MICHIGAN PURCHASERS HEALTH ALLIANCE: 2012 ANNUAL FALL CONFERENCE THE FUTURE OF EMPLOYER BASED...

MICHIGAN PURCHASERS HEALTH ALLIANCE: 2012 ANNUAL FALL CONFERENCE

THE FUTURE OF EMPLOYER BASED HEALTHCARE REFORM: WILL EMPLOYERS STAY IN THE GAME?

September 27, 2012

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Copyright 2012 National Business Coalition on Health

Presentation Overview

The Supreme Court’s decision Federal regulations not yet issued Health insurance exchanges Medicaid expansion

What is the impact on employers?

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The Supreme Court’s Decision

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Procedural history 26 state AGs (including Michigan) sued HHS

Main argument: individual mandate is unconstitutional

11th Circuit Court of Appeals (opinion: August 12, 2011) Individual mandate is unconstitutional, but

severable from entire rest of ACA Medicaid expansion is constitutional

Supreme Court granted certiorari on November 14, 2011

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3 days of oral argument – March 26-28, 2012

Four issues briefed and argued Tax Anti-Injunction Act Individual Mandate Severability Medicaid Expansion

Opinion released on June 28, 2012



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Tax Anti-Injunction Act: A tax cannot be challenged in court until it is assessed against a taxpayer.

Held: The Tax Anti-Injunction Act does not apply. There is no jurisdictional bar to the Court deciding the case.

“Congress’s decision to label this exaction a ‘penalty’ rather than a ‘tax’ is significant because the Affordable

Care Act describes many other things it creates as ‘taxes.’ … Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally.”



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Individual Mandate: All U.S. residents must purchase health insurance providing a minimum level of coverage.

Held: The individual mandate is a constitutional exercise of Congress’ power to “lay and collect taxes.” (Art. I, § 8, cl. 1).

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health

insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”



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Because the individual mandate was upheld, the Court did not reach the issue of severability.

The majority opinion clearly states that imposing a mandate on everyone to buy insurance is NOT an acceptable exercise of Congress’s Commerce Clause, or Necessary and Proper Clause powers.

Dicta, but future implications? Limits on Congress’s power?



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Medicaid Expansion: If a state chooses not to expand Medicaid eligibility to all adults up to 133% FPL, it will forego all of its Medicaid funding.

Held: Conditioning a state’s entire Medicaid funding stream upon expansion of the Medicaid program is unconstitutionally coercive because it does not leave states with any real choice.

“Congress may attach appropriate conditions to federal…programs to preserve its control over the use of federal funds…Conditions that do not here govern the use of the funds, however, cannot be justified on

that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the

conditions are properly viewed as a means of pressuring the States to accept policy changes.”


Federal Regulations10


Federal Regulations

Imposition of $2,000 penalty if no coverage offered, or $3,000 penalty if not affordable or does not meet minimum value (“pay or play”)

Determining if a plan meets “minimum value” Treatment of employer contributions to HSAs and

HRAs in that calculation High-cost health plan excise “Cadillac” tax Notification requirements to employees about

exchanges and consequences of selecting coverage in an exchange

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Federal Regulations12

New incentives to encourage participation in employer wellness programs

Requirements for large employers (200+) to automatically enroll employees into a health plan

Interim Guidance Issued August 31: 90-day limit on enrollment waiting periods Definition of full-time employee (e.g., “on

average” 30 hours/week)


Medicaid Expansion13


Medicaid Expansion

States must choose whether to expand Medicaid eligibility to all adults up to 133% FPL* Medicaid expansion was foundation for achieving

near-universal coverage under the ACA (~ 20 million newly insured through Medicaid)

States have MANY questions and need CMS guidance Timeline/deadline for expansion? Partial expansions? Phased-in expansions? Maintenance of Effort requirements? IT infrastructure concerns/interactions with exchanges?

*~ $15,000 for single person; ~$30,600 for family of four

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Medicaid Expansion15

Impact on employers in states that do not expand Medicaid eligibility COST SHIFTING

Disproportionate Share Hospital (DSH) payments phased out in anticipation of decrease in uncompensated care

Employees between 100% - 138% of FPL are eligible for tax credits on exchange – “pay or play” penalty

Employees may qualify for Medicaid if state does full expansion up to 133% FPL

Multi-state employers – different rules across states


ACA Health Insurance Exchanges

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ACA Health Insurance Exchanges States must choose: own exchange, Federal

Fallback Exchange (FFE), or “partnership model” Michigan governor expressed interest in partnership

exchange and Michigan received a federal planning, but no action from the legislature

Still awaiting regulations and guidance on FFE (and partnership model) Regulations expected “before the end of the

summer” Some speculation that HHS will not be ready to run

FFEs/partnerships by 2014 because more states than expected are not running their own exchanges

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ACA Health Insurance Exchanges Tax credits available (ACA § 1401) to assist consumers

with premium payments 100 – 400% FPL, sliding scale Below 100% FPL, assume Medicaid or hardship exemption

from individual mandate Implications in states that do not expand Medicaid to all adults up to

133% FPL? ACA assumes no tax credits to purchase on exchange Credits not available in FFE?

July 2012 Case Western Reserve University Law Review Article (Adler and Cannon) – Section 1401’s tax credits are only available on exchanges set up through section 1311 (state exchanges), not section 1321 (FFE) HHS/IRS maintains use of “state” exchanges is a drafting error;

credits available on all exchanges, state, partnership, and FFE

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ACA Health Insurance Exchanges “Pay or Play” triggered only if an employee

applies for and receives a tax credit on an exchange Employee eligible for tax credit only if

employer plan is not “minimum essential coverage” (60% actuarial value) or

premium exceeds 9.5% of annual household income No penalty if employee is eligible for

employer coverage through a spouse or family member

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ACA Health Insurance Exchanges

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Implications for employers Exchanges must work with employers to verify

eligibility Multi-state employers need to monitor exchange

development because high potential for different rules across states

Advocate for “active purchasing” through exchanges to enhance opportunities for working with health plans to implement value-based purchasing

If exchanges are successful, potential for private exchanges? Future of employer-based coverage?


Private Health Insurance Exchanges21


Private Health Insurance Exchanges

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Employers in a changing and uncertain environment requiring a re-thinking of benefit strategies Affordable Care Act Lingering effects of recession Rising health care costs

All options are on the table for employers; growing sense that employers are thinking about a shift Status quo (probably unsustainable) Get out of the game (think about “pay or play” carefully) Middle ground – offer benefits, but with a very different

approach such as defined contribution and use of an exchange, or more sophisticated value-based purchasing strategies Similar to shift in employer pensions strategies Potential effect of high-cost plan excise (“Cadillac”) tax in 2018



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Shift in overall approach to employee health insurance from defined benefit to defined contribution; private exchanges may be best way for employers to approach this shift State exchanges/FFE – not available to large employers State exchanges/FFE – not good option for multi-state

employers Potential for employers to have more influence and

control in private exchange than in state exchanges/FFE Still achieves goals of exchanges generally – individual

choice for consumers and increase competition among plans


Private Health Insurance Exchanges Aon Hewitt

Owns and operates its own exchange All 20,000 U.S. employees used exchange in 2012; 93%

satisfaction rating No change in overall costs, but allowed Aon to budget health care

costs accurately Opening to “several large employers” on January 1, 2013

Towers Watson Acquired Extend Health, Inc., which operates the largest private

Medicare exchange in the United States, in May of 2012 Innovative retiree health benefit solutions; transitions to Medicare

Bloom Health WellPoint and BCBS of Michigan purchased stakes in September of

2011

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Many considerations in making decision How will employees feel? Employer’s continued competitiveness in recruitment and

retention of a talented workforce Employer’s level of control over health management of

employees Employers watching carefully to see if exchanges (public

and private) are successful Exchanges could cause improvement in overall quality of health

care if emphasis placed on importance of quality reporting Success could indicate willingness to move away from

employer-based coverage models Already some appetite for decoupling health insurance from

employment


Conclusion

Questions? Comments?

Colleen Bruce, Esq.

Director of Value Based Purchasing and Public Policy

(202) 775-9300 ext. 14

[email protected]

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MICHIGAN PURCHASERS HEALTH ALLIANCE: 2012 ANNUAL FALL CONFERENCE THE FUTURE OF EMPLOYER BASED...

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