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A. Federal Court Strikes Down Entire Health Care
Reform Act
A federal judge in Florida has struck down the entire
PPACA which, in part, requires most Americans to obtain health
insurance or face a monetary penalty. The case originated
when Florida's attorney general filed a lawsuit in federal district
court and was immediately joined by attorneys general from 13 other
states. The lawsuit directly challenged the PPACA's
constitutionality. By the time of the decision, 26 states had
joined the lawsuit.
In his opinion, Judge Roger Vinson held that PPACA's
individual insurance mandate exceeded Congressional power to
regulate commerce under the U.S. Constitution's Commerce
Clause. Vinson further ruled that because the individual
insurance mandate is "not severable" from PPACA, the
entire legislation "must be declared void."
This decision represents a more robust repudiation of
PPACA than a Virginia federal judge's ruling last December, which
also held the individual mandate to be unconstitutional. In
the present case, Judge Vinson compared PPACA to a "finely
crafted watch" in which "one essential piece is defective
and must be removed," and that "there are simply too many
moving parts...for me to try to dissect out...the able-to-stand-alone
from the unable-to-stand-alone."
In reaching his decision, Judge Vinson focused on the
question of whether an individual's passive decision to not
purchase health insurance is an "activity" within the
meaning of the Commerce Clause and therefore within the scope of Congressional
authority. In all of the Supreme Court's previous decisions
upholding laws enacted under the Commerce Clause, the Court has
required that some element of activity be present.
The Judge determined that an individual's decision to
not purchase health insurance cannot be considered an economic
activity. He further commented that it would be a radical
departure from existing case law to hold that Congress can regulate
inactivity under its Commerce Clause powers, and that if he
were to hold so, "Congress could do almost anything it
wanted", such as requiring all citizens to purchase a certain
amount of bread each week in order to stabilize wheat prices.
The Judge stopped short of granting an injunction
against the PPACA, as the plaintiffs requested, to prevent its
ongoing rollout while his decision is appealed.
This case is just one of 25 lawsuits challenging the
PPACA's constitutionality. Several of the lawsuits have now
been decided in the lower courts, some rulings upholding the PPACA,
while others have found all or part of the PPACA to be
unconstitutional. Virtually all legal scholars agree that the
U.S. Supreme Court will ultimately decide whether the PPACA is
constitutional. However, the Supreme Court has denied a
petition from the Virginia Attorney General to expedite a review of
PPACA's constitutionality, so many of these lawsuits will be heard
by U.S. Courts of Appeal before the Supreme Court makes its ruling.
B. The Federal Budget & Patient Protection
and Affordable Care Act
Recent legislative activity has impacted certain
provisions of the PPACA.
Repeal of Form 1099 Reporting Rule. President
Obama has signed legislation repealing PPACA's Form 1099 reporting
provision. This provision required all purchases or
payments for services in excess of $600 annually to be reported on
Form 1099. Both Democrats and Republicans conceded that this
particular requirement was overly burdensome and served little
purpose.
In addition, with the passage of the budget deal to
keep the federal government operating, the following changes to
PPACA were enacted:
Funding Cut to the Consumer Operated and Oriented Plan
Program (CO-OP). Over $2 billion in funding has been cut from
the CO-OP program. The CO-OP program is designed to create
new non-profit health insurance cooperatives in each state and the
District of Columbia. The CO-OPs would operate as member-run
health insurance issuers that provide qualified health plans
("QHP") in the individual and small group markets.
The CO-OP program had an initial earmark of $6 billion.
Any QHP offered by a CO-OP is required (just like
other insurers in the state), to comply with the requirements of
PPACA, including pre-existing condition clauses, solvency and
licensure requirements and rules on payment to providers.
CO-OPs may form private purchasing councils to enter into
collective purchasing arrangements for items and services that
increase their administrative efficiency, within the confines of
federal antitrust law. Any CO-OP profits must be used to
lower premiums, improve benefits, or provide other programs
intended to improve the quality of health care delivered to CO-OP
members.
Repeal of the Free Choice Voucher Program. The
Free Choice Voucher Program has been repealed. This Program
would have required employers who offer group health plan coverage
to provide free choice vouchers ("FCVs") to certain
employees. The employees could then use the FCVs to purchase
other insurance through a state insurance exchange. The
voucher would have been equal to the amount of the employer's plan
contribution for a plan participant. To qualify for the FCV,
the employee's required plan contribution would have had to exceed
8% but be less than 9.5% of the employee's household income for the
year. In addition, the employee's household income could not
have been greater than 400% of the Federal Poverty Level.
C. Sixty-Day Advance Notice Requirement
Under a provision of PPACA, group health plans and
health insurance carriers will be required to provide at least 60
days' advance notice to participants before the effective date of
any material modification to the plan. However, the effective
date of this new requirement was unclear under the law.
Now, in Part V of their Frequently Asked Questions
("FAQs") about the implementation of PPACA, IRS, DOL and
HHS have clarified the effective date of this 60-day rule.
Under another provision of PPACA, the agencies are
required to issue regulations establishing standardized language
for plans to use to describe plan coverage and benefits. These
regulations are required to be effective by March 23, 2012.
The agencies have now stated in their FAQs that 60-day
advance notice requirement will become effective at the same time
that the standardized language requirement takes effect.
D. More Guidance on Grandfathered Plan Status
IRS, DOL and HHS have issued Part VI in their series
of Frequently Asked Questions ("FAQ"). In
particular, Part VI addresses the following matters related to
"grandfathered" health plans under the PPACA:
Clarification of the Anti-Abuse Rule. Transferring employees from one grandfathered
plan (transferor plan) to another (transferee plan) will generally
cause the transferee plan to lose its grandfathered status if
amending the transferor plan to match the transferee plan's terms
would cause the transferor plan to lose its grandfathered status.
However, if there is a "bona fide employment-based
reason" for the transfers, this rule does not apply. The
FAQ provides a non-exhaustive list of "bona fide
employment-based reasons" for transfers including:
· the elimination of a benefits package due to the
issuer exiting the market or no longer offering the product to the
employer;
· low or declining participation in a benefit package,
making it impractical for the employer to continue offering it; and
· the elimination of a benefit package for any reason
where multiple benefit packages covering a significant portion of
other employees are available to the employees being
transferred.
Moving Brand Name Drugs into a Higher Cost-Sharing
Tier. Grandfathered plans may move brand name drugs into a
higher cost-sharing tier once generic alternatives become available
without losing their grandfathered status.
Employer Contribution Formula and Increase in Cost of
Coverage. Sponsors of grandfathered plans that contribute
towards employees' coverage based on a formula are not required to
raise their contribution rates to account for increases in the
total cost of coverage in order to maintain their plan's
grandfathered status.
Amendment to Grandfathered Plan Causing Loss of Grandfathered
Status. A grandfathered plan that adopts an amendment which
causes its grandfathered status to be lost will cease to be a
grandfathered plan on the effective date of the amendment, rather
than the date the amendment is adopted.
E. Mini-Med Plans
Under PPACA, non-grandfathered group health plans are,
in general, prohibited from imposing annual limits on essential
health benefits. However, restricted annual limits may be
imposed by grandfathered plans until 2014. These limits are:
$750,000 for plan years beginning after September 22, 2010; $1.25
million for plan years beginning after September 22, 2011; and $2
million for plan years beginning after September 22, 2012.
HHS has recognized that mini-med plans, with much
smaller annual limits, are frequently the only health care coverage
option available to many workers. It ruled that certain
mini-med or limited benefit plans that were in existence before
September 23, 2010, may be exempted from the minimum annual benefit
rule. HHS, therefore, issued procedures under which issuers
or sponsors of mini-med plans may request a waiver from these
minimum annual limits.
Now HHS has said that mini-med plans which receive
these waivers must provide "current and eligible
participants" with a notice containing the following
information:
·
a statement that the health care coverage provided
under such plans has lower annual dollar limits than the limits
prescribed under PPACA;
·
the dollar amount of the annual limit, along with a
description of plan benefits to which the limit applies; and
·
a statement that the waiver is granted for only one
year.
Mini-med plan insurers must also direct consumers to http://www.HealthCare.gov where they can
obtain further information about other available coverage options.
F. Community
Living Assistance Services and Support Act
HHS has released a
general overview on the Community Living Assistance Services and
Support Act ("CLASS Act"). CLASS is a new federally
administered program, created under PPACA, establishing a national,
voluntary long term care program to be known as the CLASS
Independence Benefit Plan (the "CLASS Plan") under which:
·
Most individuals, age 18 and over, who are actively at
work, can enroll. Individuals who are actively at work cannot
be excluded from enrolling due to pre-existing conditions such as
having a physical disability or because of other health issues.
·
Employers who make the CLASS Plan available to their
employees may have automatic enrollment as long as they provide an
opt-out provision. Employees may use payroll deduction to pay
their monthly premiums, but employers need not contribute to the
CLASS Plan.
·
The premiums are intended to remain
level, with a minimum premium of $5.00 per month for poverty-line
individuals and students. The maximum premium is to be determined
in the future.
·
Benefits are payable to persons
who have paid CLASS Plan premiums for at least 5 years and who have
earned enough to qualify for at least one quarter's Social Security
credit in each of 3 out of the last 5 years. In addition, to
be eligible for benefits, an individual must be unable to perform
at least two "Activities of Daily Living"
("ADL") for a period of at least 90 days or must require
substantial supervision due to cognitive impairment (e.g.,
dementia, Alzheimer's). ADLs include bathing, dressing, using
the toilet, moving (e.g., from bed to chair), caring for
incontinence and eating.
·
A benefit payment scale, to be developed by HHS, will
be based on an assessment of the individual's need for help due to
the physical or cognitive limitation, but will not be less than $50
per day.
HHS, along with a "CLASS Independence Advisory
Council", will determine the final details of the CLASS
Plan. HHS is required to issue regulations by October 1,
2012.
G. Student Health Plan Regulations
HHS has issued
proposed regulations on the application of PPACA to student health
plans.
PPACA provides
that: "nothing in this title...shall be construed to prohibit
an institution of higher education...from offering a student health
insurance plan." HHS's proposal tackles the problem by
classifying student health plans as individual health
insurance. It then creates a special subcategory for the
student plans that exempts them from certain provisions of PPACA
that would "prohibit an institution of higher education...from
offering a student health insurance plan".
The proposal
defines "a student health plan" as "individual
health insurance coverage that is provided pursuant to a written
agreement between an institution of higher education and a health
insurance issuer, and provided to...[its] students and their
dependents", which:
·
does not make health insurance coverage available
other than in connection with enrollment as a student in the
institution of higher education;
·
does not condition eligibility for coverage on any
health status-related factor; and
·
meets any additional state law requirements.
However, the
regulations specifically exempt self-insured student plans, stating
that they are not subject to HHS regulations.
The proposal
exempts or modifies the following PPACA requirements:
·
Guaranteed availability and guaranteed renewability
rules do not apply to student health plans because they are, by
definition, only available to students and their dependents.
·
Permitted annual limits for student health plans are
reduced to $100,000 for policy years beginning before September 23,
2012. For policy years beginning on or after September 23,
2012, student health plans must meet same $2 million annual limit
that applies to grandfathered group health plans. As with
other plans, beginning in 2014, no annual dollar benefit limit is
permitted.
·
Student administrative health fees charged to students
for certain health services are not considered a cost sharing fee
and therefore do not violate the PPACA requirement that cost
sharing cannot apply to preventive care services.
Student health
plans would have to comply with the other requirements of PPACA,
including the prohibition on lifetime benefit limits and the
pre-existing condition rule.
In addition,
student health plans must provide a notice to students stating that
the plan may not comply with all of the PPACA requirements. A
sample notice is provided in the proposed regulations.
H. Nursing
Mothers at Work
In addition to the
rules pertaining to group health plans, PPACA contains a rule requiring
break times for nursing mothers. The Wage and Hour Division
of the Department of Labor ("WHD") has now released
interpretive guidance on this new requirement.
Under the Nursing
Mothers at Work provisions of PPACA, employers are required to
provide: a) "reasonable breaks for an employee to express
breast milk for her nursing child for 1 year after the child's
birth, each time such employee has need to express the milk";
and, b) a location, other than a bathroom, that may be used by employees
to express breast milk, which is shielded from view and free from
intrusion from coworkers and the public. An employer that
employs fewer than 50 employees is not subject to these rules, if
the rules would impose an undue hardship on the employer.
Under the guidance:
·
All employees who work for the covered employer,
regardless of work site, must be counted when determining whether
the employer has fewer than 50 employees;
·
Only employees who are not exempt from Section 7 (e.g.,
overtime requirements) of the Fair Labor Standards Act are covered
under these Nursing Mothers at Work provisions;
·
Break time for expressing milk does not have to be
paid, but where an employer already provides for paid breaks, an
employee who uses that break time to express milk must be paid in
the same manner as other employees;
·
No fixed rule will be made for the reasonableness of
the break time, rather, it will depend on many facts and
circumstances; and
·
The space provided to express milk need not
permanently designated for this purpose.
Finally, it is
important to note that PPACA does not preempt any existing state
laws that exceed the requirements of the Nursing Mothers at Work
provisions.
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