SUPREME COURT WILL HEAR ARGUMENTS ON HEALTH CARE REFORM
On November 14, 2011, the U.S Supreme Court announced that it would hear oral arguments regarding the constitutionality of the Patient Protection and Affordable Care Act (PPACA). The announcement sets the stage for a decision by late June.
When setting the scope of its hearing on the case, the Supreme Court allowed for five and a half hours of oral arguments. That may not seem like a lot for a challenge to a 1,000+ page law, but the Supreme Court, has not allowed this much time for a case in decades. The court has agreed to hear arguments about not only the constitutionality of the individual mandate, but also the law’s Medicaid expansion, and whether or not certain provisions of the law, like the individual mandate, may be “severed” from the rest of law. Opponents contend that if one provision is struck down, the entire law must be as well because the measure does not contain a “severability clause.
The justices will also hear arguments as to whether a federal tax law, the Anti-Injunction Act, should apply in this case. The Anti-Injunction Act prevents court action on a tax until it actually takes effect. The individual mandate penalties do not take effect until 2014, so if the court finds that the law applies, it would prevent review of the mandate until at least 2014. In defending the constitutionality of the individual mandate up until this point, the Obama administration has repeatedly argued that the penalties are just that – penalties – and not a tax, so the Anti-Injunction Act should not apply.
The court’s action seems to indicate that all nine justices will be involved in deciding this case. Various groups have been arguing that both Justices Elena Kagan and Clarence Thomas should recues themselves from the case. A variety of conservative activists have been arguing for months that Kagan should recues herself, since she previously served as President Obama’s Solicitor General. However, Kagan and the Justice Department have long maintained that Kagan was never involved in the development and defense of this case. PPACA supporters have encouraged Justice Thomas to recues himself since his wife has lobbied for entities that have opposed the law, and some groups feel this alleged conflict of interest was not disclosed. However, the court documents showed that neither justice exempted themselves from the consideration of this case.
As we previously reported, the 11th U.S. Circuit Court of Appeals in Atlanta upheld a federal judge’s ruling in Florida that the individual mandate in the national healthcare law is unconstitutional. The court also struck down part of the lower court’s decision in that the judge in Florida ruled that because the individual mandate was unconstitutional, the entire law should be struck down; however, the 11th Circuit panel disagreed and found that the rest of the law could stand.
The 6th Circuit and the Court of Appeals for the District Of Columbia Circuit have ruled that the individual mandate is constitutional. The 4th Circuit ruled that because the penalties imposed on people for failure to purchase insurance have not yet gone into effect, it is too soon to sue on the issue.
CHANGES TO STATUTORY DISABILITY PLANS IN CALIFORNIA & NEW JERSEY
Effective January 1, 2012, there will be a number of changes to the statutory disability plans in California and New Jersey.
In California, the maximum weekly benefit amount for State Disability Insurance (SDI) and Paid Family Leave (PFL) will increase from $987 to $1,011. The contribution rate will decrease from 1.2% to 1.0% and the taxable wage ceiling will increase from $93,316 to $95,585. The combination of these changes means that the maximum contribution will decrease from $1,119.79 to $955.85.
In New Jersey, the maximum weekly benefit amount for Temporary Disability Benefits (TDB) and Family Leave Insurance (FLI) will increase from $559 to $572. The taxable wage base will increase from $29,600 to $30,300. The contribution rate for TDB will decrease from 0.5% to 0.2%. The combination of these changes means that the maximum contribution for TDB will decrease from $148 to $60.60. The FLI contribution rate remains 0.06% and the increase in the taxable wage base means the maximum contribution for FLI will increase from $17.76 to $18.18.
SUMMARY OF BENEFITS AND COVERAGE COMPLIANCE DATE DELAYED
The Department of Labor has delayed the compliance date for the new Summary of Benefits and Coverage. On August 22, 2011, the Departments of Labor, Health and Human Services and the IRS issued proposed regulations and proposed templates in connection with implementation of the Summary of Benefits and Coverage and Uniform Glossary requirements of health care reform. An applicability date “beginning March 23, 2012″ was proposed. At the same time, the Departments invited comments generally, as well as on a range of discrete issues, including the timing of the application of the SBC requirement.
On November 17, 2011, the Department of Labor posted the following on its web site:
The Departments received many comments on the proposed regulations and templates and intend to issue, as soon as possible, final regulations that take into account these comments and other stakeholder feedback.
PHS Act section 2715 provides that group health plans and health insurance issuers shall provide the Summary of Benefits and Coverage and Uniform Glossary pursuant to standards developed by the Departments. Accordingly, until final regulations are issued and applicable, plans and issuers are not required to comply with PHS Act section 2715.
It is anticipated that the Departments’ final regulations, once issued, will include an applicability date that gives group health plans and health insurance issuers sufficient time to comply.
WHAT DOES THE FAILURE OF THE SUPERCOMMITTEE MEAN?
The failure of the Joint Select Committee on Deficit Reduction, known as the Supercommittee, to produce a deficit reduction bill has a number of ramifications. The failure of the Supercommittee to come to an agreement means that automatic cuts will go into effect in 2013. This gives Congress time to come to an agreement that will alter these automatic cuts. Of more urgency are other changes that will be effective January 1, 2012. Many observers believed the Supercommittee would reach an agreement that would address these changes. Now that the Thanksgiving recess is over, Congress has returned to Washington to face these looming deadlines, not least of which is the so-called “doc-fix” to prevent a 27.4% cut to Medicare physician reimbursements starting on January 1, 2012, and a continuing resolution to fund the government after December 16, 2011.
If Medicare payments to physicians are cut by 27.4%, there is widespread concern that many doctors will stop taking new Medicare patients.
In an effort to stimulate the economy, Social Security payroll taxes paid by employees were reduced two percentage points. If Congress takes no action, these FICA taxes will return to their prior levels in January 2012, costing the average employee about $1,000 a year.
Transit benefits that give commuters up to $230 per month will automatically fall to $125 on January 1, 2012 if Congress takes no action. Paradoxically, parking benefits will rise to $240 per month, which would make driving more attractive than mass transit for many people.
Social Security and Medicaid are protected from the automatic cuts that will go into effect in 2013 if Congress fails to act, but other non-defense discretionary appropriations will be cut by 7.8% in 2013. In addition to the 27.4% reduction in Medicare payments in 2012, there would be additional cuts of 2% each year, beginning in 2013.
Both houses of Congress are scheduled to adjourn for the year on December 16. Depending on what progress is made on these issues, as well as on possible extensions of federal unemployment benefits, it is possible that members of the legislative branch will have to stay in town during the week leading up to Christmas.
FINAL RULES RELEASED ON ACCOUNTABLE CARE ORGANIZATIONS
On October 20, 2011, the Department of Health and Human Services released final regulations on Accountable Care Organizations (ACOs). The Medicare Shared Savings Program will provide incentives for participating health care providers who agree to work together and become accountable for coordinating care for patients. Providers who band together through this model and who meet certain quality standards based upon, among other measures, patient outcomes and care coordination among the provider team, may share in savings they achieve for the Medicare program. The higher the quality of care providers deliver, the more shared savings the providers may keep.
The Advance Payment model will provide additional support to physician-owned and rural providers participating in the Medicare Shared Savings Program who also would benefit from additional start-up resources to build the necessary infastructure, such as new staff or information technology systems. The advanced payments would be recovered from any futute shared savings achieved by the ACO.
Both the Medicare Shared Savings Program and Advance Payment model create incentives for health care providers to work together to treat an individual patient across care settings – including doctors’ offices, hospitals, and long-term care facilities.
Unlike a managed care plan, Medicare beneficiaries will not be locked into a restricted panel of providers. Rather, a determination of whether an Accountable Care Organization was responsible for coordinating care for a beneficiary will be based on whether that person received most of their primary care services from the organization.
The final rule will increase the incentives and streamline the Shared Savings Program, extending the benefits of the new program to a broader range of beneficiaries. Other changes from the proposed rule include expanding participation to Rural Health Clinics and Federally Qualified Health Centers and organizations where specialists provide primary care and providing a flexible starting date in 2012.
Please contact Garner Consulting for assistance with any of these issues.
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Garner Consulting does not practice law. Please seek qualified counsel if you need legal advice. For employee benefits consulting, please call John Garner, Gerti Reagan Garner or Zaven Kazazian at (626) 351-2300. Please visit our web site at www.garnerconsulting.com, where you can find back issues of our Bulletins.
