Feds Say It Again: Don’t Pay or Reimburse Employee’s Individual Premiums

via Lockton

In three new frequently asked question (FAQs), the agencies responsible for implementing the health reform law continued their efforts to stamp out reimbursement of employees’ individual health insurance premiums. They also condemned paying incentives for individuals with high claims costs to obtain coverage elsewhere.

In the FAQs, the agencies stressed that employers who pay or reimburse premiums for individual health insurance coverage will violate health reform law requirements, even if the amounts are treated as taxable compensation.  The agencies then explained that an employer violates various laws by paying individuals with high claims to waive coverage under the employer’s health plan. Finally, the agencies explained that schemes for reimbursing individual health insurance premiums are group health plans that must comply with health reform law mandates even if the employer has no involvement in choosing the health coverage.


One of the promises of the health reform law was greater availability of individual health insurance coverage. And employers, looking to simplify and reduce costs for health benefits, have considered replacing employer-sponsored health plans with tax-favored payments to help employees obtain individual coverage (through the public health insurance exchanges, or Marketplaces, or elsewhere). There are significant questions, however, about the legality and consequence of such assistance, including whether it would:

  • Prevent the employer from incurring penalties under the employer play or pay mandate.
  • Prevent employees from qualifying for premium tax credits (subsidies) for Marketplace coverage.
  • Be subject to the health reform law’s benefit mandates.

The health reform law itself prohibits employers from allowing employees to use pre-tax amounts to pay for individual Marketplace coverage, and available guidance was never encouraging. Then, in September 2013, the agencies issued guidance on the status of various health reimbursement programs under the health reform law (see our Alert). In the 2013 guidance, the agencies condemned what they called “employer payment programs” (or EPPs) under which employers pay or reimburse the cost of individual insurance policies. The agencies explained that, unless an exception applies, EPPs are group health plans and are required to comply with the health reform law’s prohibition of annual and lifetime dollar limits on essential health benefits and the requirement to cover preventive services without cost sharing. Such programs, by their very nature, violate these mandates.

Lockton Comment: In FAQs issued last May, the Internal Revenue Service (IRS) explained that failing to comply with the health reform law’s benefit mandates may result in a $100/day excise tax per affected individual (which is $36,500 per year, per individual). Other penalties and liabilities may apply, as well.

EPPs Include Taxable Reimbursements of Individual Coverage 

In the 2013 guidance, the agencies noted that EPPs do not include arrangements under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. This led to speculation that payments or reimbursements are permitted (and do not violate the health reform law mandates) if they are treated as taxable compensation. In the new FAQs, the agencies quashed that notion.

They explained that the previous guidance allowed for arrangements in which the employee would receive the taxable amount in cash if the benefits are not elected. Any arrangement that conditions availability of a taxable (or nontaxable) amount on an employee obtaining health coverage qualifies as an EPP. As such, it must comply (but cannot comply) with the dollar limits and preventive care mandates noted earlier.

Lockton comment: EPPs escape these mandates if they qualify as exempt retiree- only plans or excepted benefits (e.g., because they reimburse only dental and vision premium expenses). Even though a retiree-only EPP will not result in non-compliance with the benefit mandates, a retiree who has EPP coverage is considered to have minimum essential coverage and cannot qualify for premium assistance for Marketplace coverage. 

One Step Further: Paying High Claims Risk Employees to Waive Coverage 

Employers who have high-cost claimants in their plans know how drastically such individuals can affect the cost of providing coverage. Rather than eliminating coverage for all employees, some employers in this situation have considered paying high-cost claimants relatively large amounts if they will waive coverage under the employer’s plan. As explained above, the employer could not explicitly pay for Marketplace or other coverage or make the payment contingent on obtaining other coverage. Nonetheless, the assumption underlying such a proposal is that the employee would obtain Marketplace or other individual coverage in place of the employer’s plan.

Lockton comment: Under recent IRS guidance regarding changes to pre-tax elections, employers have greater leeway than they did previously to allow mid-year transfers to Marketplace coverage. An employer could, for example, allow an employee with premature triplets to drop employer coverage and move to Marketplace coverage coincident with the birth of the children. See our Alert.

Although the health reform law does not contain an anti-dumping rule with respect to Marketplace coverage, the agencies explained in the new FAQs that offering disenrollment incentives to only to high-cost claimants constitutes discrimination based on a health status factor, which is a HIPAA violation. Very generally, HIPAA’s nondiscrimination provisions prohibit conditioning or varying health coverage eligibility or contributions based on an individual’s health status. According to the agencies, an individual who is offered a payment to opt out of an employer plan is being required to pay more for health coverage than other similarly situated participants based on a health status factor, which violates HIPAA.

In a fine piece of lawyerly reasoning, the agencies noted that an individual being offered the disenrollment incentive must forego that payment to remain in the plan, and therefore the individual’s cost for coverage includes both the regular contributions and the foregone payments. Because the offer is made only to the high-cost claimant, the agencies conclude that the individual’s required contribution is greater than the contribution required of a similarly situated individual enrolled in the plan, which violates HIPAA’s nondiscrimination provisions. The agencies also noted that they would revise the HIPAA nondiscrimination regulations to make clear that opt-out incentives offered only to high-cost claimants are not considered to be “benign” discrimination in favor of those with adverse health conditions (a form of health status discrimination that is permitted). 

If It Sounds Too Good to Be True… 

Much like locusts, vendors appear every few years claiming they can save employers huge amounts of cash by implementing a Section 105 plan. In the past, these were “double- dipping” arrangements that were sold as allowing tax-free reimbursement of employees’ pre- tax payments for health coverage. Needless to say, the IRS condemned these arrangements.

The Marketplaces and premium tax credits have inspired vendors to offer a new variation on the Section 105 plan. Employees obtain individual coverage, perhaps from the Marketplace and perhaps with a premium tax credit, they then present their premium receipts to the employer and are reimbursed on a tax-free basis for the premium. The vendors apparently assure the employer that the reimbursement is not a group health plan that must comply with the health reform law mandates because the employer has no role in choosing the employees’ coverage.

In the new FAQs, the agencies explained that the premium reimbursement itself is a group health plan, so the employer’s lack of involvement with the employee’s choice of individual health coverage is irrelevant. The agencies concluded that the absence of an unfettered right to receive the reimbursement amount in cash results in the reimbursement program being a group health plan. Like the EPPs described above, therefore, the arrangement is subject to, but cannot comply with, the dollar limits and preventive care benefit mandates. In addition, the reimbursement program qualifies as minimum essential coverage, so an employee participating in it could not qualify for premium assistance with respect to Marketplace coverage.


These new FAQs provided no surprises, given the agencies’ previous pronouncements on EPPs. For employers that wish to support employees’ purchase of individual coverage, it appears that the only option is providing additional taxable pay that is available regardless of whether the employee obtains coverage. In addition, the payment may not be made on a selective basis to those having adverse health status factors.

Posted in Health, Health & Welfare, Health Reform, News & Updates

It’s Easier to Measure the Cost of Health Care than Its Value

via Harvard Business Review

How can there be no licensed treatment or vaccine for Ebola, a disease with a very high death rate that has caused a global public health emergency?

The answer is painful but clear: The profit potential from Ebola treatments was too small to interest large manufacturers. Ebola historically has threatened West African countries that have low standards of living. The small Canadian laboratory that produced an experimental vaccine was funded by the Canadian government, and Ebola was chosen as a research target because it is a good model for other infectious diseases.

Ebola may seem remote, but the economics of innovation are the same in Africa and the United States: Innovation subsists entirely on the prospect of substantial rewards earned from the discovery of a new drug.

This brings us to hepatitis C, a chronic infectious disease affecting perhaps 3.2 million Americans. Hepatitis C virus, or HCV, infection is often asymptomatic — but its severity fluctuates, and it can progress after many years. Eventual complications include cirrhosis of the liver in 20% to 30% of patients, with grave consequences in terms of health and costs.

Until recently, standard treatment for chronic HCV was a course of combination drug therapy — with relatively poor effectiveness and serious side effects. However, several innovators have worked hard to identify breakthrough antiviral treatments. Sofosbuvir — sold under the brand name Sovaldi and taken in combination with another drug — can eliminate the virus in more than 94% of cases. However, Sovaldi’s manufacturer has received much criticism for the price, both in the media and Congress. Many stories highlight the $1,000 cost per pill.

While this may make for good theater, focusing solely on the cost of therapy — or, worse, the price per pill — misses four crucial points about the value of treatment, and the reward to innovation. We now discuss these four points and, subsequently, offer three solutions for the short and the long term.

1. The illusions of accounting. First, consider the case of a man who is diagnosed with diabetes at age 50. He would pay, each and every year, for oral medications and various health care services, with a lifetime cost in the hundreds of thousands of dollars. Thus, if someone came along with a diabetes cure that cost upwards of $100,000, society should welcome it, even though the one-time price tag seems high.

Now consider hepatitis C. Treating HCV infection costs about $85,000, but it is all paid in a matter of weeks. Using treatments available before the introduction of sofosbuvir, the present lifetime medical costs are about $175,000 to $200,000. If HCV infection progresses, there is often cirrhosis of the liver and, in some cases, the need for a liver transplant. Taking into account the upfront cost of treatment — but also the lifetime benefits — researchers have found that sofosbuvir regimens are highly cost-effective, even at current prices.

2. The benefits beyond the treated patient. None of these calculations takes into account additional benefits to others. The hepatitis C virus is bloodborne and can be transmitted by inadequately sterilized needles during intravenous drug use, acupuncture, tattooing, and even public shaving. Health care workers are also at risk. Therefore, each successfully treated patient functionally “cures” the disease in others (at a cost of zero for those people) — a social benefit not captured by traditional cost-effectiveness analyses.

3. The ephemeral nature of high prices. In 10 to 12 years, generics for Sovaldi will enter the market, thereby increasing competition, reducing prices, and expanding access to treatment. A similar downward trend in price occurred with highly active antiretroviral therapy (HAART) for HIV infection. Generic antiretrovirals are now a cornerstone of the emergency plan for AIDS relief, put in place by President George W. Bush, and have done much to combat HIV in the developing world.

4. Long-term health improvements. HAART, introduced as HIV treatment in the 1990s, dramatically increased survival from HIV infection, although at significant financial cost. Before HAART, an HIV-positive patient could not buy a longer life at any price. HAART thus lowered the price of a longer life, even though the cost of treating HIV-infected patients appeared to rise dramatically.

With regard to Sovaldi, the United Kingdom (which uses a relatively stingy decision rule to cover treatments) has agreed to cover sofosbuvir for the subset of HCV-infected patients who have advanced liver disease, albeit at a lower price than the one typically cited in the United States. The lesson here: Do a “true calculation” whereby we decide, given the drug’s cost, which patients it makes sense to treat. Of course, the higher the price, the less access to new drugs for patients in need, particularly those belonging to vulnerable and disadvantaged groups. It is precisely for this reason that sofosbuvir has caused so much uproar. So what can be done?

Solutions for the Short and the Long Run

Many observers want the U.S. government to mandate lower drug prices — for example, by allowing re-importation of drugs or by having Medicare negotiate drug prices. It is tempting to believe that price reductions reduce company’s profits without affecting innovation. However, the absence of R&D into unprofitable third-world diseases, like Ebola, and the increase in drug approvals for rare diseases under the U.S. Orphan Drug Act belie this point. Indeed, economists estimate that a 10% increase in market size increases the number of new drugs by 40%. Price regulation has been shown to delay the launch of new drugs, limit their availability, and reduce the pace of innovation.

Furthermore, placing the vast bargaining power of the entire U.S. Medicare population in the hands of a public agency invites an overreaction. There are few tangible incentives to prevent cash-strapped public agencies (which often focus primarily on the present) from driving down pharmaceutical prices so much that future generations suffer from the depletion in innovation.

Protecting the vulnerable could take three forms:

  • We could simply bite the bullet and agree to cover treatment, especially in indigent populations such as Medicaid recipients. Although it may be infeasible to provide access for all hepatitis C patients immediately, a targeted approach could maximize the reach of limited public dollars. The patients at greatest risk for developing expensive complications like end-stage liver disease — or for transmitting the disease to others — may be the best cases to start with. In time, the disease can be cured in less pressing cases, with the rate of treatment expanding, especially when a low-priced generic enters the market.
  • Public payers could negotiate longer-term arrangements in which manufacturers are rewarded as the evidence of effectiveness mounts. We are starting to see such arrangements in other areas of health care under the guise of “pay for performance” — even in Medicare, where hospitals are reimbursed extra if patients avoid readmission.
  • We could consider innovative, financing mechanisms (both public and private) that allow cash-strapped programs to spread out the substantial upfront cost of treatment into a more manageable stream of payments, perhaps tied to the treatment’s effectiveness. The federal government could set up an Access to Breakthroughs Fund to loan states the money to pay for highly effective treatments like sofosbuvir. To be eligible, the treatment would need to have the FDA’s “breakthrough” designation. States would gradually repay the loan, perhaps through their Medicaid or corrections budgets. Companies with breakthrough therapies might also have access to capital to support trials, in return for pricing agreements with states.

These are only some of the practical ideas that are feasible. The bottom-line principle is that if we reimburse care on the basis of value — rather than price — and preserve access to that care, everyone wins in the end.

Posted in Health, Health & Welfare, News & Updates

Congress & ObamaCare: What to Expect Next

via Fox News

The resounding rejection of President Obama and his administration’s policies seems like the obvious interpretation of the midterm election. And polling indicates that ObamaCare ranked near the top of the issues serving as the object of that widespread repudiation. Voters ranked health care second only behind the economy as “the one issue most important in deciding their vote”, according to the final pre-election CBS News Poll of October 23-27.

Even the president’s hard core supporters are now strongly opposed to his health reforms. Harvard’s Institute of Politics survey of Americans between ages 18 and 29 just one month before the voting revealed that they disapproved of the Affordable Care Act by 57% to 39%, and similarly disapproved of “the way the president is handling health care” by 59% to 37% who approved. This is the same group who voted for President Obama over Governor Romney in 2012 by 53% to 33%, a group of whom only 22% call themselves Republicans.

Election results notwithstanding, we can surmise that this president will steadfastly block reversal of the major components of the ACA, let alone allow its repeal. But the breadth and magnitude of the Republican victory is likely to sway some Democrats in Congress to support changes in areas of common ground, and force the president to sign or veto passed legislation.

Although less than bold to most observers, we will quickly see two low-hanging fruit proposals to ObamaCare that will likely pass with bipartisan support.

One will eliminate the harsh excise tax on medical devices, the innovative tools that streamline diagnosis, ensure safer treatment and save lives in an era where Americans rely more than ever on specialist care and advanced technology.

Even more immediately, this tax has already pushed companies to expand offshore and with that take up to 45,000 new medical technology jobs outside the country, high paying jobs desired by America’s newly educated, technology-focused young people.

A second proposal will dissolve the IPAB, an unaccountable, government-appointed 15-member Board, which has the unprecedented power to unilaterally reduce payments to doctors that the Secretary of Health and Human Services is required to implement and that will result in de facto rationing, as widely decried by long time Democrats like Howard Dean, former chairman of the Democratic National Committee and former governor of Vermont.

But now is also the time for Congress to directly help individuals, especially middle class and poor Americans who ultimately are the most harmed by ObamaCare, with two fundamental fixes that will improve and maintain choices and health care access for the short and long term.

Let’s start with health insurance exchanges. We know that exchanges can offer access to a wider array of insurance choices at competitive prices and are working well in the private sector. However, the anti-competitive regulations and edicts of ObamaCare exchanges escalate prices, reduce choices for insurance, and eliminate access to many of America’s top doctors and hospitals for all but the rich and connected. Congress should decentralize the federal government’s control over the exchanges by allowing individual states to not only set their own rules, but also go further – encourage states to form multi-state exchanges.

New reforms should also aggressively ease mandates and strip back unwanted special-interest coverage requirements, since current mandates (climbing to 2,271 in the 2012 Council for Affordable Health Insurance report) represent the biggest controllable factor driving up insurance costs.

Congress should also allow everyone, regardless of age, the option of high deductible plans with more liberalized rules on health savings accounts.

ObamaCare has regrettably doubled down on policies requiring bloated coverage with near-zero copayments that subsidize the consumption of ordinary, expected medical services, rather than insure against the risk of financial loss from catastrophic illness. This not only substantially raises prices, but it hides the true cost of care from consumers.

By raising health savings account limits, consumers would also seek value as they would pay directly for most care. Additionally, spending accounts remove some of the small claims burden, now exceeding 31 percent of all US health expenditures and causing each physician to spend an estimated $72,036 of his or her time interacting with insurance plans. Needless to say, those costs are passed on to patients.

The next important step for this Congress is to liberate the poor from Medicaid, a program that has failed to improve health or provide access to care, yet whose expansion is key to ObamaCare.

Reminiscent of the blind belief in the UK’s socialized NHS with its egregious waiting lists and its rationed care despite “universal insurance,” Medicaid has been only a façade for years.

Beneficiaries cannot find doctors and their health outcomes are worse than private insurance and sometimes worse than no insurance at all. More than one-third of primary care doctors and one-fourth of specialists already refused new Medicaid patients five years ago. And from a 2012 survey of 15 large metropolitan areas, more than half of doctors in the most commonly-used fields already refuse Medicaid patients.

Instead of cynically labelling people as “insured” by expanding a failed government program and wasting another $700 billion of taxpayer money, Medicaid beneficiaries should receive money to purchase insurance and fund health savings accounts of their own. Imroving access to medical care as well as the dignity of personal choice of doctor, regardless of income, is the principled approach to American health reform.

Important remedies to the Affordable Care Act are readily available, changes that would represent a significant step forward toward increasing the insured population and improving access to medical care.

When the young voters in the recent Harvard survey were asked “How important is health care in determining which (presidential) candidate you support in November?”, 76% said “important” – virtually tied with the economy as the most important issue, higher than foreign policy, immigration, and race relations. The clock for 2016 is already ticking.

Posted in Health, Health & Welfare, Health Reform, News & Updates

What the 2014 Election Results Really Mean for Health Care

via Brookings

There have already been numerous descriptions for last night’s election results- everything from “worst news ever for democrats” to “greatest opportunity for the GOP to gain control of Washington.” When it comes to health care, there are mainly three important areas to watch that really matter, despite the headlines.

Dismantling the Affordable Care Act
It’s clear that while John Boehner picked up seats in the House, he still struggles with having a true governing majority. However, it is absolutely expected that a call for more bills that repeal the ACA will be a major messaging point. The Senate has a much more difficult time. Mitch McConnell is working with a slim majority and a need to balance expectations, since there are a number of reasons to not repeal the ACA in its entirety. The most important of which is that a number of private sector companies are reaping the rewards of the ACA. For example, Tenet Healthcare just posted record revenues of $4.8 billion, attributed in large part to a reduction in uninsured visits at its hospitals (according to investor calls).

McConnell will also have to be careful about which parts of the law can be repealed (e.g., individual mandate, Medicaid expansion), since they could trigger a Presidential veto. Plus, 2016 brings even more Republican Senate seats under scrutiny. If the Senate can’t make good on promises now, it could come back to haunt them in 2016 when voter turnout will be much higher. Expect bipartisan issues such as the medical device tax and the independent payment advisory board (IPAB) to be more vulnerable, but insurance subsidies, the individual mandate, and Medicaid expansion will be much more difficult to amend.

Also, expect a version of dismantling through increased scrutiny of programs or entities established by the ACA (this is very necessary and I would encourage this need for balanced oversight). These include the Center for Medicare and Medicaid Innovation (CMMI) and the Patient-Centered Outcomes Research Institute (PCORI). Both CMMI and PCORI have been criticized, and the oversight process will allow for opportunities to better understand and improve existing activities.

Medicaid Expansion
The NY Times reported today that the Election will leave policies largely unchanged; for those who follow health care closely, this is partly true. The news that Colorado’s Governor Hickenlooper will remain is an important step in their ambitious plans to change the delivery of the state’s Medicaid services through the federal waiver process (this remains a very poorly understood process, yet possibly the most influential one in Medicaid). Critcal components such as integration of behavioral health services and incorporation of training programs like Project ECHO, would have been on the chopping block had the Governor not remained in office. In addition, Pennsylvania’s election of Democratic Governor Tom Wolf will likely undo some troubling aspects of Republican Governor Corbett’s deal on Medicaid expansion, including premiums for low-income beneficiaries. Finally, the continuing lack of expansion in certain states is actually much more problematic than the nation realizes- heterogeneous coverage might be appropriate for a randomized trial, but tends to not work well for our nation’s health.

Improving Our Health Care System/New Ideas
While it is completely reasonable to obsess about the ACA, a smart GOP majority should concentrate on ways to improve our current system beyond the law. This will be smart for several reasons: 1) it can set up an important platform for 2016 national and local elections that go beyond “repeal Obamacare;” i.e. an election based on ideas and not fear; 2) the ACA certainly did not fix health care and there are many areas that need further work including how to change our payment system. These include fixing graduate medical education, improving the end of life care (as we still are scared to do this), and addressing long-term care needs (since we now realize class isn’t really the route to follow). The Democrats should also think about how to address these issues, as gaining back the majority should remain a priority for 2016.

The potential Presidential nominees will likely weigh in on the above, or I hope they will. As expected, discussions of a Clinton vs Bush scenario emerged last night—any Democratic presidential nominee will want to discuss how they can improve the ACA, and any Republican nominee must be careful about how much they promise on health care. After all, by 2016 the Affordable Care Act will have been much more integrated into the fabric of American culture.

Posted in Health, Health & Welfare, Health Reform, News & Updates

Latinos Lag Under Health Law

via Wall Street Journal

One quarter of Hispanics in the U.S. lack health insurance, the highest rate for any racial or ethnic group, according to census data. Reducing that number will be one of the Obama administration’s biggest challenges when it reopens health-insurance exchanges for a second year on Saturday.

During the first year’s sign-up period, just 2.6 million of an estimated 10.2 million uninsured Hispanics eligible for coverage enrolled in health plans, according to an October report by the Department of Health and Human Services. The Latino uninsured rate among those ages 18 to 64 declined 18%, but that was a smaller percentage decrease than for other groups.

“Providing insurance to 2.6 million is a huge accomplishment,” said Mayra Alvarez, director of the state exchange group at HHS. But “we have more work to do.”

The experience of Brígida Hernández illustrates the obstacles ahead. She completed her application for health insurance under the Affordable Care Act on the final day of enrollment during its first year. But she said she never heard back on what she was told would be a request for additional information, and she let the matter drop. Despite having diabetes and arthritis, she’s not sure she’ll try again.

“The monthly payment was high for me,” said Ms. Hernandez, 50 years old, as she sat in a waiting room recently at the Borinquen Health Care Center, a community clinic here.

Latinos and other Americans who lack insurance typically turn to community health centers that cater to the uninsured and emergency rooms, or they forego treatment altogether. Government funding and hospital charity care programs absorb those costs.

Numerous factors hampered sign-ups. The Spanish version of the federal health-insurance website, CuidadoDeSalud.gov, didn’t launch until December, and various glitches made it difficult to use. A shortage of Spanish-speaking enrollment aides, known as navigators, resulted in hourslong waits.

Uninsured Hispanics, who often knew little about copays, deductibles and provider networks, required more education than many advocates anticipated.

“It takes a heck of a lot longer to go through an application than any of us thought,” said Sinsi Hernández-Cancio, director of health equity at Families USA, an enrollment advocacy group.

Many Latinos legally qualified to secure coverage worried that applying would jeopardize family members who were in the country illegally, despite administration assurances that it wouldn’t. “The hostile atmosphere around immigration and deportations has had a chilling effect on enrollment,” said Daniel Zingale, senior vice president at the California Endowment, which invested in outreach efforts.

“It’s a real concern,” said the HHS’s Ms. Alvarez. “That’s why we are continuing to work to inform the Latino community that they do not need to be fearful to submit this information.”

A Pew Research Center survey in March found that support for the law dropped to 47% among Hispanics, down from 61% six months earlier. And the Obama administration said Monday it had instructed insurers to terminate 112,000 people’s plans because enrollees failed to provide additional documents to prove they were legal U.S. residents.

Enrollment for 2015 presents additional challenges. Enrollment groups will be advising those with existing coverage on how to renew or change plans while simultaneously luring new enrollees. Latinos “will probably need a wider range of assistance,” said Jodi Ray, project director at Florida Covering Kids & Families.

In response to complaints from consumers and advocacy groups, HHS made an array of fixes to CuidadoDeSalud.gov. It enabled the site to better handle hyphenated names and smoothed the identity-verification process, Ms. Alvarez said. It also ensured that half the navigators it is funding this round speak Spanish.

Outreach organizations have tweaked their approach with Hispanics as well. Enroll America, a national coalition of the law’s supporters, is emphasizing large-scale community events that entice families with food, music and free health screenings, said Jose Plaza, national director of Latino engagement. Those proved more effective in the first enrollment period than door-to-door canvassing and lecture-style presentations, he said.

Health insurers are taking a similar tack. “We’ll be doing a lot of face-to-face meetings,” in settings including community centers, markets and churches, said Alec Hoffman, sales manager at Blue Cross and Blue Shield of North Carolina.

In Florida’s Miami-Dade County—where 66% of the population is Hispanic and 33% is uninsured, the highest rate in the state—groups like the Epilepsy Foundation of Florida are training navigators and teaming up with hospitals and Spanish-language outlets to reach Latinos. The Borinquen clinic is hosting its annual health-care festival, which typically draws more than 2,000 people, a week into the new enrollment period.

Among those hoping to gain coverage this time around are Paulo and Ligia Coelho, who visited the clinic recently for a doctor’s appointment. If Mr. Coelho, 64, gets insurance, he said he plans to have a cataract removed from his eye. Mrs. Coelho, 60, is in good health, she said, but “you never know when there could be an emergency.”

Posted in Health, Health & Welfare, News & Updates

Supreme Court to Hear Case on Health-Care Law Subsidies

via The Wall Street Journal

The Supreme Court said it would review a centerpiece of the Affordable Care Act, agreeing to decide whether the Obama administration is improperly providing tax credits to consumers who purchase insurance through federal exchanges serving more than 30 states.

The case granted Friday marks the law’s third trip to the high court and sets the stage for another major health-care ruling next summer.

The appeal threatens a principal aim of President Barack Obama ’s signature law—extending private health insurance to lower-income Americans who don’t receive coverage from their employers or qualify for Medicaid—and could cripple the law if the challengers prevail.

The court’s decision to hear the appeal, coming while the issue is still pending before another federal appeals court, also casts a cloud over the tax subsidies as the second round of open enrollment for insurance through the exchanges is set to begin in mid-November. Nonprofit groups have been pushing the tax credits to get more people to sign up.

Ron Pollack of Families USA, a group that advocates for the Affordable Care Act, said the latest case represented “the most serious existential threat” of the moment to the 2010 law.

Conservative groups contend the health law’s text permits tax credits only for people who buy insurance from state-run exchanges. Eliminating the tax subsidy, which totals billions of dollars, could further sour the public on the health-care overhaul. The law has struggled to gain acceptance amid Republican opposition, technical problems and legal challenges.

In 2012, Chief Justice John Roberts joined four more liberal justices to uphold most of the law, over a sharp dissent by four conservatives.

Earlier this year, Chief Justice Roberts joined other conservatives in a 5-4 ruling that carved out an exception to providing contraceptive coverage for employers who object on religious grounds. Friday’s order suggests the justices are eager to renew their scrutiny of the law.

In July, the Fourth U.S. Circuit Court of Appeals in Richmond, Va., upheld the subsidies for the federally run exchanges on the same day a panel of the U.S. Court of Appeals for the District of Columbia Circuit struck them down. The full D.C. Circuit decided to rehear its decision, setting aside the panel ruling, and scheduled arguments for December. Those could be canceled in light of the Supreme Court’s move.

Arguments at the high court are likely in March, with a decision before July.

“The need for a quick and final resolution of this question is undeniable,” said Sam Kazman, general counsel of the Competitive Enterprise Institute, a conservative advocacy group that is coordinating lawsuits against the tax credits. “This subsidies-for-everyone rule affects nearly every person across the country,” he said.

White House spokesman Josh Earnest said, “These lawsuits won’t stand in the way of the Affordable Care Act. We are confident that the financial help afforded millions of Americans was the intent of the law.”

The health law provides tax credits to lower-income Americans who purchase insurance “through an exchange established by the state.”

At issue is whether those same credits are available to consumers who buy insurance through the federal exchanges, which the law established as a backup if states didn’t set up their own marketplaces. The Internal Revenue Service has issued regulations authorizing the tax credits for both state and federal exchanges.

The administration and several of the law’s authors say it would be senseless to deny tax credits to Americans who have no choice but to use the federal exchanges. The challengers argue the language serves to encourage states to run their own exchanges by providing financial benefits to their residents.

The 2010 health-care overhaul was conceived as a federal-state partnership that, like Medicaid and other programs, would principally be funded through Washington but managed by states. Many Republican-controlled states and some Democratic-led ones were unwilling or unable to fully set up their own exchanges, leaving the federal government to run them.

The decision to hear the case comes eight days before the second round of enrollment begins. The HealthCare.gov website, which will serve as the main platform for people in 37 states to get coverage this year, goes live Nov. 15.

At least a dozen states are fully running their own exchanges. A number of other states are in a gray area because they have turned over at least some responsibilities to the federal government. Officials in some of those states have already indicated they are willing to take further steps to guarantee their residents access to the tax credits if necessary.

The Affordable Care Act requires most Americans to carry health insurance, regardless of their home state. The exchanges were designed to extend coverage to the uninsured—for the most part, individuals who didn’t get health care through their employer, Medicaid or Medicare—by providing a competitive marketplace for policies. Tax credits for lower-income consumers were considered essential in delivering the promise of the law’s name.

Posted in Health & Welfare, Health Reform

IRS Offers First Proposed Regulations on “Play or Pay”

The IRS has released its first set of formal, proposed regulations, and a parallel set of questions and answers, on the health reform law’s “play or pay” mandate on employers. Lockton is preparing two separate Alerts to address the 144 pages of regulations, but here’s a sneak preview:

Some Non-Calendar Year Plans Get a Reprieve

Health reform’s “play or pay” mandate on employers applies January 1, 2014, but after pressure from many employer groups the IRS proposes to permit some employers with non-calendar year plans to delay coverage offers to their full-time employees until the first day of the plan year beginning in 2014. But many large retail, hospitality, staffing and seasonal employers will not be able to take advantage of this special accommodation unless they’re offering employees at least some coverage today. See our impending Alert (Part I) for the details.

Penalty Calculations Apply on an EIN-by-EIN Basis

In determining whether an employer is subject to the play or pay rules in the first instance, all full-time equivalent employees in the controlled group are counted.

But once it’s determined that a controlled group of employers is subject to the play or pay mandate, the mandate’s obligations and penalties would be applied–under the proposed regulations–not on a controlled group basis, but on an employer-by-employer (EIN-by-EIN) basis. This means that if one employer in a controlled group decides not to offer coverage to its full-time employees, only that employer–not every employer in the controlled group–would be penalized.

“All Full-Time Employees” Means 95 Percent…and “Dependents” Do Not Include Spouses

The health reform law requires an employer subject to the play or pay mandate to offer minimum essential coverage to all its full-time employees and dependents, or pay a penalty. The proposed regulations would deem an employer in compliance if it offered coverage to at least 95 percent of its full-time employees, and the employees’ children under age 26. The proposed rules would not require the employer to offer coverage to spouses.

Three Affordability Safe Harbors

When determining whether an offer of coverage to a full-time employee is “affordable” under the health reform law, an employer would be permitted to use one of three “affordability safe harbors,” one based on W-2 pay, one based on the employee’s rate of pay as of the beginning of the plan year, or one based on the federal poverty level.

Updated Rules on Measurement Periods

The guidance makes important changes to the “measurement period” and “stability period” concepts described by the IRS in late August, and summarized by our Alert on September 10, 2012.

Changes include guidance relating to breaks in employment, crediting hours for gaps in service by employees of school districts and other educational institutions, shrinking the measurement period to ignore gaps in coverage due to some unpaid leaves, special rules and restrictions on staffing companies, adjusting measurement periods to embrace payroll periods that extend outside a measurement period’s boundaries, and much more.

Cafeteria Plan “Change in Status” Rules

The guidance permits certain employees to change their cafeteria plan elections to take advantage of certain entitlements under the health reform law in 2014.

Effective Date and Reliance

Generally, the proposed regulations–when finalized–will apply for 2014 except where they deal with matters already addressed in earlier guidance (such as the IRS’s important Notice in late August, addressing how to determine “full-time employees” for 2014). However, employers may rely on the proposed regulations before they are finalized, if they find it helpful to do so. Generally, earlier guidance continues to apply for 2014.

via Lockton

Posted in Executive Benefits, Health & Welfare