Filed Under:Health Insurance, Individual Health

Industry Lawyers Give Their Own Verdict on PPACA

From the Washington Bureau

This artist rendering shows opening arguments before the Supreme Court over PPACA. (AP Photo/Dana Verkouteren)
This artist rendering shows opening arguments before the Supreme Court over PPACA. (AP Photo/Dana Verkouteren)

 

The Supreme Court decision upholding the Patient Protection and Affordable Care Act means that the 2010 legislation intended to reshape an industry that constitutes one-sixth of the nation’s annual economy will continue apace.

In a majority opinion written by Chief Justice John Roberts, the Court held that the individual mandate imposes a “tax” on individuals who fail to purchase health insurance coverage, and that the broad taxing powers in the Constitution give Congress authority to impose this tax, according to a legal bulletin by the Washington office of Covington & Burling.

Covington & Burling lawyers also cautioned that, “Many observers believe that the Supreme Court’s decision is just the first act in a drama that will play out in the November elections and beyond, as the law’s opponents seek to repeal the PPACA and it supporters rally to its defense.”

But James Napoli, head of the Health Care Reform Task Force at Proskauer and a senior counsel there, said that regardless of the headwinds or tailwinds, the law is currently the law.

“With this ruling, everything is back to business as usual, and everyone can continue implementing the PPACA's various reforms and coverage mandates,” Napoli said.

“Whether the ruling is good or bad from a constitutional prospective is for the academics to debate,” Napoli said, “from a practical point of view, the ruling adds a certain measure of stability with respect to the rules that govern employer-sponsored health care benefits.”

He added that this measure of stability will be somewhat short-lived as Congress continues to modify PPACA’s rules as they are implemented. This will undoubtedly give rise to additional litigation challenging the implementation and administration of the PPACA's various coverage mandates.

“That said, such litigation would have resulted—in one form or another—regardless of the Court's ruling,” Napoli concluded.

Lawyers at Covington & Burling said in a bulletin to clients that “Employers have very little time remaining in which to comply with significant new health plan requirements that become effective this year or next. The PPACA requirements that take effect in 2012 and 2013 present significant challenges for employers.

Scott Sinder, a partner at Steptoe & Johnson in Washington and counsel to the Council of Insurance Agents and Brokers, added that, “As a practical matter, this means the law survives intact, but the Medicaid ruling creates a hole in the universal coverage promise that undergirded the legislation.”

In a bulletin to CIAB members, he said Steptoe thinks this means that, right after this fall’s elections, Congress will be forced to re-evaluate the PPACA’s individual mandate, the subsidies provided under the law, and the Medicaid financing scheme.

“Although the Supreme Court decision “settles the constitutional questions surrounding the ACA, it does not answer all outstanding issues surrounding the law’s implementation,” Sinder said.

“There remain many questions that must be resolved through rulemakings at the federal level and through state legislative and regulatory action,” he told the brokers. “These issues could provide opportunities for some significant re-thinking of the law in a number of areas, including issues affecting brokers and employers.

He also raised the specter that because states are lagging, for both operational and political reasons, in establishing healthcare exchanges, the centerpiece of the law, the Obama administration could decide to push back the rollout from January 2014 to January 2015.

“A minority of states have taken action to create exchanges; the remainder are not in a position to get their exchanges up and running on schedule,” Sinder said in a note to clients.

In addition, the Department of Health and Human Services has issued guidance regarding federally facilitated exchanges and discussing federal-state “partnerships,” in an effort to get lagging states on board.

“It is unclear what impact today’s ruling will have on the states’ decisions to move forward on exchanges, but it could very well put pressure on the Administration to delay implementation deadlines,” Sinder said, referring to a possible delay in implementing exchanges until 2015.

He made the point that using the subsidies and the potential huge budget savings for each year the implementation of the 2014 package of reforms (exchanges/subsidies/etc) is delayed would provide a pay-for that could form the basis for compromise in Congress in the fall, after the election. One example would be Republican de facto acquiescence to PPACA in return for Democratic acceptance for extension of the Bush tax cuts for an additional period of time.

“I think that one upshot of the Supreme Court’s opinion on Medicaid—with the prospect that some states may opt to not expand their Medicaid programs—is that it could create further pressure to rethink/delay,” Sinder said. “But, this is really just political conjecture; it is not driven by the text of the law in any way,” he cautioned.

Concerns over potential delays in implementing the centerpiece of PPACA are more practical than political, however.

Daniel J. Schuyler is former director of technology for the Utah Health Insurance Exchange. He is now a director at Leavitt Partners in Salt Lake City, and was hired to help guide the firm’s health insurance exchange practice.

The National Association of Insurance Commission is working on SERFF IT enhancements aimed at helping states implement exchanges; the project is currently on time and appears “to be on target for operational readiness.”

Schuyler said that the Department of Health and Human Services’ CCIIO has indicated it will take a hands-off approach with states that opt to use the SERFF system in their blueprint for plan management.

At the same time, he said that while CCIIO has indicated they will be ready to build and run a Federally Facilitated Exchange (FFE) for use by states, “there are some issues that indicate they may not be completely ready by Oct. 2013.”

October 2013 is the date when open enrollment is expected to begin for exchanges to be up and running by January 2014. To date, only half the states at most will be ready—even if they try, according to NAIC officials, while the others face a federal exchange or a partnership.

But HHS said the day after the ruling that federal exchanges, which it hoped to not have to run, could morph into state exchanges at later dates. HHS effectively turned the Exchange implementation into an evolution.

Will anybody be ready is an ongoing question. One the big IT pieces is the Federal Data Services HUB.

The HUB will be an integral piece for a State Based Exchange (SBE) a State / Federal Partnership Exchange and even for an FFE.  “CCIIO recently indicated they still do not have the necessary service level agreements (SLAs) in place with the federal agencies (IRS, Treasury, etc) necessary to complete the development of the HUB,” Schuyler said.

Additionally there was a six-month delay getting the contract signed with the IT vendor who is building the HUB, Schuyler said. “These issues indicate to me that the HUB will not be ready in time for states to do enough testing and verification and could ultimately delay the development of any exchange model,” Schuyler said.

As for insurance agents, the industry noted that the ruling is having a severe impact on the income of some agents, but vowed to soldier on.

Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, said that the “The PPACA’s Medical Loss Ratio  provisions threaten the livelihoods of health agents and brokers and establish perverse incentives that make it challenging for smaller insurers to enter the marketplace.”

He said the MLR requirements have produced cuts in agent compensation of up to 50 percent in some areas of the country and made it a challenge for many agents to maintain the level of customer service and quality of advocacy traditionally provided at a time when such assistance is needed more than ever.”

Janet Trautwein, CEO of the National Association of Health Underwriters, said the Supreme Court decision “offers some clarity on the future of the health insurance industry and allows American individuals, families and businesses to adjust to the law.”

She said that, “While we still have concerns that PPACA does not address the true drivers of health insurance costs in this country, and the law is having a huge and costly compliance burden on American employers, it is our responsibility as industry leaders to move forward within the constraints of the law to help Americans access high-quality, affordable healthcare.”

Trautwein noted that “There are still legislative actions that can be taken to fix parts of the law, and though we support many of these efforts, our focus is to help our customers transition to the regulations, policies and procedures the law outlines.”

Trautwein acknowledged that, “As insurance professionals, our job is to assure full-scale implementation of PPACA will continue and to help our individual and employer clients with the transition and compliance requirements the law entails.

“Our efforts to enroll individuals in high-risk pools, Medicare, Medicaid and CHIP programs will continue as we work to lower the number of uninsured Americans,” Trautwein said.

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