US Supreme Court: Affordable Care Act Decision – impact on Group Health Plan

Posted June 22, 2012 by PHaynes in News | 0 comments

Update, 6/28/2012, 10:38 a.m. (EDT):

1   The Affordable Care Act (PPACA), including its individual mandate that virtually all Americans buy health insurance, is constitutional.

2  There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters.

3  Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding.

In short – all theimplementation initiatives that we’ve been discussing with you for the past 3 years should be followed & implemented without delay.  

And, here’s the Court’s opinion – all 193 pages of it!

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The U.S. Supreme Court:  The Decision on the Affordable Care Act – What impact will it have for my Group’s Health Plan?

With the end of the Court’s business yesterday (6/21), the possibility of a decision from the USSC, this week, ended.  The Court is expected to be in session next week, and TV-camera crews are setting up shop again for Monday as they prepare to air the results this “big” decision.  Whatever side of the issue you may be on, you have to admit that a bill/law that effects 18% of our economy is huge.  With an unprecedented three days of oral argument on the question of the constitutionality of the Affordable Care Act (PPACA), the Court signaled just how seriously the matter deserved their full consideration.

Possible Outcomes?

1  PPACA is upheld in its entirety (holding that the individual mandate is constitutional and keeps PPACA in place).  This decision would essentially be “business as usual,” and employer, plan sponsors and carriers should continue with their implementation timelines that we’ve been discussing for the past two (2) years.  SBCs (Summary of Benefits and Coverage) are the next “big” implementation piece that carriers and employers need to prepare and distribute.

2  Individual Mandate is struck down, but the rest of PPACA remains.  This would mean that not only does the USSC believe that the mandate is a legally permissible means by which Congress can regulate commerce between the states, but that they also found that this provision was severable from the rest of the Affordable Care Act.  Certainly this will effect carriers and the promise of “guaranteed issue” as well as for the exchange-markets that are due to come online in 2014 and 2015.  However, for Employers, it would mean very little—your implementation timeline, duties & responsibilities would proceed without delay or change.

3  The Affordable Care Act is partially upheld.  This would mean that the USSC held the individual mandate to be unconstitutional and found that certain provisions of PPACA were intertwined with the mandate and that they are struck down as well (along with the mandate).  Depending on how many other provisions are struck down there might be some impact for employers/plan sponsors.  It is more likely that the impact would be on the side of the carriers and the states (as it relates to guaranteed issue and implementation/pricing of the exchanges).

4  All of the Affordable Care Act is struck down.  This would mean that the USSC held the individual mandate to be unconstitutional and that the rest of PPACA cannot be severed from the mandate.  This is the outcome that will have the most impact on group health plans.  It effectively would “toss out” all the changes that have been made since PPACA became law in 2010.

Some things to consider:

A.  Early Retiree Reinsurance Program – if a plan received monies from the ERRP would they need to be repaid to the federal government?

B.  Coverage of children to age 26 – while this is a popular feature of the Affordable Care Act (and no one can argue that not tormenting employees twice a year with proof-of-student-status is a good thing) the fact remains that PPACA expanded coverage to age 26 and the IRS issued guidance making that coverage non-taxable for your natural, adopted and stepchildren.  Without PPACA, we are left with IRS Section 152 definitions of tax dependents and could only offer tax-free coverage for children to age 19 and full-time students to age 23 (if all other dependent rules were met/kept; E.g. live with you, you provide more than 50% of their support, they are unmarried, have no dependents of their own, etc.).

C.  Lifetime and Annual limits on essential benefits.  PPACA threw out lifetime limits, and permitted some restricted annual limits on an ever-increasing scale.  Without PPACA what will plans choose to cover?  How will that affect their reinsurance?  What will fully-insured carriers do (revert to old state mandates)?

D.  Rescissions – plans and carriers will have to carefully wade into this topic.  There was a great deal of public outcry on the issue of retroactive rescissions prior to PPACA’s enactment.  Now they are still possible, but only in cases of fraud or intentional misrepresentation of a material fact and for the failure to pay premiums.  So reverting to “old practices” may not be a “best practice” in light of past abuses.  Some middle ground will certainly be called for here.

E.  Preventive Care.  Under PPACA, only grandfathered health plans can still charge a cost-sharing measure on preventive services (deductible-applies, copays, coinsurance, etc.).  Since 2007, HDHP/HSA plans have also been able to offer preventive care without jeopardizing the right to have an HSA.  If PPACA is struck down, plans will have the ability to begin to charge cost sharing for preventive services again.  A few national carriers have already stated that they will keep this provision even if PPACA is struck down.  I’m sure we can all see the value in making it easier/cheaper for people to get annual check-ups, physicals, labs, etc.

F.  Other considerations that would be tossed out with PPACA that might impact your plans (or save you time/money/work), include:  SBC (Summary of Benefits & Coverage), IRC Section 105(h) Nondiscrimination requirements applying to fully insured plans, Internal claims and External Appeals procedures, removing the prohibition on reimbursements for OTC (Over The Counter) medicines (for your HRAs, HCFSAs and HSAs), $2,500 cap on HCFSAs (beginning 1/1/2013), W-2 reporting, Patient Centered Outcomes Research Institute fee/tax and the so-called Cadillac Tax (that is due to begin in 2018).

Other & Future Considerations.

Elections 2012.  Changes to the makeup of the House and Senate can certainly impact PPACA’s future (as could a new President).  The Supreme Court’s decision could impact the elections, alter the makeup of Congress and/or energize elements of both parties to act, elect and spur change (E.g. Key parts of the bill could be overturned by acts of Congress; new directors at DOL and HHS could alter the implementation timeline/funding/structure of key provisions; Executive Orders could also be utilized to alter, modify and even stop key provisions from taking effect).

2.  There are still other lawsuits pending.    In addition to other pending suits regarding the constitutionality of the Affordable Care Act, Catholic institutions have filed multiple legal challenges to PPACA’s mandate regarding counseling for abortions, copay free birth control, etc. (as part of PPACA’s classification of women’s health initiatives as preventive care).

3.  State Mandates have changed.  Many state mandates were altered to either raise their plans to the levels required by PPACA, or they were changed to create a new “floor” from which consumers, employers and the like could “buy up from” the floor/entry-level plan.  So, even if PPACA is overturned, fully insured plans will still have to contend with augmented state mandates (until/if they are changed).

Rest assured that whenever the Court reaches its decision our In-House-Counsel, Account Managers and Account Executives will collaborate to read, review and analyze the decision.  Then, we will follow up with you to:

  • Help you and your organization makes sense of the Court’s decision;
  • Help you understand the impact of the decision on your organization’s needs, interests and corporate culture;
  • Offer our counsel and advice regarding any required changes to your plans; and
  • Continue to consult with your organization about your benefit offerings within your region and industry sector–to ensure that your benefit plans remain powerful tools for your company to attract and retain the top talent.
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