Posted July 10, 2012
In January of 2011 Judge Roger Vinson ruled in Florida v United States Department of Health and Human Services (the lawsuit joined by 26 states in a challenge to the Affordable Care Act) that the portion of the act requiring individuals to purchase health insurance exceeded the authority of Congress to regulate interstate commerce and that clause was not severable. This ruling in essence struck down the entire act and formed the basis of the appeal to the Supreme Court. The American Hospital Association was one of the various groups that filed Amici briefs with the Supreme Court in support of the Affordable Care Act.
The Court scheduled three days of testimony to consider the following provisions of the Act:
• The Anti-Injunction Act, which proscribes law suits to restrain the assessment of collection of taxes as it applied to the individual mandate.
• The expansion of Medicaid eligibility to include all individuals and families with incomes up to 133% of the federal poverty level and a simplified CHIP enrollment process.
• The individual mandate, which would require all individuals not covered through an employer sponsored or individual private insurance plan, Medicaid, Medicare or other public insurance program to purchase an approved insurance policy or pay a penalty unless the individual is a member of a IRS recognized religious sect or waived due to financial hardship.
• The issue of severability, which was the final question before the Court – in the event that only the individual mandate was overturned what parts of the Act were severable and would remain in effect.
On June 28, the Court ruled that the Act, in its entirety, was constitutional. Chief Justice Roberts wrote and presented the Majority Opinion for Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan. Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito, Jr. dissented.
• Justice Robert wrote that the Anti-Injunction Act did not apply to the Affordable Care Act.
• The Justices allow Medicaid expansion, but not with the penalty to withhold all Medicaid funding. In essence, the Court ruled that to withhold all a state’s Medicaid funding should a state refuse to expand Medicaid was “coercion.” States must continue to receive their current Medicaid funding even if the opt out of the expansion.
• The individual mandate is constitutional – not under the Commerce Clause (which is not Constitutional) – but under congressional authority to levy, collect and spend taxes. Judge Roberts noted that the Court was not limited to consider the mandate solely on the Commerce Clause, but rather – as in any ruling – to seek what is constitutional under other sections. He also wrote that “extractions not label taxes can in fact be taxes. Labels are not the deciding factor, rather the substance and application of an extraction is determinative.” The mandate satisfies the two requirements of taxing power – raises revenue and protects the general welfare.
• As the individual mandate was upheld, the issues around severability were not addressed.
What the Ruling Means for Louisiana
Governor Jindal has opposed the legislation from the beginning and is likely to continue to do so. Louisiana has not implemented the major portions of the legislation.
• It is now left up to each state to determine what to do about Medicaid expansion, and all we know for sure is that if a state opts out of the expansion provision, the state will retain the current level of funding (barring cuts at the federal level). States cannot be penalized for refusing to expand Medicaid.
• Approximately 340,000 low income Louisiana residents will not be eligible for Medicaid or federal subsidies in the event that Louisiana opts out of the expansion.
• There was nothing in the ruling regarding ACA funds from other programs and whether or not HHS/CMS could hold those funds from states that do not expand Medicaid, nor is there any direction on whether or not HHS/CMS could use these funds as an enticement to “lure” states into Medicaid expansion.
• The expansion itself does not occur until 2014. For the first two years, the expansion is funded entirely at 100% from federal funds. After that time, the federal portion will be 90% with the states assuming the other 10% after 2019. These funds are targeted only for those individuals who are covered under expansion – not those normally eligible for Medicaid.
• The DSH cuts will remain in place, and the recalculation of DSH will continue whether states opt in or opt out. HHS/CMS has not provided any details on the specifics of these reductions and potential redistributions at this time. The American Hospital Association (AHA) is working on principles for both the Medicare and Medicaid DSH cuts.
• The Supreme Court decision did not strike down any part of the Medicaid or Medicare statutes, nor did it strike any of the provisions regarding either that are in the ACA.
• AHA is planning to collaborate with all the state associations to advocate for Medicaid expansion in their respective states; if a state opts out, funding that would have gone to that state may move to other states.
• There is no decision regarding Maintenance of Effort. AHA believes that HHS/CMS never imagined that the Medicaid expansion would be an issue. As a result, there will be some time before new directives (regarding timelines, MOE, etc.) are written and disseminated.
• Medicaid expansion will, in all probability, require an amendment to the state plan.
• As of this point in time, there is no direction on whether or not a state may partially opt in – in other words – cover a certain population but not another; such an action could result in a mandate to cover all by the federal authorities. Individual Mandate
• Individuals will be required to have some sort of insurance coverage and the penalty, according to the Supreme Court, “must be construed as imposing a tax on those who do not have insurance.”
• For those individuals who opt not to buy insurance, an annual tax of $95 or up to 1% of income (whichever is greater) is imposed initially. By 2016, the tax rises to $695 or 2.5% of income. For families, there is a limit of $2,085.
• There is an exemption for cases of financial hardship or religious beliefs.
• If an individual pays the tax, according to Justice Roberts, “they have fully complied with the law and are not prosecuted nor are they viewed as lawbreakers.”
• One scenario proposed during the AHA call was that of an individual who appears in the emergency room without insurance, has a CAT scan, and a tumor is discovered. The individual could then go to the Insurance Exchange or the “free market” and purchase insurance even though they have a pre-existing condition - beginning in 2014. As of this date, an insurance company cannot refuse to sell the individual a policy, but the individual would still have to meet the insurer’s provisions – perhaps including a specific enrollment period. AHA is working with a company called ENROLLNOW that provides online enrollment that could be offered at the hospital.
• Federal subsidies are available to purchase insurance for individuals and families with incomes between 133% and 400% of the poverty level or $14,865 to $44,680 for individuals and $30,656 to $92,200 for a family of four based on current poverty guidelines; insurance would have to be purchased through the exchange.
All Insurance Provisions in the ACA Remain
• Louisiana has opted not to implement a state insurance exchange. Legislation was proposed during the past session that was defeated. Insurance Commissioner Donelon supported the creation of a state insurance exchange, but the governor and secretary of DHH opposed the creation of the exchange. As a result, the federal government will run the insurance exchange for the state of Louisiana.
• A federally-run exchange will be responsible for not only selling insurance, but also determining eligibility for the various programs (including Medicaid) and subsidies, tax credits, etc.
• A second option for an exchange is a state-federal partnership exchange. The Office of Consumer Information and Insurance Oversight has released a guideline document for states that opt for the method. There is no indication that the state will pursue this option. The option would permit the state to maintain control over eligibility decisions.
• Louisiana received an initial grant to explore the creation of an exchange, but eventually returned a portion of the funds.
• States must demonstrate that they can run their insurance exchanges by January 1, 2013 so that they can “go live” in 2014.
• HHS announced on June 30, 2012 that additional funding will be available to assist states as they work with individuals and small businesses with one-stop shops to find, compare and purchase health insurance through the exchanges.
• Rate Review – The Office of Consumer Information and Insurance Oversight (HHS) has cited Louisiana has being non-compliant with the provisions of the ACA regarding rate review. Legislation was proposed during this past session to bring Louisiana into compliance, but the legislation did not make it through the process. As a result, Louisiana remains non-compliant.
• External Review and Grievance Procedures – the National Association of Insurance Commissioners (NAIC) developed model legislation to address these mandates contained in the ACA. Louisiana was cited as being non-compliant with both, and legislation was proposed to bring the state into compliance during the past session. This legislation did not make it through the legislative process and, and as a result, Louisiana is still non-compliant.
• In both instances (rate review and external review and grievance procedure), Louisiana did not meet the time requirement, not the legislative requirements, contained in the ACA. It is unclear what the state plans to do to address these issues.
• Insurers are prohibited from establishing and enforcing lifetime caps.
• State Health Insurance Exchange for Small Businesses called the Small Business Health Options Program (SHOP) provisions remain in effect.
• Consumer Oriented and Operated Plans (CO-OPs) provisions remain in effect creating a new type of nonprofit health insurer – directed by customers to offer individuals and small business more “consumer-friendly and high quality insurance options.”
• Funding is available from HHS for both the SHOP and the CO-Ops.
• All provisions regarding medical loss ratios remain in place.
All Coverage Provisions in the ACA Remain
• Young adults up to the age of 26 (who meet the guidelines) will be able to remain on their parents’ insurance policies.
• Preventive care – including mammograms, immunizations, cholesterol tests, etc. – will continue to be considered preventive services with no out of pocket costs.
• Rescission is not permitted, that is, a health plan cannot cancel coverage once an individual becomes ill unless the individual committed fraud when applying for coverage.
• Children with pre-existing conditions cannot be denied coverage. This same provision applies to adults beginning in 2014.
• Rebates for drug costs to Medicare recipients will continue (checks are being mailed June 30, 2016), and the donut hole will continue to shrink until it is completely closed by 2020. Seniors will then be responsible for 25% of their prescription costs. Pharmaceutical discounts will remain in place.
• Payment and spending for Medicare Advantage will be cut and the Independent Payment Advisory Board remains to recommend reductions to Medicare and Medicaid drug reimbursements and Medicare and Medicaid spending, which may adversely affect care and the provision of services.
Employer Provisions to Provide Healthcare Remain
• Beginning in 2014, businesses with 50 or more employees that currently do not provide healthcare coverage and have at least one worker who receives subsidized coverage through the exchange will have to pay a fee of $2,000 per employee. However, the firms first 30 workers are excluded from the fee.
• For employers who have fewer than 50 employees, there are no penalties.
• Two years of tax credits will be offered to qualified small businesses. To receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full-time equivalent, excluding the owner of the business, of less than $25,000 and have fewer than 11 FTEs. The subsidy is reduced by 6.7% per additional employee and 4% per additional $1,000 of average compensation.
Accountable Care Organizations – All Provisions Remain
• HHS plans to continue to expand the Accountable Care Organizations and will issue new notices to apply for additional awards.
• On July 9, 2012, CMS announced awards to begin ACOS to an additional 89 organizations. This brings a total of 116 ACOs in the United States.
• Entities that have begun planning for Accountable Care Organizations should continue to do so.
Value Based Purchasing and Safety and Quality Provisions Remain
• No change to any of these provisions or to the timelines associated with them. CMS Reported the Following Data for Individuals in Louisiana from the Affordable Care Act:
• 53,000 young Louisiana adults have coverage through their parents’ health plans.
• 2.2 million residents with private insurance will have no lifetime limits on their coverage.
• 1,411,000 residents, including 538,000 women and 385,000 children, no longer have to worry about lifetime limits on their private insurance coverage.
• 795 Louisiana residents are enrolled in the Federal Pre-Existing Condition Insurance Plan.
• 497,292 Louisiana residents with Medicare received free preventive services offered through the ACA, and 719,000 Louisiana residents with private health insurance gained preventive service coverage with no co-pay.
• 52,932 Louisiana residents on Medicare saved $53,879,178 on prescription drugs through ACA discounts, and 55,799 received a $250 rebate to help cover the cost of drugs.
• $4,111,975 in rebates to 75,493 consumers in all markets from insurance companies that did not meet the minimum loss ratio requirements.
• Community health centers in Louisiana have received $41.8 million to create new health center sites in medically underserved areas.
• $423,000 to support the National Health Service Corps to assist Louisiana in repaying educational loans of healthcare professionals in return for practice in underserved areas.
• $5.9 million for health professions workforce demonstration projects to help low income residents receive training.
• $6.3 million for school-based health centers to expand coverage to students.
• $10.3 million for Maternal, Infant and Early Childhood Home Visiting Programs to bring health professionals to meet at-risk families in their homes.