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NAW News

Health Care Reform

- September 2012

With the enactment of the Patient Protection and Affordable Care Act (“PPACA”) – ObamaCare – in the spring of 2010, the attention of stakeholders necessarily turned to the regulatory process by which the new health reform law is being implemented, and the judicial process by which it was constitutionally challenged. At the same time, the legislative effort to repeal or, short of that, change key elements of PPACA, has remained highly active as well.

On the legislative front, the Republican-controlled House of Representatives took action early in the 112th Congress and again in the summer of 2012 to repeal PPACA; however, the former NAW-supported effort fell 13 votes short in the Democrat-controlled Senate and the latter has yet to elicit a Senate response. An effort in Fall of 2011 in the Senate Appropriations process to defund the new health care law though the FY 2012 Labor HHS Appropriations bill also fell short. In the wake of the repeal initiative, two elements of PPACA were repealed with NAW’s support: the expansion of the IRS Form 1099 reporting requirement imposed on businesses to cover virtually all business-to-business transactions of $600 or more (annually, in the aggregate); and a provision which required employers, beginning in 2014, to offer vouchers to employees whose income does not exceed four times the federal poverty level (FPL) and whose premium contribution is between 8% and 9.8% of income. With these vouchers, with a value equal to what the employer would have paid on the employee’s behalf had the employee enrolled in the available option with the highest employer contribution, the employee could decline to enroll in the employer plan, purchase coverage in an exchange and keep the excess, if any, of the value of the voucher over the cost of the purchased plan.

A “limited” victory of sorts was scored by PPACA opponents when the Department of Health and Human Services (HHS) announced in the fall of 2011 that it was cancelling its effort to implement that portion of PPACA known as the Community Living Assistance Services and Supports Act (“CLASS Act”), essentially a national insurance program for long term care assistance that was supposed to be self-sustaining. However, the CLASS program was criticized as an irrationally designed insurance program that would require substantial future taxpayer bailouts. Ultimately, HHS agreed and Secretary Sebelius informed the Congress, “Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.” Nevertheless, the Obama Administration does not support legislative repeal of the CLASS Act. House legislation to repeal CLASS (H.R. 1173) was passed by the House in February by a vote of 267 to 159 (28 Democrats voted with 239 Republicans in favor of repeal; no Republican voted to retain the CLASS Act). Senate repeal legislation (S. 720) is pending in the Finance Committee. NAW supports CLASS Act repeal.

Other bills passed by the House with NAW’s support to significantly alter the Affordable Care Act include measures to repeal the Independent Payment Advisory Board (IPAB) and reform certain medical liability rules (H.R.5) and to repeal the medical device tax and the prohibition on the use of health savings accounts (HSAs) to purchase over-the-counter medications (H.R.436). Regrettably, neither is expected to receive the Senate’s attention in this session of Congress.

NAW is simultaneously engaged in two additional legislative efforts to repeal particular provisions of PPACA; the “free-rider” employer mandate and the “hidden” health insurance tax (HIT). The former penalizes employers of 50 or more employees which fail to provide “affordable” health coverage to their full-time employees. The latter imposes a fee on insurance companies based on their “net premiums” and market share. The HIT is designed to raise $87 billion in over the first 10 years and $208 billion in the following decade. The Congressional Budget Office (CBO) confirms that these costs will be “passed through to consumers in the form of higher premiums for private coverage.”

Sen. Orrin Hatch (R-UT) and Rep. Charles Boustany (R-LA-7) have introduced legislation to repeal the employer mandate (S. 20/H.R. 1744, “American Job Protection Act”). S. 20 is pending in the Finance Committee, H.R. 1744 in the Ways & Means Committee. Rep. Boustany and Sen. John Barrasso (R-WY) have introduced legislation to repeal the HIT. Rep. Boustany’s bill (H.R. 1370) is pending in the Ways & Means and Energy & Commerce Committees; Sen. Barrasso’s bill (S. 1880, “Jobs and Premium Protection Act”) is pending in the Finance Committee. NAW is working with our allies in the Small Business Coalition for Affordable Health Care and the Stop the HIT Coalition in aggressive efforts to build support on the Hill for S. 20/H.R. 1744 and H.R. 1370/S. 1880 respectively.

Both of these issues are addressed in a broader NAW-supported package of health reforms (S. 1049/H.R. 2676, “Small Business Health Relief Act of 2011”) introduced by Sen. Jon Kyl (R-AZ), the Senate GOP Whip, and Rep. David Schweikert (R-AZ-5). This legislation also repeals and replaces the following provisions of PPACA: catastrophic plan section; prohibition on the use of Health Savings Account funds for over-the-counter medications; the $2,500 Flexible Spending Accounts cap; and it strikes the grandfathering regulations now in place.

Since the enactment of PPACA, NAW has engaged the regulatory process on several issues, including the employer mandate, exchange standards for employers, grandfathering, health coverage affordability safe harbor for employers, non-discrimination rules, and summary of benefits and coverage. None will be more important than the regulatory effort now underway at HHS to define the “essential health benefits” (“EHB”) package mandated by PPACA, because this will define what employers must provide to meet the employer mandate and what individuals must buy to meet the individual mandate. On October 7, 2011, the Institute of Medicine (IOM) released its eagerly-awaited report on EHB. Without suggesting specifically what the benefits should be, the IOM included affordability and flexibility among the key features it emphasized. On December 16, 2011, HHS released a guidance bulletin outlining the regulatory approach it intends to take to define EHB and contends their approach emphasizes state flexibility in the selection of a benchmark plan reflecting the scope of services offered by a “typical employer plan” to best meet the needs of their citizens. As the Obama Administration moves toward a formal EHB rulemaking, NAW and our allies in the Essential Health Benefits Coalition are vigorously promoting a primary emphasis on affordability and flexibility for employers and health plans and plan to comment as appropriate.

The federal courts have been busy with various challenges to the constitutionality of the individual mandate contained in PPACA. Most recently and decisively, the Supreme Court of the United States, ruling in National Federation of Independent Business et al v. Sebelius, Secretary of Health and Human Services et al, upheld the constitutionality of the individual mandate as a valid exercise of Congress’ taxing power.