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NAW News

Health Care Reform

- May 2013

The outcome of the 2012 national election virtually assures that full repeal of the President’s new health care reform law (the Affordable Care Act) is unattainable. In a similar vein, while efforts to alter key elements of the ACA will continue, these efforts will face a steep uphill climb in the 113th Congress. Nonetheless, the employer community, with NAW’s active support and participation, will continue efforts to repeal two items enacted in the ACA: the “free-rider” employer mandate and the “hidden health insurance tax” (“HIT”). Repeal initiatives on both displayed significant support in both houses of the 112th Congress but were not voted on in either chamber.

The ACA’s employer mandate penalizes employers of 50 or more full-time equivalent employees which fail to provide “affordable health coverage” to their full-time (30 or more hours per week) employees. The health insurance tax takes the form of 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 (approximately $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.” Both the mandate and the tax go into effect in 2014.

Legislation to repeal the employer mandate (H.R. 903; S. 399, “American Job Protection Act”) has been introduced in both houses. H.R. 903 is sponsored by Rep. Charles Boustany (R-LA-3) and Rep. John Barrow (D-GA-12) and is cosponsored by 18 additional Republican Members. The bill has been referred to the Ways & Means Committee. S. 399 is sponsored by Sen. Orrin Hatch (R-UT) and is cosponsored by 28 Republican Senators. The bill has been referred to the Finance Committee where Sen. Hatch is the Ranking Republican Member.

Rep. Boustany has also introduced legislation to repeal the health insurance tax. H.R. 763 has 111 cosponsors (108 Republicans and 3 Democrats) and has been referred to the Ways and Means Subcommittee on Health. Sen. John Barrasso (R-WY) has introduced his HIT repeal bill (S. 603, “Jobs and Premium Protection Act”), and the measure has been referred to the Finance Committee. S. 603 is cosponsored by 13 Republican Senators.

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. HHS published a final EHB rule in the February 25, 2013 Federal Register which closely follows the approach taken in its November 20, 2012 proposed rule. In general, the final rule implements the health care reform law’s requirement that health plans cover “essential health benefits” in 10 “buckets”, requires plans to cover at least 60 percent of the actuarial value (AV) of covered services, and applies to health plans sold both inside and outside the new exchanges.

Currently under review is an IRS proposed rule issued on January 2, 2013 by the Internal Revenue Service, to implement the ACA’s employer shared responsibility provisions. This rulemaking is important to employers which employ at least 50 full-time equivalent employees (a full-time employee is one who works at least 30 hours per week). In as much as IRS has determined that “employers may rely on the proposed rule pending the issuance of final regulations or other applicable guidance”, NAW prepared a brief Regulatory Alert on January 14th (http://www.naw.org/files/RegulatoryAlert.pdf) outlining the most basic features of the proposed rule.

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 three additional cases of note pending in the federal courts: Pruitt v. Sebelius (in the US District Court for the Eastern District of Oklahoma); Liberty University v. Geithner (in the US Court of Appeals for the Fourth Circuit); and Sissell v. US Department of Health & Human Services. In the Pruitt case, 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 Liberty University, the US Supreme Court in November 2012 revived the 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.

The Sissell case, in the US District Court for the District of Columbia, challenges the validity of the ACA based on the federal Constitution’s Origination Clause (Article 2 Section 7) requiring bills raising revenue to originate in the House of Representatives.