OUT IN FRONT

The Patient Protection andAffordable Care Act

What Does It Do, To Whom, When and How?

History (in the making…)

• The Patient Protection and Affordable Care Act (ACA) - March 23, 2010

• The Health Care and Education Reconciliation Act - March 30, 2010

• Key Implementation Dates:– Immediately upon passage– September 23, 2010 (6 month mark)– January 1, 2011 and annually thereafter– Other dates as designated in regulations

Key Provisions

• Grandfathered Plans– Which plans?– For how long?– What does it mean?

• Pre-Existing Conditions– Under 19– Everyone

• Rescission of Coverage

Key Provisions

• Lifetime/Annual Limits

• Dependents

• Minimum Loss Ratios

• Simple Cafeteria Plans

• Retiree Reinsurance

Key Provisions

• Nondiscrimination Rules– “Highly Compensated Employees”– Two part test:

• Eligibility• Benefits

– Effective Date delayed

• Preventive Services Requirement

• Form W-2 Reporting

Bigger Pieces: The Individual Mandate

• What is it?

• What is its impact?

• What if you don’t comply?

• What exemptions exist?

Bigger Pieces: The Medicaid Expansion

• Who is eligible?

• Who will pay?

• States would be required to participate or lose ALL Medicaid funding.

Bigger Pieces: Health Insurance Exchanges

• What is a Health Insurance Exchange?– State Based Exchanges– Federally Facilitated Exchanges

• Who May Purchase from Exchange?– Individuals– Small Businesses

• ACA – 1-100• States – 1-50 (if desired until 1/1/16)

– Larger Businesses (2017)

• Benefit tiers

Health Insurance ExchangesPart II

• Qualified Health Plans

• Essential Health Benefits

• Rating Variation:– Benefit coverage– Age (3 to 1)– Tobacco use (1.5 to 1)– Family composition

Health Insurance ExchangesPart III

• Navigators

• Financial Sustainability– January 1, 2015

• Participation by States Nationally– http://www.healthcare.gov/news/factsheets/2011/

05/exchanges05232011a.html

Premium Assistance

• Who is eligible?• How is it paid?• How much is available?• Starting when?

Example – Premium Assistance

• Family of 4 at 200% of FPL– $48,677

• Cannot pay more than 6.3% for health insurance.– $3,067

• Cost of 2d lowest silver plan is $14,100

• CREDIT = difference - $11,033

OUT IN FRONT

The Employer Mandate

The Employer Mandate

• Provide Affordable Coverage that provides at least Minimum Value, or else (sort of).– “Affordable Coverage” defined.– “Minimum Value” defined.

• Size matters!– What are the recognized categories?– How do we count employees?

• Employers’ four basic options:– Stay “small” and do what you want– Provide no coverage– Provide affordable coverage– Provide unaffordable coverage

Stay Small: Tax Credit (2010-13)

• Small Business Tax Credit – 25 or fewer full-time employees [defined]; and – average annual wages of less than $50,000

– 10 or fewer full time employees [defined]; and – average annual wages of less than $25,000

• Employers must pay for at least 50% of the employee's premium.

Stay Small Tax Credit (2014)

• Under same parameters:– 25 or fewer employees– Tax credit goes to maximum of 50%.

– 10 or fewer full time employees and– average annual wages of less than $25,000– GET FULL 50% CREDIT.

• Only in effect for two years beginning in 2014• Only if employees are in the Exchange.

Tax Credit Scenario 1

Tax Credit Scenario 2

Tax Credit Scenario 3

“Large Employer” – Providing No Coverage

• If Employer employs at least 50; AND

• Provides no health ins. coverage; AND

• At least one full-time employee goes to Exchange and receives a subsidy; THEN– Penalty of $2000 per employee per year

• Calculated on monthly basis• First 30 employees exempt from calculation.

“Large Employer” – “Unaffordable” Coverage

• IF 50 or more FTEs; AND• Do not offer “affordable coverage”; AND• At least one employee goes to Exchange and

receives a subsidy; THEN– $3000 per employee who enrolls through the

Exchange– Capped at amount of penalty that would have

applied for no coverage.

OUT IN FRONT

Taxes, Fees, Fines and Penalties

Individual Taxes: High Incomes

• Medicare payroll tax increase by .9%

• Additional Medicare tax 3.8% on unearned income

• “High income” defined– $200,000 single; $250,000 joint

• Effective Tax Year 2013

Fees on Plans

• For each fiscal year 2013-2019 there is a fee on employer-sponsored plans to fund Comparative Clinical Effectiveness Research.

– $1 for policy year ending 2013– $2 times average # of lives covered under the

policy 2014-2019

• Insured and Self Insured.

Tax Deductions

• Medical expense deduction raised from 7.5% to 10%

• If taxpayor or spouse is 65+ then stays at 7.5% for tax years 2013-2016

• Effective Tax Year 2013

• Floor on deductible medical expenses is raised to 10% AGI for all taxpayers, including 65 and over in 2017

Cafeteria Plans

• Small Employers [100 or less] can create Simple Cafeteria Plans.

• Must meet certain employee eligibility and minimum contribution requirements in order to have safe harbor from non-discrimination requirements relating to highly compensated employees.

• Effective Year 2011.

FSA Limits

• Lower contribution limits on Health Flexible Spending Arrangements (FSAs) take effect for purposes of being a "qualified benefit" (employee contribution limited to $2,500 per year ).

• Includes grandfathered plans.• Effective Year 2013.

HSAs, FSAs, Archer MSAs

• What are HSAs, FSAs and Archer MSAs?

• These vehicles no longer approved for purchase of over-the-counter medicines.

• Penalties apply in HSAs and Archer MSAs.

• Includes grandfathered plans• Effective Year 2011.

Industry Taxes

• Insurance Industry– 2014 - $8 Billion– 2015 - $11.3 Billion– 2018 - $14.3 Billion

• Pharmaceutical– 2011 - $2.5 Billion– 2018 - $4.1 Billion– 2019+ $2.8 Billion

• Medical Device Industry– Excise tax of 2.3% on all taxable sales

OUT IN FRONT

Legal Challenges to PPACA…

First Challenge to the ACA

• Who initiated the challenge?– Florida– 25 other states

• Basis for challenge?

• Where?– Florida District Court; 4th Circuit; SCOTUS

• When?

Supreme Court Decision

• Oral Arguments (March, 2012)

• Opinion Issued (June 28, 2012)

• Divided Court

• Four Issues Addressed– Anti-Injunction Act– Individual Mandate– Medicaid Expansion– The Rest of the Law

Individual Mandate

• Question – Is the Mandate Constitutional?– Commerce Clause

• Regulation vs. Requiring Commerce• Healthcare vs. Broccoli

– Spending/Taxing Power• Penalty is a Tax.• Congress can do it.

– Essentially – the “mandate” is now an option.• Buy insurance, OR• Shared responsibility payment

Medicaid Expansion

• In a word, it’s

OPTIONAL

The Rest…

ALL STANDS(Don’t reach question of severability)

Oral Arguments

http://www.supremecourt.gov/oral_arguments/argument_audio.aspx

OUT IN FRONT

More Challenges Ahead…

The Next Challenges: Exchanges

• The Argument– Employer penalties are triggered when employee goes to

Exchange and qualifies for subsidy– Subsidies are available, per ACA 1311, to employees who

enroll through “state established exchange.”– So, if a State doesn’t have an SBE, but only an FFE, then

no subsidies and no employer penalties.– Thus, ALL STATES should refuse to establish SBEs.

• ACA Drafters: We made an error.• IRS: We will fix that.

The Next Challenges: Contraceptives

• PPACA says:– Employee group plans must cover preventive care

• Contraceptives (sterilization, abortifacients)

– No copay or cost-sharing– August, 2011 – interim final rule– Coverage mandate effective 8/1/12

• The Challenge:– Archbishop, Notre Dame– 40+ Catholic organizations in various states

The Next Challenges: Contraceptives

• The Argument– Violates First Amendment to Constitution– Violates Religious Freedom Restoration Act

• Government’s Response– Exemption of “religious employers”

• Plaintiffs say exemption is meaningless– Definition of “religious employer”

• Relief sought