2012 NARPA Annual Rights Conference: - PowerPoint Presentation

Slide1

2012 NARPA Annual Rights Conference: The Affordable Care Act

Ruth Colker

Distinguished University Professor

The Ohio State University

Moritz College of LawSlide2

Outline of TalkHistory of enactment of ACAConstitutionality of ACAProvisions of ACAImplications for Medicaid, Children’s Health Insurance (CHIP) and Longterm

CareSlide3

The BeginningObama made a campaign promise to help enact a new national health plan for all Americans that would include:Guaranteed eligibilityNo pre-existing condition rulesAffordable premiums, co-pays and deductibles

Those who do not qualify for public insurance would be able to buy private insurance with subsidies

Portability and choiceSlide4

Economic Theories Underlying ACANeed to deal with “adverse selection” problem:If preclude insurers from turning away anyone, including those with a pre-existing condition, then people would have a strong incentive not to buy insurance until they had a serious health event.

So, have to require everyone, even when they believe they will be healthy, to buy insurance in order to expand the pool.

Need to preserve employer-provided health insurance

Don’t allow people to choose Exchanges if employer offers affordable insurance

Require people to buy employer-provided insurance so long as it is affordableSlide5

Political ChallengesIn 2008, Democrats had strong majority in House but had exactly 60 votes in SenateNeeded all 60 Senate votes to prevent filibusterSlide6

The SenateTed Kennedy died on August 25, 2009. To attain 60 votes in Senate, needed all 57 Democrats, Independents Joe Lieberman and Bernie Sanders, and a Massachusetts Senator. Special election scheduled for January 19, 2010. Seat meanwhile vacant.Slide7

MassachusettsIn 2004, when John Kerry ran for President while Senator from Massachusetts, Mitt Romney was Governor of Massachusetts.Massachusetts legislature was worried that Governor Romney would replace Kerry with a Republican if he won the election so it took away Governor’s power to nominate a replacement (over Romney’s veto).Slide8

New Massachusetts LegislationMassachusetts legislature passed legislation that would keep the January special election but allow Governor

Deval

Patrick to appoint an interim senator until the special election.

On September 24, 2009, the Governor named a Kennedy family friend, Paul Kirk, to be the interim Massachusetts Senator.Slide9

HouseNovember 7, 2009ACA approved by House by a vote of 220-215 with one Republican supporting it and 39 Democrats voting against it.Joseph Cao, a first-term Republican from New Orleans, was the lone Republican in favor. (Needed 218 for passage.) He ultimately voted against the final bill. His district was overwhelmingly Democrat and he lost re-election to a Democrat.Slide10

Passage in SenateThe Senate passed a different version of the ACA after first voting to end a possible filibuster with a vote of 60-39 on December 23rd. Democrats were only able to get to 60 votes by caving into a request by Democratic Senator Ben Nelson (Nebraska) to offer a higher rate of Medicaid reimbursement for Nebraska. Slide11

ReconciliationHouse and Senate needed to pass same language.Republican Scott Brown won election in Massachusetts on January 19, 2010 so Democrats no longer had 60 votes to break a filibuster.Slide12

Differences between House and SenateFinancing: House sought a 5.4 % surcharge on families with incomes over $1 million whereas Senate sought an excise tax on high-cost insurance plansPublic option: House version had a public optionAbortion: House version gave more freedom for plans to cover abortionsSlide13

ReconciliationHouse agreed to pass a bill that was very close to the one that had already passed the Senate.After coming to an agreement with a group of pro-life Democrats, the House passed the bill with a vote of 219 to 212 on March 21, 2010 with 34 Democrats and all 178 Republicans voting against it.

Senate used the reconciliation process that is available for revenue bills to pass some amendments that would not be subject to filibuster.Slide14

President’s signaturePresident Obama signed ACA into law with the strokes of 22 pens on March 23, 2010.Slide15

Legal Challenge: Anti-Injunction Act (Roberts plus 4 liberals)Does Anti-Injunction Act bar suit from even occurring before statutory penalty has gone into effect?

No, because Congress did not intend the payment for failure to comply with individual mandate to be a “tax.” It is a “penalty.”Slide16

Does Congress Have Power to Enact Individual Mandate under Commerce Clause? (Roberts plus 4 conservatives)

T

he

individual mandate is an invalid exercise of Congress’ commerce clause authority, because it compels individuals to become active rather than regulates existing activity.

C

annot

justify ACA under “necessary and proper clause” because using this broad power is not “proper” even if it is

considered

“necessary.”Slide17

Does Congress have authority to enact legislation under its Taxing Power? (Roberts plus 4 liberals)Individual mandate must be construed as imposing a tax on those who do not have health insurance, if such a reasonable construction could save it from unconstitutionality.

Court uses a functional approach to answer question if it is a tax (rather than deferring to Congress’ label under Anti-Injunction Act).

Should not be understood as punishing unlawful conduct because there are no negative consequences other than paying the tax.Slide18

Does Congress have power to expand Medicaid under its Spending Powers?Roberts, Breyer and

Kagan

: Medicaid expansion violates spending clause by threatening states with the loss of their existing Medicaid funding if they decline to comply with the expansion.

Threatened loss of over 10 percent of a state’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.

Violation is remedied by precluding the Secretary from applying ∫ 1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. The other provisions of ACA are not affected.

Ginsburg and Sotomayor agreed to this remedy, creating five votes for holding.Slide19

What does ACA already do?: Insurers:Cannot deny coverage of children under the age of 19 based on pre-existing conditions.

C

annot rescind coverage based on a review of the original application after someone gets sick.

Cannot impose lifetime dollar limits on essential benefits, like hospital stays.

M

ust

cover certain preventive services without charging a deductible, co-pay or coinsurance

.Slide20

MoreEach state (or HHS) must create a pre-existing condition insurance plan for those who have been uninsured for at least six months because of a pre-existing condition.Young adults are allowed to stay on their parents’ plan until they turn 26 years old (unless young adult is offered insurance at work).

S

tates are able to receive federal matching funds for covering some additional low-income individuals and families under Medicaid for whom federal funds were not previously available.Slide21

Rebates85 % of all premium dollars collected by insurance companies for larger employer plans must be spent on health care services or health care quality improvement.

80 % of the premium must be spent on benefits and quality improvement for plans sold to

individuals and small employers.

If costs are too high, then must provide rebates to consumers.

There has been some confusion about whether money must be returned to consumer or employer can use funds for wellness programs for all employees, because of language about “

quality improvement

.”Slide22

SeniorsProvides a one-time, rebate check of $250 to seniors who reach the gap in Medicare prescription drug coverage known as the “donut hole

.”

Seniors who reach the coverage gap will receive a 50 % discount when buying Medicare Part D covering brand-name prescription drugs.

Seniors receive free preventive services under Medicare. (That’s similar to rule for all insurance plans.)Slide23

What ACA Will do in 2014 (if not repealed or dismantled)Prohibit discrimination due to pre-existing conditions or genderEliminates annual limits on insurance coverage

Tax credits for those whose income is between 133 % and 400 % of the poverty line who are not eligible for other

affordable

coverage.

Can buy health insurance through an Exchange.

Will have to pay a tax penalty if health insurance is available and affordable but has not been purchased by individual.Slide24

Definition of Affordable“Affordable” employer provided health insurance is defined as the individual option being less than 9.5 % of employee’s household incomeIf that is true, then expected to buy the FAMILY plan

No premium tax credits or cost sharing subsidies availableSlide25

Tax Credits and SubsidiesTax credits for insurance premium:Contribute no more than 2 % AGI towards health insurance if less than 133 % of federal poverty lineContribute between 2 and 9.5 % of AGI if 133 to 300 % of federal poverty line

Contribute no more than 9.5 % if 300 to 400 % of federal poverty line

No premium tax credits if over 400 % of federal poverty (but can take deduction if health costs above 10 % of AGI) or eligible for public coverage (Medicaid, CHIP, Medicare or military coverage)

Cost sharing subsidies ranging from $604 (225 % of federal poverty line) to $4834 (125 % of federal poverty line) for things like deductibles, coinsurance

Cost sharing subsidy phases out at 225 % of federal poverty line whereas premium credit phases out at 400 %Slide26

MedicaidIf states elect to participate:Americans who earn less than 133% of the poverty level ($14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid.States will receive 100% federal funding for the first three years, phasing to 90 % in subsequent years.Slide27

Health Care ExchangesWho are they available for?Primarily serve individuals buying insurance on their ownSmall businesses with up to 100 employees can also buy insurance through Small Business Health Options Program (SHOP)

What are rules governing insurance under exchanges?

Minimum basic coverage

Limits on out of pocket expensesSlide28

Scope of Insurance MandateEmployers with more than 50 employeesAll individuals, unless:Religious objection; undocumented immigrant; incarcerated; member of an Indian tribe

Family income is below threshold requiring you to file a tax return

You have to pay more than 8 % of your income for health insurance, after taking into account any employer contributions or tax credits

You were insured through Medicare, Medicaid, CHIP, military insurance, employer plan, or purchased insuranceSlide29

Penalty for being without health insurance2014: $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater2015: $325 per adult and $162.50 per child (up to $975 for a family) or 2.0 % of family income, whichever is greater

2016 and beyond: $695 per adult and $347.50 per child (up to $2085 for a family) or 2.5 % of family income, whichever is greater

CBO estimates average annual premium for individual would be $4,500 – 5,000 and for a family would be $12,000 - $12,500 (equivalent to 2.5 % for 4-person family with income of $50,000).Slide30

ProblemsPeople who earn between 100 and 133 percent of poverty guidelines will not be entitled to subsidies to buy insurance under assumption they would move to Medicaid. If employer offers “affordable” individual plan, and have family, then must buy family plan (or be subject to penalties).

But family plan might be terrifically expensive.

Only assistance is deduction if expenses above 10 % of AGISlide31

How ACA affects Children’s Health Insurance ProgramChildren currently covered by CHIP between 100 % and 133 % of poverty would be transitioned to Medicaid

CHIP is funded through 2015, with increased federal match

CHIP eligible children (6 to 19 years old) who cannot enroll in the program due to federal allotment caps must be screened to determine if they are eligible for Medicaid and, if not, would be eligible for some new tax creditsSlide32

Longterm CareEstablishes the Community First Choice Option in Medicaid to allow states to provide community-based attendant supports and services to individuals with incomes up to 150 % FPL with disabilities who require an institutional level of care through a state plan amendment.

Provides states with new options for offering home and community-based services through a Medicaid State Plan Amendment rather than through a wavier for individuals with incomes up to 300 % of the maximum SSI payment

Creates the State Balancing Incentive Program to provide enhanced federal matching payments to eligible states to increase the proportion of non-institutionally-based long-term care services.

Extends the Medicaid Money Follows the Person Rebalancing Demonstration program through 2016Slide33

ConclusionLots of uncertainty:What exactly would Romney seek to repeal if elected?

If Obama is re-elected,

Will states go through with threat not to participate in Medicaid expansion?

If so, will individuals in those states become eligible for premium credit and cost sharing subsidies?

Will all states set up Exchanges (eventually if not immediately)?