Life After the PPACA-lypse
While the U.S. Supreme Court keeps everyone in suspense about when the ObamaCare decision will be announced, it is important to prepare for what happens next. A recent Associated Press poll shows that just ⅓ of Americans support the new law, with only 21% of independents approving. Another poll shows that a majority of former U.S. Supreme Court law clerks believe at least the individual mandate will be struck down.
So, before it is too late, what is sexy about ObamaCare? The Commerce Clause. The seminal U.S. Supreme Court precedents from Wickard and Raich. Scalia invoking the Eight Amendment at the prospect of having to read 2700 pages of bureaucratic mandates. Forcing insurance carriers to provide “free” contraception. The individual mandate, and debating whether Romney’s federalism argument is enough to dismiss his underlying policy judgment as governor to impose the Massachusetts version. Refundable premium tax credits up to 400% of the federal poverty line. The name “ObamaCare.”
What is not sexy about ObamaCare? Actually trying to read and interpret it alongside the rapidly growing group of attorneys, consultants, brokers, administrators, and actuaries who pour over the law and its varying forms of implementing guidance to assist employers with compliance. DOL Reg. § 2590.715-2719 (“enhanced” claims and appeals process and external review), IRS Notice 2012-9 (Form W-2 reporting requirements), DOL/HHS/Treasury FAQ Parts VIII & IX (on the new four-page SBC requirement), and a HHS Essential Health Benefits Bulletin casually informing employers that they must consult up to 50 different state benchmark plans. Endless model notices, safe harbors, and requests for waivers. The name “PPACA.”
Interestingly, if you talk to ObamaCare’s industry professionals, the name “ObamaCare” is practically taboo. It is the Patient Protection and Affordable Care Act, PPACA, the A-C-A, or President’s Obama’s favorite used throughout the administration: the Affordable Care Act. By uttering “PPACA,” you instantly identify yourself as an insider who has to work with this law in the trenches. And if you are on the front line, you do not dare violate the cardinal rule by calling it ObamaCare. So we shall discuss PPACA.
Most of this law has not taken effect, has not been implemented, or has been delayed by the three horsemen of the PPACA-lypse: the Department of Labor, Health and Human Services, and the Treasury Department. It would require an extensive treatise to describe how PPACA would change your health coverage experience come 2014, particularly as it relates to the myriad of rules applicable to individual insurance policies to be sold on “exchanges.”
But there is a real possibility that before we reach that dire outcome, the U.S. Supreme Court will strike down PPACA by finding the individual mandate unconstitutional and unseverable. The purpose of this commentary is not to provide the Constitutional analysis of the law’s evisceration of enumerated federal powers, federalism, and the Tenth Amendment. This has been superbly argued in court already by Paul Clement and others. The question I want to answer is: How would the complete elimination of PPACA affect your employer-sponsored group health plan coverage?
The following is a short summary of the seven most significant changes you can expect, and some predictions of how the changes will eventually play out:
1) Dependent coverage of children to age 26. Even though 25-year olds are not children, participants generally like the ability to cover their “adult children” as dependents though that age. But I believe it is not the age 26 mandate (which President Obama is now promoting as a campaign issue on the college circuit) that drives this provision’s popularity, it is the change in tax law from IRS Notice 2010-38 that allows employers to provide the coverage on a tax-free basis. Before this change to conform tax law to the mandate, employers had to tax employees on the fair market value of coverage for any child who was not under age 19, or age 24 if a full-time student. My guess is that the eventual conservative health care reform bill to replace PPACA will include some version of this tax break, but without the federal mandate. States would still be free to add the mandate to any insured plan (many already have). For self-funded plans that receive ERISA’s preemption protection from state health insurance mandates, market forces should be sufficient to encourage most employers to continue offering adult child coverage.
2) Choose your own doctor (non-grandfathered plans). One of the least controversial of PPACA’s mandates is the right to choose your in-network primary care physician or pediatrician, and for women to choose their OB/GYN without prior authorization – the so-called “patient protections.” Many states already include similar requirements for insured plans. Although conservatives should agree that it is not appropriate to make this a federal mandate, its inclusion in any replacement bill could be a reasonable compromise if needed to pass.
3) Lifetime and annual limits. This has always been an issue that had more political value than real-world value. PPACA’s elimination of lifetime limits and restricted annual limits (until also eliminated in 2014) apply only to “essential health benefits,” a term which has never been properly defined. And, outside of “mini-med” plans (which almost universally received the infamous waiver from HHS through 2014), very few participants ever hit these plan limits prior to PPACA anyway. This mandate should be eliminated permanently, primarily to prevent excessive stop-loss coverage costs for self-funded plans and to encourage employers to provide at least mini-med plans in low-income industries where more comprehensive coverage is not economically feasible.
4) “Free” preventive services, including contraception (non-grandfathered plans). This mandate originally had little guidance and even less interest. Then we learned that contraception for women is “preventive,” and therefore plans must cover it without any cost-sharing. The so-called compromise requiring insurers to carry the cost is clearly an accounting fiction, and don’t even bother trying to understand how it will work for self-funded plans. The Catholic Church is not holding back on this one, and rightfully so from a Constitutional perspective. No politician will dare touch this again in the future, and coverage mandates should once again become almost exclusively a state insurance mandate concern anyway. With any luck, future federal legislation will open an interstate insurance market to break down the current state mandate monopoly regime.
5) Rescission. This PPACA rule banning retroactive termination of coverage absent fraud or intentional misrepresentation of material fact was too muddled in its implementation to be meaningful. It is another issue that should go back to being a state insurance regulation issue.
6) “Enhanced” claims and appeals processes, including external review (non-grandfathered plans). These rules in PPACA have been burdensome for employers and administrators (particularly language translation and independent review organization contracting requirements), with negligible benefit to participants. They will likely go away. The Department of Labor has already hinted it will add many of these rules to its general claims regulations through existing statutory power to regulate ERISA’s “full and fair review” requirements for all employer-sponsored plans. A Romney administration should prevent that from happening.
7) Over-the-counter drugs and medicines. Medicines and drugs are no longer reimbursable under your health flexible spending account, health savings account, or health reimbursement account (all different types of consumer-driven coverage) unless you have a prescription for them. Furthermore, health flexible spending accounts will be subject to a $2,500 cap starting in 2013. Both of these rules were revenue raisers for the federal government. They should be opposed on both sides of the isle in a conservative health care reform bill that doesn’t require massive revenue increases.
The end of the PPACA era should bring new political will to replace it with a package of consumer-driven reforms that will unleash market forces to lower costs, increase coverage, and improve services. All with no price controls, care rationing, or absurd CBO scoring required. However, this momentum can only lead to real reforms with real change in the White House and Senate in 2013.
In the meantime, we should not allow the mainstream media to frame the Path to Prosperity as “RyanCare.” Not only is the moniker inaccurate for a bill that devolves power away from the federal government, legislation with names like that never seem to work out.
Brian Gilmore is an ERISA and employee benefits attorney who specializes in assisting employers with health and welfare plan compliance matters.