QUESTION ONE: WHAT WAS THE EFFECT OF PPACA ON THE U.S.
HEALTH CARE SYSTEM?
1. It creates a new government health care plan to replace private insurance.
2. It requires every working person to set up a Health Savings Account that is funded both by the employee and
employer and coupled with a HDHP.
3. It provides incentives for the states to set up a comprehensive, universal health care system for their citizens.
4. It builds on the existing system by preserving Employer Sponsored Health Insurance (ESHI) and private
individual health insurance but vastly increases federal regulatory authority over private insurance markets
PPACA
• Adopted March 2010 on a straight party line vote
• Based on Romneycare, a health care plan devised by the
Heritage Foundation and adopted by the Commonwealth of
Massachusetts when it had a Republican Governor and a
legislature controlled by Democrats.
• Full implementation on January 1, 2014, but some features were
implemented earlier and others have been delayed.
BASIC ELEMENTS
Insurance Exchanges
Qualified Health Plans
Three Legged Stool- Insurance Reforms; Individual Mandate; Premium and Cost-Sharing
Subsidies
Large Employers-Pay or Play
Small Employers -Subsidies and SHOP
Medicaid Expansion
INSURANCE EXCHANGES
•
States were supposed to establish exchanges to facilitate
purchase of “qualified health plans” by individuals and
small businesses from private insurers
•
But several state refused so Federal Government set up
many of the exchanges
17 state-based, 7 partnerships, 27 federal
INSURANCE EXCHANGES
• Beginning fall 2013 with coverage effective January 1 2014, individuals may
purchase qualified health plans (QHPs) on the exchanges during annual
enrollment periods or after qualifying events
• Individuals may also purchase QHPs outside of exchanges but no subsidies
are available
QUESTION TWO: WHAT IS A “QUALIFIED HEALTH PLAN” (QHP)?
1. A plan that is approved by the Insurance Commissioner of Insurance in the state where it
is to be offered.
2. A health insurance policy that has a high deductible and can be coupled with a Health
Savings Account.
3. A plan that is affordable.
4. A plan that is certified by the Health Insurance Marketplace as being in compliance with
the requirements of PPACA.
QUALIFIED HEALTH PLAN
“Under the Affordable Care Act, starting in 2014, an
insurance plan that is certified by the Health Insurance
Marketplace, provides essential health benefits, follows
established limits on cost-sharing (like deductibles,
copayments, and out-of-pocket maximum amounts),
and meets other requirements. A qualified health plan
will have a certification by each Marketplace in which it
is sold.”
Qualified Health Plan, https://www.healthcare.gov/glossary/qualified-health-plan/
QHPS: BENEFIT TIERS
In the Exchanges-Four Categories (all providing essential benefits package) plus separate Catastrophic plan
 Bronze: covers 60% of the standard benefits cost (actuarial value)
 Silver: Covers 70% of the standard benefits cost
 Gold: covers 80% of the standard benefits cost
 Platinum: covers 90% of the standard benefits cost
 Catastrophic:
 Only available for those age <30 or with hardship exemptions
 Only available in the individual market
QHPS: ESSENTIAL HEALTH BENEFITS (EHBS)
• Small group and individual plans offered both within and outside exchanges must be QHPs offering at
least EHBs
• EHBs are delineated in accordance with a benchmark plan offered by a private insurer in the State
• States required to choose benchmark plan by 12/26/2012 but if State failed to act default plan was
largest small group plan in the state (e.g. BCBS of AL- 320 Plan, PPO)
• Must comply with statutory guidelines (10 essential benefits)
• Grandfathered small employer and individual plans, large employer group plans and Self Insured
Plans not required to offer EHB or adhere to the actuarial value and metallic tier requirements
Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013http://kff.org/health-reform/state-indicator/ehb-benchmark-plans/,
ESSENTIAL HEALTH BENEFITS
EHBs include at least the following ten items and services :
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Outpatient Care
Trips to Emergency Room
Treatment in the hospital for inpatient care
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment, counseling and
psychotherapy
Prescription drugs
Rehabilitative services and devices to including physical and occupational therapy, speech therapy, etc.
Laboratory services
Preventive services including counseling, screenings, and vaccines and chronic disease management
Pediatric services, including dental and vision care
What’s Covered in the Marketplace, https://www.healthcare.gov/blog/10-health-care-benefits-covered-in-the-health-insurance-marketplace/
PREVENTIVE SERVICES
• All non-grandfathered private health plans including self-insured plans
are required to provide coverage for preventive services including certain
screenings and immunization without cost sharing
• For women preventive coverage includes Contraceptives, EC (including
Ella) and sterilization
QUESTION THREE : WHAT DID SCOTUS HOLD IN THE HOBBY LOBBY CASE ?
1. Employers don’t have to provide contraceptives or Viagra to employees.
2. Employees of religious organizations can be fired for using birth control.
3. Requiring religious employers to provide contraceptives to employees violates the First Amendment.
4. Under the Religious Freedom Restoration Act, the owners of a closely held for profit corporation with a
religious objection to certain contraceptives are entitled to the same accommodation given certain
religious employers (i.e., their insurer will pay for the contraceptive if they fill out a form claiming an
exemption)
“THE THREE LEGGED STOOL”
Insurance Reforms
Individual Mandate
Premium and Cost Sharing Subsidies
http://theincidentaleconomist.com/wordpress/stools-need-more-than-two-legs/
INSURANCE REFORMS
Prohibition on use of pre-existing condition limitations
Guaranteed Issuance and Renewal
Adjusted Community rating - age ratio limited to 3:1, geography,
family size, and tobacco use (1.5:1 ratio)
No annual and lifetime caps
INDIVIDUAL MANDATE
Individual Shared Responsibility Provision
requires individual to maintain “minimum
essential coverage” for themselves and their
dependents
Insurers will be required to provide everyone that
they cover each year with information that will
help them demonstrate they had coverage
beginning with the 2015 tax year.
Questions and Answers on the Individual Shared Responsibility Provision, http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-SharedResponsibility-Provision
QUESTION FOUR: WHAT DID THE SUPREME COURT HOLD IN NFIB V.
SEBELIUS (DECIDED 6/28/2012)?
Congress had the power to enact the individual mandate under both its taxing power and its commerce clause
power.
Congress had the power to impose individual mandate as a tax but not under ithe commerce clause.
Congress has plenary authority to enact all health care legislation including the individual mandate because there
is a constitutional right to healthcare.
Only the States have the authority to require health insurance.
NFIB V. SEBELIUS (DECIDED 6/28/2012)
 Individual mandate is an unconstitutional exercise of
commerce clause power because it punishes
inactivity rather than regulating activity
 Individual mandate is constitutional as a tax
NFIB v. Sebelius, http://www2.bloomberglaw.com/public/desktop/document/Natl_Federation_of_Independent_Business_v_Sebelius_No_Nos_11393_1
SISSEL V. HHS- ORIGINATION CLAUSE CHALLENGE
•
After NFIB v Sebelius held individual shared responsibility is a tax, PLF’s amended complaint
alleged that the individual mandate tax is illegal because it was introduced in the Senate rather than
the House, as required by the Constitution’s Origination Clause for new revenue-raising bills (Article I,
Section 7).
•
On June 28, 2013, U.S. District Court for DC dismissed the complaint holding that “the individual
mandate was not a “Bill[] for raising Revenue,” and thus the plaintiff’s Origination Clause challenge
likewise fails to state a claim upon which reliefmay be granted. In any event, even if the individual
mandate were a “Bill[] for raising Revenue,” the Court holds that it was nevertheless an amendment
to a bill that “originated in theHouse of Representatives” and thus was enacted in compliance with the
Origination Clause.”
• Oral Argument before DC Circuit on May 8, 2014.
Sissell v HHS, http://www.pacificlegal.org/old-site/document.doc?id=917
QUESTION FIVE: WHAT IS “MINIMUM ESSENTIAL COVERAGE”?
1. The type of coverage an individual needs to have to meet the individual
responsibility requirement under PPACA (includes individual exchange
policies, employer-sponsored coverage, government-sponsored plans, and
grandfathered plans )
2. Stand alone vision or dental coverage
3. Workers Compensation
4. Accident or Disability Policies
Questions and Answers on the Individual Shared Responsibility Provision, http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-SharedResponsibility-Provision
QUESTION SIX: IS THE INDIVIDUAL MANDATE NECESSARY TO
THE SUCCESS OF PPACA?
1.
No, it is merely an attempt to raise taxes to redistribute wealth.
2. Yes, it is necessary to prevent adverse selection if you have insurance
reforms and it may also reduce free riders and cost shifting.
3. No, it is merely a way to punish opponents of PPACA.
4. Yes, it provides essential funding.
INDIVIDUAL MANDATE
Capped at average premium for bronze plan
Penalty to be phased in:
$95 or 1% of income in 2014
$325 or 2.0% of income in 2015
 $695 or 2.5% of income in 2016
> 2016 annual COLA
INDIVIDUAL MANDATE
Exemptions from fine:
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Financial hardship
religious objections
Member of Health Care Sharing Ministry
Indian Tribes
Short coverage gap< 3 months
Undocumented immigrants
Incarceration
Affordability: Those for whom the lowest cost plan option > 8% income
Those with incomes <tax filing threshold
Hardship
HARDSHIP EXEMPTION
“If you have been notified that your health insurance
policy will be cancelled, and you believe that the
individual market health plan options available in
your area are unaffordable, you will be eligible for a
hardship exemption and will be able to enroll in
catastrophic coverage available in your area.”
Questions and Answers on Options Available for Consumers with Cancelled Policies, CMS Guidance, Jan. 3, 2014,
http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/cancellation-consumer-options-faq-01-03-2014.pdf
QUESTION SEVEN: ARE PREMIUM AND COST-SHARING SUBSIDIES ESSENTIAL
TO THE SUCCESS OF PPACA
1. No, it is merely a mechanism to redistribute wealth.
2. Yes, it is necessary to garner votes to keep Democrats
in power and prevent repeal.
3. No, it is merely vote buying.
4. Yes, without these subsidies many low income persons
will be unable to gain coverage and access health care.
EXPLAINING HEALTH CARE REFORM: Questions About Health Insurance Subsidies, July 2012,
http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7962-02.pdf
PREMIUM SUBSIDIES TO INDIVIDUALS
Rationale: Increases access and enables lower income persons subject
to mandate to afford to buy insurance
Provided for purchase of insurance through exchanges
Refundable & advanceable premium credits for those with incomes
between 100-400% of FPL
Pegged to the 2d lowest cost silver plan in the region
PREMIUM SUBSIDIES TO INDIVIDUALS
 Sliding scale limiting premiums to % of income
Up to 133 %-2%
133-150% FPL: 3 – 4%
150-200% FPL: 4 – 6.3%
200-250% FPL: 6.3 – 8.05%
250-300% FPL: 8.05 – 9.5%
300-400% FPL: 9.5%
COST- SHARING SUBSIDIES
• Reduces out of pocket maximum in silver plan for households
with incomes 100-250% FPL
• Increases actuarial value of silver plan for households with
incomes of 100-250% FPL
100-150% FPL: 94%
150-200% FPL: 87%
200-250% FPL: 73%
HALBIG V. SEBELIUS
• “In its final rule, the IRS interpreted the ACA as authorizing the agency to grant tax credits to certain
individuals who purchase insurance on either a state-run health insurance “Exchange” or a federallyfacilitated “Exchange.” Plaintiffs contend that this interpretation is contrary to the statute, which, they
assert, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges.
Plaintiffs therefore assert that the rule promulgated by the IRS exceeds the agency’s statutory
authority and is arbitrary, capricious, and contrary to law, in violation of the Administrative Procedure
Act.”
• US District Court in DC upheld IRS Rule authorizing provision of tax credits to individuals purchasing
insurance on federally-facilitated exchanges.
• Argued 3/25/2014-Pending before a panel in the D.C. Circuit
• Could unravel PPACA
Halbig v. Sebelius, https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2013cv0623-67; Michael Cannon, Who Needs Hobby Lobby When You Got Halbig? Yesterday’s Appellate
Arguments in Halbig v. Sebelius, Forbes, 3/26/2014, http://www.forbes.com/sites/michaelcannon/2014/03/26/who-needs-hobby-lobby-when-youve-got-halbig-yesterdays-appellatearguments-in-halbig-v-sebelius/
SMALL EMPLOYERS
< 50 full-time employees
Not required to provide coverage or make contribution to
coverage provided through exchanges
May purchase coverage outside or through exchange but
subject to essential health benefits requirement unless
“grandfathered”
SMALL EMPLOYER SUBSIDIES
Employers with no more than 25 employees and average annual wages
of less than $50,000 that purchase health insurance for employees will
be eligible for a tax credit to be phased in:
2010-2013-up to 35% if employer pays at least 50% of cost
2014 and later-two-year credit of up to 50% if employer pays 50% of the
cost for insurance purchased through Exchange
Source: Side-by-Side Comparison, Kaiser Foundation, http://www.kff.org/healthreform/upload/housesenatebill_final.pdf
LARGE EMPLOYERS PAY OR PLAY
Larger Employers (50 or more full time employees)
 Not required to offer coverage
 Insured and self insured plans ) not subject to essential benefits requirement
 If employer fails to offer “minimum essential coverage” and one fulltime employee receives a subsidy through
the exchange, then employer will be assessed $2000 per full time employee (excluding first 30 employees)
 If offers coverage, but one fulltime employee receives subsidy, employer will be assessed the lesser of $3000 for
each employee receiving subsidy or $2000 per full time employee (excluding first 30 employees).
EMPLOYER MANDATE DELAYED
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• Firms 100+ full time employees do not have to meet the employer mandate until
2015
 Need only offer coverage to 70% of employees in 2015
 95% required thereafter
• Firms with 50 to 99 full time employees do not have to meet the mandate until 2016
but they have to maintain current coverage
Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, http://www.irs.gov/uac/Newsroom/Questionsand-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
PPACA-SHOP
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PPACA creates a new health insurance Exchange for small businesses called the SHOP (Small Business Health
Options Program), to offer QHPs to small employers with 100 or fewer employees
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Uses Adjusted Community Rating rather than experience rating
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Delayed until 2015 for 32 states, until 2016 in 18 states
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Participation in the Exchanges limited to businesses with up to 50 employees until 2016.
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Employers with > 100 employees may be allowed in beginning in 2017
Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plan; Small Business
Health Options Program, 78 Fed. Reg. 33233 Tuesday, June 4, 2013, http://www.gpo.gov/fdsys/pkg/FR-2013-06-04/pdf/2013-13149.pdf ; Small Business
Health Options Program (SHOP), CMS, http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/2015-Transition-toEmployee-Choice-.html
IMPACT OF PPACA ON HSA/CDHP
• Under PPACA Insurers have Medical Loss Ratio Limits of 80% for individuals and small groups and
85% for large groups.
• Individual and small-group HDHP not likely to not spend 80 percent of premiums on medical claims
because oftentimes members will never reach the deductible
• In testimony before Congress, HHS Director Gary Cohen stated that HSA contributions by employer
will be considered first dollar coverage for MLR as long as it is spent.
Energy & Commerce Hearing: State of Uncertainty: Implementation of PPACA's Exchanges and Medicaid Expansion
December 13, 2012, http://www.aba.com/Issues/HSA/Documents/EandC_hearing_12.13.12Cohen_Cassidy.pdf
CADILLAC TAX-PPACA
• Begins in 2018
• Imposes 40% tax on the value of ESHI plans that exceeds these
thresholds >$10,200 single coverage and $27,500 for family coverage
• Threshold pegged to CPI but health insurance have historically increased
at a rate > CPI
• Over time more plans will be subject to Cadillac tax
IMPACT OF PPACA ON ESHI
• Enrollment in ESHI has increased by 8.2 million people since
September 2013
• Most of these people were previously uninsured
• May be due to individual mandate and lower unemployment rate
Rand Corporation, Change in Health Insurance Since 2013, file:///C:/Users/User/Documents/RAND_RR656.pdf
IMPACT OF PPACA ON ESHI
•
3/4 of employers will continue to provide coverage for full time
employees in 2015
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1/3 one-third of employers have increased out-of-pocket limits,
increased participants' share of premium costs and/or increased innetwork deductibles
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More than 1/5 have increased copayments or coinsurance for primary
care and/or increased employee proportions of dependent coverage
costs
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More than ¼ have increased emphasis on HDHP with HSA
International Federation of Employee Benefit Plans, 2014 Employer-Sponsored Health Care: ACA's Impact,
http://www.ifebp.org/pdf/research/ACASurvey_2014.PDF
MEDICAID EXPANSION
 Expands Medicaid eligibility to all <age 65 w/ incomes below 133% FPL (actually 138%
because of 5% income disregard)
 All newly eligible adults to get at least essential benefits package
 States have to expand eligibility if they participate in Medicaid (but see SCOTUS opinion
holding this condition is unconstitutional)
NFIB V. SEBELIUS
 Medicaid expansion violates Congressional
spending power (and 10th amendment) by amounting
to undue coercion
 Remedy for unconstitutional Medicaid expansion is
to limit penalty to loss of federal match for expansion
NFIB v. Sebelius,
http://www2.bloomberglaw.com/public/desktop/document/Natl_Federation_of_Independent_Business_v_Sebelius_No_Nos_1139
3_1
MEDICAID EXPANSION
Increased Federal Funding for Medicaid Expansion
2014 – 2016-100%
2017 -95%
 2018-94%
2019-93%
>2020-90%
MEDICAID EXPANSION
Governors in several states including Alabama have rejected Medicaid
expansion
Implementing Expansion in 2014 (26 States and DC)
 Open Debate (3 States)
 Not Moving Forward at this Time (21 States)
Status of State Action on the Medicaid Expansion Decision, June 2014, Kaiser Family Foundation, http://kff.org/health-reform/state-indicator/stateactivity-around-expanding-medicaid-under-the-affordable-care-act/