncture, funding measures for the bill are vague but include appropriation of existing federal funding for Medicare, Medi-Cal, CHIP and other health benefits provided to California residents, as well as an increase in payroll taxes. The estimated cost for this system is $400 billion annually, which is twice the size of the current budget for the entire state. SB 562 is widely popular in concept but also widely misunderstood, with many confusing it for a universal coverage system that would be supplemented by private and employer-sponsored coverage. The bill is currently in suspense with the Appropriations Committee in Sacramento. The committee chair (who is also the author of the bill) may wait for the results of a detailed study on the bill’s cost and impact, or he may choose to send it to the Senate for a vote. If the bill makes it through the Senate and the Assembly (which it is likely to do because it is such a popular concept), it is anticipated that it will be vetoed by Governor Jerry Brown, who has already expressed concerns about the bill’s financing. Alternatively, the legislature could vote on the bill and then table it until a new governor takes office in 2018. Either way, the bill would become a ballot measure to be approved by voters. Progress of the American Health Care Act in Washington, D.C. will impact SB 562 because the state bill would make use of state innovation waivers, which are slated to expand under the AHCA, but federal retooling of health care reform won’t impede SB 562’s progress to the Governor’s desk. Employers who offer health insurance as a benefit to attract and retain quality employees should be aware of the meaning and impact of this single-payer bill and should continue to track its progress.

 2) “Play or Pay” is still in play. The Affordable Care Act (ACA)’s “play or pay” penalties are still in place, so Applicable Large Employers are required to offer affordable, minimum value health insurance to eligible employees or pay a penalty. The current administration has suggested that they will reduce the penalties to $0 retroactive to 2016, but that has not happened yet. The 1094/1095 reporting requirements also remain in place. There has been some recent talk that penalty notices for 2015 and 2016 may be going out soon, perhaps first to the employers who have the largest penalty assessments.†  However, the Internal Revenue Service is also significantly understaffed so the availability of resources to enforce these penalties remains in doubt. Applicable Large Employers should continue to assess their play or pay options, track employee hours and offers of coverage, and complete 1094/1095 reporting for 2017. They should also address any penalty notifications from the IRS in a timely manner.

3) If there are no penalties, revenue has to come from another source. The extremely unpopular revenue-generating pieces of the ACA, including the individual mandate, the employer mandate, and the Cadillac Tax (currently delayed to 2020) are likely to be cut from the new AHCA, but that would create a shortfall in revenue that would need to made up elsewhere. The employer exclusion is a popular target in current discussions – this is the tax benefit that allows employer contributions to health insurance to be considered separate from employee income. If the employer exclusion is capped or eliminated, it will effectively increase taxes on the approximately 50% of U.S. residents who receive health insurance through their employers, and deliver a huge blow to the employer-sponsored health insurance system. Employers who offer health insurance as a benefit to attract and retain quality employees should be aware of the meaning and impact of capping or eliminating the employer exclusion.

4) 2018 Health insurance renewals will be business as usual. Insurance carriers filed their health insurance plan designs and rates with the regulatory agencies (Department of Insurance and Department of Managed Health Care) for 2018, so any substantive changes to plans (for example, removing Essential Health Benefits) won’t happen until 2019. For employers offering coverage, this means business as usual for 2018 health insurance renewals. Expect increases to premiums to average 10-15%. Also expect lots of plan changes – some plans may be discontinued and participants will be mapped to new plans; benefits many change even if plan names remain the same; carriers may reduce networks and pharmacy benefits and increase deductibles and out of pocket maximums to keep premiums in check.

5) Cost-containment tools are gaining in popularity. As out of pocket costs continue to increase for health insurance participants, we will continue to see a move towards consumer-driven health care, where participants are encouraged to be more involved in the spending of their health care dollars. Health Savings Accounts (HSAs) are growing in popularity again, carriers are providing tools to promote transparency for comparison shopping, and alternative delivery systems like telehealth, nurse on call, minute clinics, free-standing urgent care centers, and even flat-fee house calls are gaining in popularity. Health Reimbursement Arrangements (HRAs), self-funding arrangements and cash-benefit policies can also be effective tools for cost containment. Employers should work with their health insurance brokers and other benefit advisers to assess the value of these tools in their current employee benefits programs.

In closing, employer-provided health benefits rest on shifting legal sands and that is likely to remain the case for some time.   Planning opportunities, and pitfalls, will arise as the reform process moves forward and the informed employer will be in the best position to navigate the changes ahead.

†Hat tip to Ryan Moulder, Lead Counsel at Accord-ACA for this detail.

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Filed under Affordable Care Act, American Health Care Act, Applicable Large Employer Reporting, Benefit Plan Design, California Insurance Laws, California SB 562, Employer Shared Responsibility, Health Care Reform, Post-Election ACA, Single Payer Health Systems