2012 NARPA Annual Rights Conference: The Affordable Care Act

1. 2012 NARPA Annual Rights Conference:The Affordable Care Act Ruth Colker Distinguished University Professor The Ohio State University Moritz College of Law

2. Outline of Talk • History of enactment of ACA • Constitutionality of ACA • Provisions of ACA • Implications for Medicaid, Children’s Health Insurance (CHIP) and Longterm Care

3. The Beginning • Obama made a campaign promise to help enact a new national health plan for all Americans that would include: • Guaranteed eligibility • No pre-existing condition rules • Affordable premiums, co-pays and deductibles • Those who do not qualify for public insurance would be able to buy private insurance with subsidies • Portability and choice

4. Economic Theories Underlying ACA • Need to deal with “adverse selection” problem: • If preclude insurers from turning away anyone, including those with a pre-existing condition, then people would have a strong incentive not to buy insurance until they had a serious health event. • So, have to require everyone, even when they believe they will be healthy, to buy insurance in order to expand the pool. • Need to preserve employer-provided health insurance • Don’t allow people to choose Exchanges if employer offers affordable insurance • Require people to buy employer-provided insurance so long as it is affordable

5. Political Challenges • In 2008, Democrats had strong majority in House but had exactly 60 votes in Senate • Needed all 60 Senate votes to prevent filibuster

6. The Senate • Ted Kennedy died on August 25, 2009. To attain 60 votes in Senate, needed all 57 Democrats, Independents Joe Lieberman and Bernie Sanders, and a Massachusetts Senator. • Special election scheduled for January 19, 2010. Seat meanwhile vacant.

7. Massachusetts • In 2004, when John Kerry ran for President while Senator from Massachusetts, Mitt Romney was Governor of Massachusetts. • Massachusetts legislature was worried that Governor Romney would replace Kerry with a Republican if he won the election so it took away Governor’s power to nominate a replacement (over Romney’s veto).

8. New Massachusetts Legislation • Massachusetts legislature passed legislation that would keep the January special election but allow Governor Deval Patrick to appoint an interim senator until the special election. • On September 24, 2009, the Governor named a Kennedy family friend, Paul Kirk, to be the interim Massachusetts Senator.

9. House • November 7, 2009 • ACA approved by House by a vote of 220-215 with one Republican supporting it and 39 Democrats voting against it. • Joseph Cao, a first-term Republican from New Orleans, was the lone Republican in favor. (Needed 218 for passage.) He ultimately voted against the final bill. His district was overwhelmingly Democrat and he lost re-election to a Democrat.

10. Passage in Senate • The Senate passed a different version of the ACA after first voting to end a possible filibuster with a vote of 60-39 on December 23rd. Democrats were only able to get to 60 votes by caving into a request by Democratic Senator Ben Nelson (Nebraska) to offer a higher rate of Medicaid reimbursement for Nebraska.

11. Reconciliation • House and Senate needed to pass same language. • Republican Scott Brown won election in Massachusetts on January 19, 2010 so Democrats no longer had 60 votes to break a filibuster.

12. Differences between House and Senate • Financing: House sought a 5.4 % surcharge on families with incomes over $1 million whereas Senate sought an excise tax on high-cost insurance plans • Public option: House version had a public option • Abortion: House version gave more freedom for plans to cover abortions

13. Reconciliation • House agreed to pass a bill that was very close to the one that had already passed the Senate. • After coming to an agreement with a group of pro-life Democrats, the House passed the bill with a vote of 219 to 212 on March 21, 2010 with 34 Democrats and all 178 Republicans voting against it. • Senate used the reconciliation process that is available for revenue bills to pass some amendments that would not be subject to filibuster.

14. President’s signature • President Obama signed ACA into law with the strokes of 22 pens on March 23, 2010.

15. Legal Challenge: Anti-Injunction Act (Roberts plus 4 liberals) • Does Anti-Injunction Act bar suit from even occurring before statutory penalty has gone into effect? • No, because Congress did not intend the payment for failure to comply with individual mandate to be a “tax.” It is a “penalty.”

16. Does Congress Have Power to Enact Individual Mandate under Commerce Clause? (Roberts plus 4 conservatives) • The individual mandate is an invalid exercise of Congress’ commerce clause authority, because it compels individuals to become active rather than regulates existing activity. • Cannot justify ACA under “necessary and proper clause” because using this broad power is not “proper” even if it is considered “necessary.”

17. Does Congress have authority to enact legislation under its Taxing Power? (Roberts plus 4 liberals) • Individual mandate must be construed as imposing a tax on those who do not have health insurance, if such a reasonable construction could save it from unconstitutionality. • Court uses a functional approach to answer question if it is a tax (rather than deferring to Congress’ label under Anti-Injunction Act). • Should not be understood as punishing unlawful conduct because there are no negative consequences other than paying the tax.

18. Does Congress have power to expand Medicaid under its Spending Powers? • Roberts, Breyer and Kagan: Medicaid expansion violates spending clause by threatening states with the loss of their existing Medicaid funding if they decline to comply with the expansion. • Threatened loss of over 10 percent of a state’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. • Violation is remedied by precluding the Secretary from applying ∫ 1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. The other provisions of ACA are not affected. • Ginsburg and Sotomayor agreed to this remedy, creating five votes for holding.

19. What does ACA already do?: • Insurers: • Cannot deny coverage of children under the age of 19 based on pre-existing conditions. • Cannot rescind coverage based on a review of the original application after someone gets sick. • Cannot impose lifetime dollar limits on essential benefits, like hospital stays. • Must cover certain preventive services without charging a deductible, co-pay or coinsurance.

20. More • Each state (or HHS) must create a pre-existing condition insurance plan for those who have been uninsured for at least six months because of a pre-existing condition. • Young adults are allowed to stay on their parents’ plan until they turn 26 years old (unless young adult is offered insurance at work). • States are able to receive federal matching funds for covering some additional low-income individuals and families under Medicaid for whom federal funds were not previously available.

21. Rebates • 85 % of all premium dollars collected by insurance companies for larger employer plans must be spent on health care services or health care quality improvement. • 80 % of the premium must be spent on benefits and quality improvement for plans sold to individuals and small employers. • If costs are too high, then must provide rebates to consumers. • There has been some confusion about whether money must be returned to consumer or employer can use funds for wellness programs for all employees, because of language about “quality improvement.”

22. Seniors • Provides a one-time, rebate check of $250 to seniors who reach the gap in Medicare prescription drug coverage known as the “donut hole.” • Seniors who reach the coverage gap will receive a 50 % discount when buying Medicare Part D covering brand-name prescription drugs. • Seniors receive free preventive services under Medicare. (That’s similar to rule for all insurance plans.)

23. What ACA Will do in 2014 (if not repealed or dismantled) • Prohibit discrimination due to pre-existing conditions or gender • Eliminates annual limits on insurance coverage • Tax credits for those whose income is between 133 % and 400 % of the poverty line who are not eligible for other affordable coverage. • Can buy health insurance through an Exchange. • Will have to pay a tax penalty if health insurance is available and affordable but has not been purchased by individual.

24. Definition of Affordable • “Affordable” employer provided health insurance is defined as the individual option being less than 9.5 % of employee’s household income • If that is true, then expected to buy the FAMILY plan • No premium tax credits or cost sharing subsidies available

25. Tax Credits and Subsidies • Tax credits for insurance premium: • Contribute no more than 2 % AGI towards health insurance if less than 133 % of federal poverty line • Contribute between 2 and 9.5 % of AGI if 133 to 300 % of federal poverty line • Contribute no more than 9.5 % if 300 to 400 % of federal poverty line • No premium tax credits if over 400 % of federal poverty (but can take deduction if health costs above 10 % of AGI) or eligible for public coverage (Medicaid, CHIP, Medicare or military coverage) • Cost sharing subsidies ranging from $604 (225 % of federal poverty line) to $4834 (125 % of federal poverty line) for things like deductibles, coinsurance • Cost sharing subsidy phases out at 225 % of federal poverty line whereas premium credit phases out at 400 %

26. Medicaid • If states elect to participate: • Americans who earn less than 133% of the poverty level ($14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid. • States will receive 100% federal funding for the first three years, phasing to 90 % in subsequent years.

27. Health Care Exchanges • Who are they available for? • Primarily serve individuals buying insurance on their own • Small businesses with up to 100 employees can also buy insurance through Small Business Health Options Program (SHOP) • What are rules governing insurance under exchanges? • Minimum basic coverage • Limits on out of pocket expenses

28. Scope of Insurance Mandate • Employers with more than 50 employees • All individuals, unless: • Religious objection; undocumented immigrant; incarcerated; member of an Indian tribe • Family income is below threshold requiring you to file a tax return • You have to pay more than 8 % of your income for health insurance, after taking into account any employer contributions or tax credits • You were insured through Medicare, Medicaid, CHIP, military insurance, employer plan, or purchased insurance

29. Penalty for being without health insurance • 2014: $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater • 2015: $325 per adult and $162.50 per child (up to $975 for a family) or 2.0 % of family income, whichever is greater • 2016 and beyond: $695 per adult and $347.50 per child (up to $2085 for a family) or 2.5 % of family income, whichever is greater • CBO estimates average annual premium for individual would be $4,500 – 5,000 and for a family would be $12,000 - $12,500 (equivalent to 2.5 % for 4-person family with income of $50,000).

30. Problems • People who earn between 100 and 133 percent of poverty guidelines will not be entitled to subsidies to buy insurance under assumption they would move to Medicaid. • If employer offers “affordable” individual plan, and have family, then must buy family plan (or be subject to penalties). • But family plan might be terrifically expensive. • Only assistance is deduction if expenses above 10 % of AGI

31. How ACA affects Children’s Health Insurance Program • Children currently covered by CHIP between 100 % and 133 % of poverty would be transitioned to Medicaid • CHIP is funded through 2015, with increased federal match • CHIP eligible children (6 to 19 years old) who cannot enroll in the program due to federal allotment caps must be screened to determine if they are eligible for Medicaid and, if not, would be eligible for some new tax credits

32. Longterm Care • Establishes the Community First Choice Option in Medicaid to allow states to provide community-based attendant supports and services to individuals with incomes up to 150 % FPL with disabilities who require an institutional level of care through a state plan amendment. • Provides states with new options for offering home and community-based services through a Medicaid State Plan Amendment rather than through a wavier for individuals with incomes up to 300 % of the maximum SSI payment • Creates the State Balancing Incentive Program to provide enhanced federal matching payments to eligible states to increase the proportion of non-institutionally-based long-term care services. • Extends the Medicaid Money Follows the Person Rebalancing Demonstration program through 2016

33. Conclusion • Lots of uncertainty: • What exactly would Romney seek to repeal if elected? • If Obama is re-elected, • Will states go through with threat not to participate in Medicaid expansion? • If so, will individuals in those states become eligible for premium credit and cost sharing subsidies? • Will all states set up Exchanges (eventually if not immediately)?