Health Care: Long-Term Uncertainty of PPACA Grows, With Supreme Court Challenges at the Forefront

September 01, 2011

Deficit reduction talks, funding shortfalls, the upcoming 2012 elections, and the numerous pending legal challenges are among the chief factors serving to fuel employer uncertainty about the future of PPACA and its various provisions, as HR Policy this week urged the Supreme Court to resolve the legal challenge as early as possible.  Meanwhile, as the layers of the health care reform law are peeled away and problems and concerns emerge, more are beginning to question whether the law will even work as intended.  Even supporters of PPACA have shifted strategies from calling it a success that will lower costs and reduce the deficit to acknowledging that the law will need to be improved, which makes Round Two of health care reform a near certainty.  Meanwhile, PPACA implementation efforts plod along slowly as the Administration continues to issue regulations, which employers must comply with as they await court decisions and future legislative action in the health care arena. 

HR Policy Urges High Court to Rule on PPACA  For employers seeking resolution regarding the legality of PPACA, the disagreement between the Sixth and Eleventh Circuit Courts over the constitutionality of PPACA’s individual mandate significantly raises the likelihood that the U.S. Supreme Court will consider the issue this coming year, with a decision before July 2012.  To further that end, HR Policy filed this week an amicus brief with the Supreme Court urging it to hear the case as soon as possible so that employers can operate in an environment of greater legal certainty.  We pointed out that “the uncertainty surrounding PPACA makes health care strategy, design, and implementation exponentially more challenging.”  While the Association did not express a view on the constitutionality of PPACA, it argued that “prompt resolution of the Act’s constitutionality, one way or another, will provide greater certainty and predictability in the health care reform process, which is needed for employers to move forward.”  The Court could agree to hear the case as early as October.  However, in the unlikely event that the Court pushes the case off until the next term, a final decision would not be rendered until June 2013 — within six months of the time the state exchanges are to be up and running and the bulk of PPACA’s mandates are set to take effect.   There is an even chance that the Court’s conservative majority of five finds that the individual mandate is unconstitutional, thereby severely undermining PPACA’s financing scheme prompting Congress to reopen the health care reform debate.

Lack of Funding and Piecemeal Legislation Threaten to Undermine PPACA  While a wholesale repeal of PPACA in this Congress is virtually out of the question, pieces of the Act are being attacked by legislators from both parties, with implementation of deficit reduction measures looming as a serious threat as well.  Some initial positive changes, which included the repeal of the Act’s 1099 tax reporting requirements and the elimination of the so-called “free choice vouchers,” have emboldened lawmakers to go further.  Additional repeal efforts with bipartisan support include measures repealing the prohibition against employees using tax-advantaged medical savings accounts to purchase over-the-counter medications and repealing the Independent Payment Advisory Board (IPAB), which was established by PPACA to rein in Medicare spending.  Moreover, House Republicans are set to attempt to undo the Administration’s unpopular regulation on “grandfathered health plans” sometime in November or early December.  Meanwhile, deficit reduction talks will assuredly put pressure on funding for key PPACA provisions including the expansion of Medicaid eligibility and the CLASS Act.  It would be surprising indeed if the law, its various provisions and its funding remain untouched throughout the deficit reduction talks.  There is also growing skepticism, particularly among some state governors, that there will be sufficient funding to fully implement state exchanges, which are the backbone of the health care reform law.       

Regulatory Implementation Slow and Bumpy, But Shift in Policy Indicates Administration Trying to Work With Employers   The Departments of HHS, Labor and Treasury have issued or soon plan to issue several proposed regulations providing helpful guidance and clarifications that would appear to benefit employers on key issues such as rules for determining employer-sponsored plan “affordability” and “minimum value” requirements.  These clarifications and proposals, addressing issues raised by HR Policy Association and other industry groups, will include several important items:

  • The calculation of whether an employer-sponsored plan is unaffordable (i.e., employees’ premium contribution exceeds 9.5 percent of employees’ household income) will be limited to the cost of self-only coverage and not the cost of family coverage.

  • A safe harbor will be provided permitting employers to measure whether the employee premium is less than 9.5 percent of the employee’s current “own wages” instead of “household income” as required  by the Act.

  • Future HHS regulations setting forth the appropriate measure of a plan’s “minimum value” will clarify that employer plans are not required to provide each of the essential health benefits or each of the 10 categories of benefits described in PPACA.

  • Agencies will attempt to coordinate and streamline the massive information swap among employers, employees, exchanges, and various agencies of the federal government by considering the use of a central federal database for the information, a move which would promote nationwide uniformity for multistate employers.

Treasury also plans to issue a proposed regulation defining “full-time employee” in a manner that provides greater flexibility in designing and maintaining health coverage for employers with large numbers of variable hour employees.  However, not all of the proposals coming from the agencies are employer friendly.  For example, they are seeking comment on a burdensome proposal requiring all employers to provide a four page Summary of Benefit and Coverage form to each plan participant for each plan after March 23, 2012, regardless of the fact that the content may substantially overlap with other documentation already required by ERISA.  This will undoubtedly result in confusion or misunderstandings for employees and dependents.  In another troubling development, the Administration has apparently decided not to proceed with regulations implementing federal back-up exchanges if a state refuses to set up a health care exchange, which makes it virtually impossible for employers to meet the March 2013 deadline for informing employees about their health care options as between the relevant exchange or through the employer’s plan.  Moreover, HHS recently amended their interim final rules on adding to the preventative services, which employer plans must provide and additional mandates will increase employer costs.  This fall, the Association will be filing comments on the various proposals that the agencies have released.