Health Care Reform
- January 2011
With the enactment of the Patient Protection and Affordable Care Act (“PPACA”) (PL 111-148) and the Healthcare and Education Reconciliation Act (PL 111-152) in the spring of 2010, the attention of stakeholders has necessarily turned to the regulatory process by which “ObamaCare” is being implemented, although the legislative process has remained active in certain areas.
On June 14, the Departments of Health & Human Services (HHS), Labor, and Treasury promulgated an Interim Final Regulation (IFR) to implement the “grandfathering” provisions of the new healthcare law. The “grandfathering” of health plans in existence on the date of enactment of the PPACA (March 23, 2010) is intended to shield those plans from some of the reforms that are applicable to plans born after that date. As such, the grandfathering provisions of the PPACA and their implementing regulations are crucial to the President’s assurances during the health care debate, “If you like the health plan you have, you can keep it.” NAW participated in the regulatory process with comments that criticized the IFR as overly restrictive “to the point of practically removing the tools employers have routinely used to mitigate large increases in premiums”, and for being “so overreaching as to severely discount the value and purpose of ‘grandfathered’ status.” On November 17, 2010, HHS, Labor, and Treasury promulgated an amendment to the IFR that partially reinstates one of those tools; i.e., the ability, in the case of insured plans, to change issuers. NAW commented positively on this change while again suggesting the need for a more sweeping restructuring of the overall IFR.
The legislative effort to scrap the Administration’s grandfathering regulations came up short on Capitol Hill in the fall. Senator Mike Enzi (R-WY), then the ranking Republican on the Health, Education, Labor, and Pensions (HELP) Committee secured a floor vote on his NAW-supported joint resolution (S.J. Res. 39) to disapprove the regulations, but the resolution was defeated on a party-line 40 – 59 vote.
A second area of particular interest is the ObamaCare provision substantially expanding the IRS Form 1099 reporting requirement imposed on businesses, to cover virtually all business-to-business transactions of $600 or more per year in the aggregate, beginning in 2012. 1099 reporting has nothing to do with health care, but was added to the $1 trillion (over 10 years) bill as a $17 billion “pay-for”. This issue has generated considerable opposition from the business community generally and the small business community in particular and NAW joined in the comments of the Small Business Coalition for Affordable Health Care directed to the Internal Revenue Service (IRS) calling for repeal.
Regrettably, the legislative effort led by Senator Mike Johanns (R-NE) and Representative Dan Lungren (R-CA-3) to repeal ObamaCare’s expanded 1099 reporting requirement has yet to make it across the finish line. As part of the Senate’s consideration of food safety legislation (S. 510) during the post-election “lame duck” session of the 111th Congress, Senators Johanns and Max Baucus (D-MT), Chairman of the tax-writing Finance Committee, offered competing proposals for 1099 repeal. Sen. Johanns proposed repeal that was paid for; Sen. Baucus’ proposal did not contain any “pay-for”. The Johanns Amendment fell six votes short of the 67 needed for passage; Sen. Baucus’ Amendment fell 23 votes short. The good news in this: between the two proposals, all Republican Senators voted for repeal and 52 Democratic Senators did as well. Just four Democratic Senators voted against repeal under any circumstances. Repeal of the 1099 requirement is considered a top legislative priority in 2011 and is expected to be signed into law by the President if/when passed by Congress.
NAW has also been at work with colleagues in the business community on issues as varied as construction of the Health Insurance Exchanges (set to go into effect in 2014) for individuals and small businesses, and a new IFR regarding internal claims and appeals and external review (on which NAW last fall issued a Regulatory Advisory) applicable to non-grandfathered health plans (both insured and self-funded) and group health insurance issuers. Initially set to take effect for plan years beginning on/after September 23, 2010, the agencies on September 20 issued a grace period through July 1, 2011 for compliance.
One final issue bears mention at this point: the status of ObamaCare’s individual mandate which under the statute goes into effect in 2014. This provision, under which most people are required to have a government-designated level of health coverage or pay a penalty, is the subject of constitutional litigation before the federal courts. As Staff Reports goes to press, two Federal District Courts have upheld the requirement and one has stuck it down. A fourth heard a case filed by elected officials in 20 states, in mid-December. The legal issue in these cases is whether the Commerce Clause of the U.S. Constitution empowers the Congress to require citizens to purchase a commercial product as part of a regulatory scheme affecting an interstate economic market, a matter that will likely be finally resolved by the U.S. Supreme Court. The ultimate outcome may have a substantial effect on the overall cost of ObamaCare which relies in part on the requirement that everyone, including young, healthy people purchase a minimum level of insurance to offset the impact of costly insurance market reforms many of which are already going into effect.
When the new 112th Congress took office, repeal of ObamaCare was an immediate agenda item for Congressional Republicans, with a vote on full repeal set for only days after they convened (and after these staff reports go to press). Repeal will likely pass in the House and move to the Democrat-controlled Senate where it will fail, if it is taken up at all. At that point, we expect there will be more narrowly focused legislative initiatives aimed at such issues as 1099 reporting, the employer mandate, HFA/FSA over-the-counter limitations, grandfathering, medical liability reform, the individual mandate, and possibly more.