PPACA OVERVIEW

1. PPACA OVERVIEW Leonard J. Nelson, III

3. Question One: What was the EFFECT of PPACA on the U.S. Health Care system? • It creates a new government health care plan to replace private insurance. • 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. • It provides incentives for the states to set up a comprehensive, universal health care system for their citizens. • 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

4. 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.

5. 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

6. 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

7. 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

8. 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.

9. 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/

10. 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

11. 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 EHBor 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/,

12. Essential Health Benefits • EHBs include at least the following ten items and services : • 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/

13. 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

14. Question Three : What did SCOTUS hold in the Hobby Lobby Case ? • Employers don’t have to provide contraceptives or Viagra to employees. • Employees of religious organizations can be fired for using birth control. • Requiring religious employers to provide contraceptives to employees violates the First Amendment. • 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)

15. “The Three Legged Stool” • Insurance Reforms • Individual Mandate • Premium and Cost Sharing Subsidies http://theincidentaleconomist.com/wordpress/stools-need-more-than-two-legs/

16. 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

17. 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-Shared-Responsibility-Provision

18. 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.

19. 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

20. 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 reliefmaybe 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 theHouseof Representatives” and thus was enacted in compliance with the Origination Clause.” • Oral Argument before DC Circuit on May 8, 2014. Sissellv HHS, http://www.pacificlegal.org/old-site/document.doc?id=917

21. Question FIve: What is “Minimum Essential Coverage”? • 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 ) • Stand alone vision or dental coverage • Workers Compensation • Accident or Disability Policies Questions and Answers on the Individual Shared Responsibility Provision, http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision

22. 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.

23. 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

24. Individual Mandate • Exemptions from fine: • 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

25. 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

26. Question SEVEN: are premium and Cost-sharing Subsidies Essential to the success of PPACA • No, it is merely a mechanism to redistribute wealth. • Yes, it is necessary to garner votes to keep Democrats in power and prevent repeal. • No, it is merely vote buying. • 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

27. 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

28. 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%

29. 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%

30. 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 federally-facilitated “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-appellate-arguments-in-halbig-v-sebelius/

31. 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”

32. 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

33. 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).

34. Employer Mandate Delayed • 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/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act

35. PPACA-SHOP • 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 • Uses Adjusted Community Rating rather than experience rating • Delayed until 2015 for 32 states, until 2016 in 18 states • Participation in the Exchanges limited to businesses with up to 50 employees until 2016. • 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-to-Employee-Choice-.html

36. 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

37. 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

38. 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

39. Impact of PPACA on ESHI • 3/4 of employers will continue to provide coverage for full time employees in 2015 • 1/3 one-third of employers have increased out-of-pocket limits, increased participants' share of premium costs and/or increased in-network deductibles • More than 1/5 have increased copayments or coinsurance for primary care and/or increased employee proportions of dependent coverage costs • 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

40. 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)

41. 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_11393_1

42. Medicaid Expansion • Increased Federal Funding for Medicaid Expansion • 2014 – 2016-100% • 2017 -95% • 2018-94% • 2019-93% • >2020-90%

43. 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/state-activity-around-expanding-medicaid-under-the-affordable-care-act/