Leading wholesaler-distributors depend on NAW Institute for Distribution Excellence groundbreaking research studies because they help solve real-world business challenges.




Order copies of Facing the Forces of Change®: Navigating the Seas of Disruption for everyone on your team!


NAW News

Health Care Reform

- January 2013

During the recently-concluded 112th Congress, the Republican-controlled House of Representatives was a hotbed of legislative activity aimed at repealing or, at a minimum, substantially changing the Patient Protection and Affordable Care Act (the “Affordable Care Act” or “ACA”) enacted in the spring of 2010. On three notable issues we were successful: repeal of the expansion of the IRS From 1099 reporting requirement; repeal of the ACA’s “free choice vouchers”; and repeal (in the recently-enacted H.R. 8, the “fiscal cliff “ bill) of the “Community Living Assistance Services and Supports Act” (“CLASS Act”). Other legislative attempts were uniformly unsuccessful in the Democrat-controlled Senate, among them: full ACA repeal; Independent Payment Advisory Board (IPAB) repeal; medical device tax repeal; to repeal the prohibition on the use of health savings accounts (HSAs) to purchase over-the-counter medications; and to reform certain medical liability rules.

Just as regrettably, two other legislative efforts to repeal particular provisions of the ACA, the “free-rider” employer mandate and the “hidden” health insurance tax (“HIT”), displayed significant support in both the House and Senate, but were not considered in either chamber. 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 health insurance companies based on their net premiums and market share. The Congressional Budget Office (CBO) confirms that the value of the HIT, nearly $100 billion through 2019 and over $200 billion in the succeeding decade, will be “passed through to consumers in the form of higher premiums for private coverage.”

The outcome of the 2012 national election virtually assures that full ACA repeal is unattainable. While efforts to alter key elements of the ACA will continue, these efforts will continue to face a steep uphill climb in the newly-inaugurated 113th Congress.

Since the ACA’s enactment, NAW has engaged the regulatory process on several issues, most recently on a proposed rule promulgated by the Department of Health and Human Services (HHS) to establish “essential health benefits” (EHB). This rulemaking is critical due to its linkage to employer obligations under the previously-mentioned employer mandate. Just before Christmas, NAW submitted comments in this rulemaking and joined in the comments of the Essential Health Benefits Coalition and in those of the Small Business Coalition for Affordable Health Care. All three sets of comments promote an approach to EHB that puts primary emphasis on affordability and flexibility for employers and health plans in order to control costs and maintain and expand private health coverage.

Currently under review is an IRS proposed rule to implement the ACA’s employer shared responsibility provisions.

In its June 2012 landmark ruling in NFIB v. Sebelius the US Supreme Court upheld the constitutionality of the ACA’s individual mandate as a valid exercise of Congress’ taxing authority. However, federal judicial activity in this space is still underway with two additional cases pending in the federal courts: Pruitt v. Sebelius (in the US District Court for the Eastern District of Oklahoma) and Liberty University v. Geithner (in the US Court of Appeals for the Fourth Circuit). In the former, the State of Oklahoma (Pruitt is Oklahoma’s Attorney General) challenges regulations that allow individuals eligible for premium subsidies under the ACA to receive them in both state insurance exchanges and federal exchanges the federal government will establish in states that decide not to create their own. Oklahoma alleges that nothing in the ACA authorizes the premium subsidies in federal exchanges. This case is of interest to employers: should Oklahoma prevail, certain employers which would otherwise be liable for penalties for failing to provide affordable coverage would not have to do so.

In the latter case, the US Supreme Court in November 2012 revived Liberty University’s constitutional challenge to the ACA, which had been dismissed by the Fourth US Circuit Court of Appeals in the fall of 2011 on lack of standing grounds. The Liberty case challenges the validity of the individual mandate (already resolved in the NFIB case) and, among other things, the validity of the ACA’s employer mandate on various grounds.