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Health Reform After the Election The Big Picture of Obamacare

Health Reform After the Election The Big Picture of Obamacare. James R. Griffin Jeffery P. Drummond Jackson Walker L.L.P . 901 Main Street, Suite 6000 Dallas , Texas 75202 jgriffin@jw.com jdrummond@jw.com 214.953.5827 214-953-5781. Conceptual Issues.

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Health Reform After the Election The Big Picture of Obamacare

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  1. Health Reform After the ElectionThe Big Picture of Obamacare James R. Griffin Jeffery P. DrummondJackson Walker L.L.P.901 Main Street, Suite 6000Dallas, Texas 75202jgriffin@jw.com jdrummond@jw.com 214.953.5827 214-953-5781

  2. Conceptual Issues

  3. Jeffery P. Drummond • Focuses on healthcare transactional, regulatory, and administrative matters. • Primarily represents physicians and physician groups, hospitals and health systems, laboratories, and other primary and ancillary healthcare providers. • Particular emphasis on Stark, Anti-Kickback, and other federal and state anti-referral statutes; HIPAA and medical record privacy and security issues; pharmacy and laboratory issues; tax exempt entities and tax exempt financing.

  4. The Supreme Court Decides: • National Federation of Independent Business v. Sebelius • June 28, 2012 • Chief Justice Roberts, joined by Justices Ginsburg, Sotomayer, Breyer and Kagan • Constitutional issues considered • Individual Mandate • Medicaid Expansion

  5. The Supreme Court Decides: • “We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.”

  6. The Supreme Court Decides: • “The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.”

  7. What’s Wrong with American Healthcare? (Why so expensive for such bad results?) • Results aren’t all that bad • Cancer survival rates are exceptional • Different data standards (e.g., infant mortality) • Unhealthy population with bad habits • Diet/obesity • Drugs and guns • We have the best toys • We get the most care • We get care up to the last day (No LCP)

  8. Normal Commercial Transaction

  9. How Does the American Healthcare System Work? • Three parties: • Provider, Patient, Payor • Unlimited wants • No natural governor on costs • A “right,” or just an “expectation”? • Charity hospitals/providers • Governmental “safety net” programs • EMTALA

  10. OPM: Other People’s Money Provider standards Networks COB Copays Deductibles Pre-existing cond. Lifetime limits

  11. Conceptual Insurance Issues • Is health insurance risk management (purchasing indemnification?) • Reimbursement to cover costs/expenses • Calculate whether to self-insure • Is health insurance a warranty or customer service plan? • Pay more upfront for repair/replace defects • “All you can eat” buffet

  12. How Does Insurance Work? • Generally provided through employment • Voluntary Participation • Sharing/pooling of Risk • Allocation based on risk profile? • Higher risk activities, higher premiums • Risk reduction activities, lower premiums • Premium = average cost + admin + profit • The “Free-Rider” Problem

  13. The Free-Rider Problem • Can you buy fire insurance when your house is already burning? • Pre-existing condition is limited fix • What to do with those who don’t buy insurance? • Refuse to provide care • Safety nets for poor and old • Possible “charity” for the rest • Non-”poor” poor, illegals,

  14. The Problem to be cured by Obamacare:The uninsured • Large numbers of uninsured (not otherwise in safety net) “don’t get healthcare” • Not really true – EMTALA ensures ER coverage • charity, bad debt account for rest • Cost-shifting impact • Insured get “in-network” pricing, so uninsured are charged huge amounts (which they don’t pay) • Uninsured costs picked up by insured • Medicare/caid underpayments add to the shift

  15. Other problems to be cured by Obamacare: • Greedy insurance companies drive up premiums, don’t pay doctors fairly, deny care and coverage • MLR, end of pre-existing conditions and lifetime limits, essential health benefits • Greedy doctors/hospitals charge too much, collect debts unfairly • ACOs and MSSP, end physician-owned hospitals

  16. Potential Non-Obamacare Solutions • Re-mutualization of insurance companies • Cross-border insurance sales • “Bare minimum” policies • Changes to tax treatment of insurance costs • Health Savings Plans • High-deductible plans

  17. ObamaCare’s Solution: the Mandate(Increase the insured population) • End the Free-Rider problem by outlawing free-riders. • “Liberty” issue • Too many exceptions • Too little enforcement • Require businesses to provide insurance (Mass.) • insurers to provide essential benefits, limit profits • Establish additional markets to provide additional avenues for insurance purchases • Basic economics work against this • Increase Medicaid population

  18. Tangential Issues: Mandate • What are “essential” health benefits? • The contraception kerfuffle • How to apply burden to employers? • And how will employers evade it? • How to deal with those who won’t play? • Medical Loss Ratios (could increase costs) • Problems with Health Insurance Exchanges • “Waiver” abuse (“rule of law” issues) • Regulatory agencies taking legislative action

  19. The contraception coverage issue • Broad range of contraceptives/abortifacients considered to be “essential health benefits.” • Very limited exception initially offered for “religious institutions” (effectively only churches). • Lawsuits ensued, with mixed results. • HHS proposed revised regulations last Friday; separated “religious employers” (churches themselves) and “eligible organizations.”

  20. The new contraception coverage rule • “Eligible Organization” is an entity that self-certifies that it meets the following: • Opposes providing specified contraceptive services on account of religious objections • Operates as a nonprofit entity • Holds itself out as a religious organization • Provides self-certification to insurer • Eligible Organization’s insurance plan then does not have to include coverage for the specified contraceptive services.

  21. The new contraception coverage rule • However, the insurer must automatically provide insurance for the specified contraceptive services through a separate insurance policy for each plan participant • Insurer may not charge copays/deductibles to the patient for the separate insurance • Insurer may not charge premium to the Eligible Organization for the coverage

  22. The new contraception coverage rule • Insurer must provide notice of availability of the separate insurance to beneficiaries/participants • ““The organization that establishes and maintains, or arranges, your health coverage has certified that your group health plan qualifies for an accommodation with respect to the federal requirement to cover all Food and Drug Administration-approved contraceptive services for women, as prescribed by a health care provider, without cost sharing. This means that your health coverage will not cover the following contraceptive services: [contraceptive services specified in self-certification]. Instead, these contraceptive services will be covered through a separate individual health insurance policy, which is not administered or funded by, or connected in any way to, your health coverage. You and any covered dependents will be enrolled in this separate individual health insurance policy at no additional cost to you. If you have any questions about this notice, contact [contact information for health insurance issuer].”

  23. The new contraception coverage rule • Insurer may offset cost of providing the separate plan against user fees it may otherwise pay to participate in a federally-facilitated exchange. • Student health insurance plans appear to be included in the “Eligible Organization” category if the sponsoring entity meets the definition. • “Self-insured” plans are not yet included, but 3 proposed methods would use the TPA to place the contraceptive insurance with another insurer

  24. Non-Mandate Provisions • Health Insurance Exchanges (“HIX”) • ACOs and MSSP • Medicare Changes • Medicaid Expansion • New Requirements for Providers • Structural issues

  25. Health Insurance Exchanges

  26. Accountable Care Organizations • Providers can form ACOs and participate in the Medicare Shared Savings Program • Shared savings only • Shared savings and losses • Defining and measuring savings and losse • Structural Issues • Stark, Anti-Kickback, etc. • Antitrust

  27. Medicare Changes • “Part C” (Medicare Advantage) changes • Restructure payment levels • MA plans must pay back if MLR is too low • “Part D” (prescription drug) changes • Changes in subsidies • Fill in the “donut hole” • Experiment with bundled payments, value-based purchasing

  28. Medicaid Expansion • Increase pool of eligible individuals to anyone earning less than 133% of FPL • Phase-in of state responsibility: • Federal government pays 100% through 2016 • 95% in 2017, 94% in 2018, 93% in 2019, 90% thereafter • Originally, once a state took the first new dollar, it could not later reduce eligibility • States not required to participate; may drop out

  29. New Requirements for Providers • Required to implement an effective compliance program (details not yet available) • Must disclose financial relationships with drug companies and other referring providers • Non-profit hospitals must perform a “community needs assessment” every 3 years, publish financial assistance policy, not “balance bill” if patients could get financial assistance • “Whole Hospital” Stark exception ended.

  30. Structural Issues • New Taxes: Pharma companies, Insurance companies, medical devices, tanning salons • IPABand “comparative effectiveness” • CLASS Act (already dead) • Physician-Owned Hospital changes • Quality initiatives • Demo projects • In-home care • Bundled payments

  31. Ridiculous and Sublime • Medicaid coverage for former foster children • Indian healthcare provisions • Chain restaurant menu nutrition information • Revenue provisions • Tanning bed tax • Medical device tax • The law of unintended consequences

  32. How Obamacare will/won’t work • It’s not a government takeover of the healthcare industry; it’s a tax on industry participants to drive more people into insurance coverage • Make more employers provide coverage (Mass.) • Tax/subsidize individuals • Won’t cover everyone, no matter what • If/when it doesn’t work, it WILL be a stepping stone in the drive toward a single-payor system • Counter-reaction could push other factors • Re-mutualization of insurance • Tiers of coverage or service

  33. Practical Implications

  34. James R. Griffin • Focuses on employee benefits and executive compensation, advising clients on issues arising under the Internal Revenue Code, ERISA and other laws. • Addresses issues affecting 401(k) and pension plans, executive compensation plans, stock option plans, and other group benefit plans. • Represents clients in controversy matters, including Internal Revenue Service (IRS) and Department of Labor (DOL) audits, investigations, examinations and voluntary compliance proceedings.

  35. Roadmap • Individual Mandate • Employer Mandate • Essential Health Benefits and Minimum Value • Market Reforms • Benefits Provisions • Other Tax and Fee Increases

  36. Individual Mandate • All citizens are required to have qualifying health coverage • Penalty (tax) greater of $695 individual/$2085 family or 2.5% of household income, subject to phase in ($95 or 1% in 2014) through 2016, increasing by COLA thereafter • Exemptions granted: Indians, prisoners, illegal immigrants, poor, those who would be covered by Medicaid in states that don’t opt in • Premium credits available for those who purchase coverage and are below 400% FPL

  37. Roadmap • Individual Mandate • Employer Mandate • Essential Health Benefits and Minimum Value • Market Reforms • Benefits Provisions • Other Tax and Fee Increases

  38. Employer Mandate • Flowchart • Employer Penalties • Employer Penalty Questions • Exchanges • Premium Tax Credits • Cost Sharing Subsidies

  39. Employer Penalties

  40. Employer Play or Pay Penalty • An employer that does not offer health coverage to its full-time employees and their dependents is subject to a nondeductible "play OR pay" penalty if any full-time employee enrolls for coverage through an Exchange and qualifies for the premium tax credit or cost-sharing reductions • $2,000 for each full time employee over 30

  41. Employer Play and Pay Penalty • Applies if a large employer offers its full-time employees (and their dependents) the opportunity to enroll in coverage but the coverage does not provide “minimum value” or is “unaffordable” and one or more full-time employees receive subsidized coverage through an Exchange • Penalty is $3,000 for each full-time employee receiving subsidized coverage through an Exchange

  42. Employer Penalty Questions • What is a large employer? • How are FTEs counted? • What are variable hour employees counted? • When is coverage affordable?

  43. What is a large employer? • An employer that employs an average of at least 50 full-time or full-time equivalent (FTE) employees on business days during the preceding calendar year • A full-time employee with respect to any month is an employee who is employed an average of at least 30 hours of service per week • Affiliated entities and entities under common control (such as a parent corporation and wholly owned subsidiary corporations) are treated as a single entity for determining large employer status • Successor employers are considered to be the same as predecessors • Special rule for new employers

  44. How Are FTEs Counted? • FTEs are determined by calculating for each month of the prior calendar year the aggregate number of hours of service (not exceeding 120 hours for any one employee) worked by all non-full-time employees (those not employed for an average of 30 hours per week), including seasonal employees, and dividing by 120, and then adding the number of monthly FTEs together and dividing by 12

  45. How are Variable HourEmployees Counted? • Variable hour employees work 30 or more hours in some weeks and fewer in other weeks • Optional Look Back Measurement Method • Measuring Period • Administrative Period • Stability Period

  46. Variable Hour Employees—Initial

  47. Variable Hour Employees—Standard

  48. When is Coverage Affordable? • Coverage is affordable if the employee’s premium obligation for self-only coverage does not exceed 9.5 percent of the employee’s household’s modified adjusted gross income • Employer Safe Harbors • W-2 • Lowest cost employer coverage • 9.5% of FPL

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