As 2010 is coming to a close and the first wave of effective dates for employer sponsored health plans are coming due, healthcare reform is beginning to feel like a reality. Is there any chance left that it might actually “go away” …like, not really happen?
Probably not. Though Republicans are planning a symbolic vote to repeal the measure when they take control of the House of Representatives, the Republican’s only real hope of unwinding health care reform lies with the courts. The House repeal measure is all but certain to fail in the Senate, and even if it passed, the President would veto it.
Even Representative Boehner, the new Republican Speaker of the House, when asserting that the Patient Protection and Affordable Care Act of 2010 will be repealed, claimed that it must be replaced with common-sense reforms.
Health care reform, in some form, is here to stay. But before 2014, when the most significant pieces of the legislation that impact employers are effective, there may be some significant changes to the law.
In 2011, here is what employers should watch for:
1) Legal challenges in the courts.
On Monday December 13, 2010, a federal judge in Virginia ruled that the individual mandate, which generally requires that effective January 1, 2014, all citizens have health insurance or pay a penalty tax, is unconstitutional. This opinion contradicted two earlier federal court opinions, both of which wrote forcefully that the legislation was within the authority granted to Congress under the Constitution.
There are numerous challenges by individuals, organizations, and 21 state governments of the Patient Protection and Affordable Care Act of 2010 (“ACA”), being waged against the federal government in courts all around the country on the grounds that the law is unconstitutional and an overreach of Congressional authority. There have been approximately two dozen distinct legal challenges to ACA since its enactment in March.
What is now clear, after Monday’s ruling, is that the challenges from dozens of states to the law’s constitutionality can no longer be dismissed as frivolous, as they were earlier this year by some scholars and Democratic partisans.
Although in November, 2010, the Supreme Court declined its first request to hear a challenge to health care reform, there are decisions pending in federal courts all over the land – and it is likely the Supreme Court will ultimately have to settle the question on the constitutionality of the new law. (Baldwin v. Sebelius, 2010 WL 361728 (U.S. 2010))
2) Regulatory Changes /Delayed Effective Dates–
Significant changes in the way the law impacts employers are likely to take shape through regulations and delayed effective dates. Republicans have vowed that once they take over the House of Representatives in January, they will chip away at ACA through financial cuts.
There are hearings held almost every day on Capitol Hill relating to one or another aspect of health care reform. Considering that ACA regulates individuals, insurers and employer-sponsored health plans, it is little surprise that as the practical impact of the new law sets in, and industry groups are speaking out on the economic impact of the law, the Obama administration and Congress is back-stepping and reassessing the impact of the legislation on certain industries.
Employers for whom a large portion of their labor force is comprised of part-time or seasonal employees are particularly hopeful that the new law’s requirement that employers “Play or Pay,” will be revised. The “Play or Pay” rules require that employers either adopt a group health plan or pay a tax into the state health plan, which is calculated based on the number of their employees.
While some form of the “Play or Pay” model is likely to remain intact, the way the implementing regulations are written could significantly change the way the law impacts employers. Employers should be looking for guidance on how to 1) count hours of service for salaried employees, 2) how to treat seasonal employees who work more than 30 hours a week and are hired at multiple intervals in a year, 3) get relief regarding how a health plan is determined to be “affordable” for their lowest paid employees so that the employer is not taxed if their lowest paid employees opt to use the state exchange policy instead of their employer –sponsored coverage, and 4) how to deal with the new nondiscrimination testing requirements for insured plans.
3) Delayed Implementation Dates
On September 30, 2010, the Obama Administration announced that it would grant the HHS Secretary Kathleen Sebelius the power to provide a waiver to numerous mini-med insurance plans for complying with the “medical-loss ratio” mandate, which is generally effective in 2011. The medical-loss ratio mandate requires that insurers spend at least 80-85% of premium revenue on medical care. Mini-med policies, sometimes referred to as limited benefit policies, can be purchased for low monthly premiums – and they offer low annual benefit caps. These policies, which are often offered by large restaurant chains and retailers to their employees, were granted a one-year waiver by Secretary Sebelius. Employers who benefitted directly from this waiver include McDonalds, Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples Inc. and Blockbuster Inc.
This waiver helped to bring mini-med policies under congressional scrutiny, however, because they do not provide the minimum benefits contemplated by health care reform. Hearings are underway on Capitol Hill this month in which the Secretary’s waiver is being debated as inappropriate and on whether these plans offer satisfactory coverage to the more than 1.4 million people who are covered by them. White House officials have defended the waiver on the basis that enforcing the medical-loss ratio may have led to an outright loss of coverage for thousands of Americans—an outcome that is antithetical to the thrust of health care reform. Opponents of the waiver, however, contend that for many employees, no employer-provided coverage would be better than coverage under one of these plans because the benefits offered under mini-med plans are not sufficiently protective.
We should anticipate changes to requirements on insurers offering mini-meds. Additional regulation of the mini-med market, which serves so many large restaurant chains, could set the pace for how benefits are provided for employees throughout the restaurant industry.
Health care reform is here to stay—but it is a long and uncertain road between now, the very inception of implementation, and the end, when the legislation becomes fully effective. Between now and then the law is likely to be re-made and re-visited—and the subject of much vigorous debate.