Supreme Court debates future of Affordable Care Act
Originally posted on March 5, 2015 by Ariane de Vogue on www.wqad.com.
WASHINGTON (CNN) — The future of health care in America is on the table — and in serious jeopardy — Wednesday morning in the Supreme Court.
After more than an hour of arguments, the Supreme Court seemed divided in a case concerning what Congress meant in one very specific four-word clause of the Affordable Care Act with respect to who is eligible for subsidies provided by the federal government to help people buy health insurance.
If the Court ultimately rules against the Obama administration, more than 5 million individuals will no longer be eligible for the subsidies, shaking up the insurance market and potentially dealing the law a fatal blow. A decision likely will not be announced by the Supreme Court until May or June.
All eyes were on Chief Justice John Roberts — who surprised many in 2012 when he voted to uphold the law — he said next to nothing, in a clear strategy not to tip his hand either way.
“Roberts, who’s usually a very active participant in oral arguments, said almost nothing for an hour and a half,” said CNN’s Supreme Court analyst Jeffrey Toobin, who attended the arguments. “(Roberts) was so much a focus of attention because of his vote in the first Obamacare case in 2012 that he somehow didn’t want to give people a preview of how he was thinking in this case. … He said barely a word.”
The liberal justices came out of the gate with tough questions for Michael Carvin, the lawyer challenging the Obama administration’s interpretation of the law, which is that in states that choose not to set up their own insurance exchanges, the federal government can step in, run the exchanges and distribute subsidies.
Carvin argued it was clear from the text of the law that Congress authorized subsidies for middle and low income individuals living only in exchanges “established by the states.” Just 16 states have established their own exchanges, but millions of Americans living in the 34 states are receiving subsidies through federally facilitated exchanges.
But Justice Elena Kagan, suggested the law should be interpreted in its “whole context” and not in the one snippet of the law that is the focus of the challengers.
“We look at the whole text. We don’t look at four words,” she said. Kagan also referred to the legal challenges to the law as the “never-ending saga.”
Justice Sonia Sotomayor was concerned that in the states where the individuals may not be able to receive subsidies, “We’re going to have the death spiral that this system was created to avoid.”
And Sotomayor wondered why the four words that so bother the challengers did not appear more prominently in the law. She said it was like hiding “a huge thing in a mousetrap.”
“Do you really believe that states fully understood?” she asked, Carvin, that those with federally run exchanges “were not going to get subsidies?”
Justice Ruth Bader Ginsburg suggested the four words at issue were buried and “not in the body of the legislation where you would expect to find” them.
Justice Anthony Kennedy asked questions that could be interpreted for both sides, but he was clearly concerned with the federalism aspects of the case.
“Let me say that from the standpoint of the dynamics of Federalism,” he said to Carvin. “It does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or we’ll send your insurance market into a death spiral.”
He grilled Carvin on the “serious” consequences for those states that had set up federally-facilitated exchanges.
“It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there’s a serious constitutional problem if we adopt your argument,” Kennedy said.
The IRS — which is charged with implementing the law — interprets the subsidies as being available for all eligible individuals in the health exchanges nationwide, in both exchanges set up by the states and the federal government. In Court , Solicitor General Donald B. Verrilli, Jr. defended that position. He ridiculed the challengers argument saying it “revokes the promise of affordable care for millions of Americans — that cannot be the statute that Congress intended.”
But he was immediately challenged by Justice Antonin Scalia.
“It may not mean the statute they intended, the question is whether it’s the statute they wrote,” he said.
Although as usual, Justice Clarence Thomas said nothing, Justice Samuel Alito was also critical of Verrilli’s argument. He said if it were true that some of the states were caught off guard that the subsidies were only available to those in state run exchanges, why didn’t more of them sign amicus briefs. And he refuted the notion that the sky might fall if the challengers were to prevail by saying the Court could stay any decision until the end of the tax season.
On that point Scalia suggested Congress could act.
“You really think Congress is just going to sit there while all of these disastrous consequences ensue?” he asked.
Verrilli paused and to laughter said, “Well, this Congress? ”
Kennedy did ask Verrilli a question that could go to the heart of the case wondering if it was reasonable that the IRS would have been charged with interpreting a part of the law concerning “billions of dollars” in subsidies.
Only Ginsburg brought up the issue of standing — whether those bringing the lawsuit have the legal right to be in Court which suggested that the Court will almost certainly reach the mandates of the case.
President Barack Obama has expressed confidence in the legal underpinning of the law in recent days.
“There is, in our view, not a plausible legal basis for striking it down,” he told Reuters this week.
Wednesday’s hearing marks the third time that parts of the health care law have been challenged at the Supreme Court.
In this case — King v. Burwell — the challengers say that Congress always meant to limit the subsidies to encourage states to set up their own exchanges. But when only 16 states acted, they argue the IRS tried to move in and interpret the law differently.
Republican critics of the law, such as Texas Sen. Ted Cruz, filed briefs warning that the executive was encroaching on Congress’ “law-making function” and that the IRS interpretation “opens the door to hundreds of billions of dollars of additional government spending.”
In a recent Washington Post op-ed, Orrin Hatch, R-Utah, and two other Republicans in Congress said that if the Court rules in their favor, “Republicans have a plan to protect Americans harmed by the administration’s actions.”
Hatch said Republicans would work with the states and give them the “freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices.”
In Court, Verrilli stressed that four words — “established by the state” — found in one section of the law were a term of art meant to include both state run and federally facilitated exchanges.
He argued the justices need only read the entire statute to understand Congress meant to issue subsidies to all eligible individuals enrolled in all of the exchanges.
Democratic congressmen involved in the crafting of the legislation filed briefs on behalf of the government arguing that Congress’ intent was to provide insurance to as many people as possible and that the challengers’ position is not consistent with the text and history of the statute.
Last week, Health and Human Services Secretary Sylvia Mathews Burwell warned that if the government loses it has prepared no back up plan to “undo the massive damage.”
New HHS Regulations “Clarify” that Health Plans Covering Families Must Have “Embedded” Individual Cost-Sharing Limits
Originally posted by Stacy Barrow and Damian A. Myers on March 18, 2015 on www.erisapracticecenter.com.
On February 27, 2015, the Department of Health and Human Services (HHS) released its final HHS Notice of Benefit and Payment Parameters for 2016. The lengthy regulation covers a wide range of topics affecting group health plans, including minimum value, determination of the transitional reinsurance fee, and qualified health plan rates and other market reforms applicable to the group and individual insurance markets.
Within the portion of the regulation’s Preamble explaining insurance issuer standards under the Affordable Care Act (“ACA”), HHS formally adopted a “clarification” to the application of annual cost sharing limitations. By way of background, the ACA requires that all non-grandfathered group health plans adopt an annual cost sharing limit for covered, in-network essential health benefits for self-only coverage ($6,600 in 2015 and $6,850 in 2016) and other than self-only coverage ($13,200 in 2015 and $13,700 in 2016). Until HHS’s clarification, many group health plan administrators applied a single limitation depending on whether the employee enrolled in self-only or other than self-only coverage (e.g., “family” coverage). That is, if an employee enrolled in family coverage, the higher limit applied to the family as a whole, regardless of the amount applied to any single covered individual.
HHS, however, now requires group health plans to embed an individual cost sharing limit within the family limit. For example, suppose an employee and his or her spouse enroll in family coverage with an annual cost sharing limit of $13,000, and during the 2016 plan year, $10,000 of cost sharing payments are attributable to the spouse and $3,000 of cost sharing payments are attributable to the employee. Prior to the HHS’s clarification, the full $13,000 would be payable by the covered individuals because the $13,000 plan limit had not been reached on an aggregate basis. However, with the new embedded self-only limitation, the cost sharing payments attributable to the spouse must be capped at the self-only limit of $6,850, with the remaining $3,150 being covered 100% by the group health plan. The employee would still be subject to cost sharing, however, until the $13,000 plan limit is reached.
The HHS clarification is not effective until plan years beginning on or after January 1, 2016. It is important to note that, at the moment, it is unclear whether the HHS clarification is intended to apply to self-insured plans. The 2016 Benefit and Payment Parameters are rules related to the group and individual insured market, including the Marketplace, and the Preamble section under which the clarification is found is titled “Health Insurance Issuer Standards under the Affordable Care Act, Including Standards Related to Exchanges.” Additionally, all previous cost sharing guidance applicable to self-insured plans have been issued jointly by the HHS, Department of Treasury and Department of Labor. As of the date of this blog entry, the Departments of Treasury and Labor have not issued a similar clarification. Nevertheless, although the HHS clarification is potentially unenforceable with respect to self-insured plans, employers and plans sponsors with self-insured plans should be prepared to adopt an embedded cost sharing limit should the other two agencies follow suit.
IRS Clarifies Prior Guidance on Premium Reimbursement Arrangements; Provides Limited Relief
Originally posted February 24, 2015 by Daimon Myers, Proskauer - ERISA Practice Center on www.jdsupra.com.
Continuing its focus on so-called “premium reimbursement” or “employer payment plans”, the Internal Revenue Service (IRS) released IRS Notice 2015-17 on February 18, 2015. In this Notice, which was previewed and approved by both the Department of Labor (DOL) and Department of Health and Human Services (collectively with the IRS, the “Agencies”) clarifies the Agencies’ perspective on the limits of certain employer payment plans and offers some limited relief for small employers.
Prior guidance, released as DOL FAQs Part XXII and described in our November 7, 2014 Practice Center Blog entry, established that premium reimbursement arrangements are group health plans subject to the Affordable Care Act’s (ACA’s) market reforms. Because these premium reimbursement arrangements are unlikely to satisfy the market reform requirements, particularly with respect to preventive services and annual dollar limits, employers using these arrangements would be required to self-report their use and then be subject to ACA penalties, including an excise tax of $100 per employee per day.
Since DOL FAQs Part XXII was released, the Agencies’ stance has been the subject of frequent commentary and requests for clarification. With Notice 2015-17, it appears that the Agencies have elected to expand on the prior guidance on a piecemeal basis, with IRS Notice 2015-17 being the first in what may be a series of guidance. The following are the key aspects of Notice 2015-17:
- Wage Increases In Lieu of Health Coverage. The IRS confirmed the widely-held understanding that providing increased wages in lieu of employer-sponsored health benefits does not create a group health plan subject to market reforms, provided that receipt of the additional wages is not conditioned on the purchase of health coverage. Quelling concerns that any communication regarding individual insurance options could create a group health plan, the IRS stated that merely providing employees with information regarding the health exchange marketplaces and availability of premium credits is not an endorsement of a particular insurance policy. Although this practice may be attractive for a small employer, an employer with more than 50 full-time employees (i.e., an “applicable large employer” or “ALE”) should be mindful of the ACA’s employer shared responsibility requirements if it adopts this approach. ALEs are required to offer group health coverage meeting certain requirements to at least 95% (70% in 2015) of its full-time employees or potentially pay penalties under the ACA. Increasing wages in lieu of benefits will not shield ALEs from those penalties.
- Treatment of Employer Payment Plans as Taxable Compensation. Some employers and commentators have tried to argue that “after-tax” premium reimbursement arrangements should not be treated as group health plans. In Notice 2015-17, the IRS confirmed its disagreement. In the Notice, the IRS acknowledges that its long-standing guidance excluded from an employee’s gross income premium payment reimbursements for non-employer provided medical coverage, regardless of whether an employer treated the premium reimbursements as taxable wage payments. However, in Notice 2015-17, the IRS provides a reminder that the ACA, in the Agencies’ view, has significantly changed the law, including, among other things, by implementing substantial market reforms that were not in place when prior guidance had been released. The result: the Agencies have reiterated and clarified their view that premium reimbursement arrangements tied directly to the purchase of individual insurance policies are employer group health plans that are subject to, and fail to meet, the ACA’s market reforms (such as the preventive services and annual limits requirements). This is the case whether or not the reimbursements or payments are treated by an employer as pre-tax or after-tax to employees. (This is in contrast to simply providing employees with additional taxable compensation not tied to the purchase of insurance coverage, as described above.)
- Integration of Medicare and TRICARE Premium Reimbursement Arrangements. On the other hand, although the Notice confirms that arrangements that reimburse employees for Medicare or TRICARE premiums may be group health plans subject to market place reforms, the Agencies also provide for a bit of a safe harbor relief from that result. As long as those employees enrolled in Medicare Part B or Part D or TRICARE coverage are offered coverage that is minimum value and not solely excepted benefits, they can also be offered a premium reimbursement arrangement to assist them with the payment of the Medicare or TRICARE premiums. (The IRS appropriately cautions employers to consider restrictions on financial incentives for employees to obtain Medicare or TRICARE coverage.)
- Transition Relief for Small Employers and S Corporations. Although many comments on the prior guidance concerning employer payment plans requested an exclusion for small employers (those with fewer than 50 full-time equivalent employees), the IRS refused to provide blanket relief. The IRS notes that the SHOP Marketplace should address the small employers’ concerns. However, because the SHOP Marketplace has not been fully implemented, no excise tax will be incurred by a small employer offering an employer payment plan for 2014 or for the first half of 2015 (i.e., until June 30, 2015). (This relief does not cover stand-alone health reimbursement arrangements or other arrangements to reimburse employees for expenses other than insurance premiums.) This is welcome relief to small employers who adopted these arrangements notwithstanding the Agencies’ prior guidance that they violated certain ACA marketplace provisions.
- In addition to granting temporary relief to small employers, the IRS also provided relief through 2015 for S corporations with premium reimbursement arrangements benefiting 2% shareholders. In general, reimbursements paid to 2% shareholders must be included in income, but the underlying premiums are deductible by the 2% shareholder. The IRS indicated that additional guidance for S corporations is likely forthcoming.
The circumstances under which premium reimbursement arrangements are permitted appears to be rapidly dwindling, and the IRS indicated that more guidance will be released in the near future. Employers offering these arrangements should consult with qualified counsel to ensure continuing compliance with applicable laws.
Supreme Court Hears Oral Argument in ACA Subsidies Challenge
Originally posted By:
Yesterday morning, the U.S. Supreme Court heard oral arguments in King v. Burwell, the second challenge to the Affordable Care Act (ACA) to reach the Court. This challenge targets the availability of subsidies on the Exchanges that were established by the Department of Health and Human Services (HHS) for the 34 states with HHS-established Exchanges.
The challengers contend that the tax code restricts subsidies to individuals who enroll in coverage through a state run Exchange when it provides that the amount of the subsidy is based on premiums on an Exchange “established by the State.” 26 U.S.C. § 36B(b)(2)(A). The Administration, however, defends an Internal Revenue Service (IRS) rule that makes subsidies available on state-run and HHS-established Exchanges alike, contending that section 1321 of the ACA makes HHS-established Exchanges equivalent to state-run Exchanges.
It is notoriously difficult to ascertain the likely outcome of a case based on oral arguments. Rather, oral arguments merely suggest at the leanings of particular Justices as they prepare to discuss the case and to assign drafting of the opinion(s) in private conference. Nonetheless, oral arguments provide the only public hints of the Justices’ views before the Court issues its decision this summer.
The Likely Swing Votes. As many expected, the tenor of oral arguments suggested that Chief Justice Roberts and Justice Kennedy are the likely swing votes in this case. It appeared that the so-called liberal block of the Court—Justices Ginsburg, Breyer, Kagan, and Sotomayor—are critical of the challengers’ interpretation of the statute. Rather, they seem inclined to conclude that the IRS rule is a permissible interpretation of the statute or that the rule reflects the only viable interpretation of the statute. On the other hand, Justices Scalia and Alito appeared to be highly critical of the Administration’s position. As is his typical practice, Justice Thomas did not ask any questions during oral argument, but most Court watchers expect that his views likely align with those of Justice Scalia and Alito. Some Court watchers had suggested that Justice Scalia might look to context to conclude that the subsidy provision is ambiguous, but his questions appeared to reflect a view that Congress enacted a statute that clearly restricts the availability of subsidies, despite the potential practical consequences of such an enactment.
Federalism and Constitutional Avoidance. One surprise yesterday was Justice Kennedy’s expression of constitutional concerns and potential inclination to avoid a constitutional problem by considering the Administration’s interpretation of the statute. In short, his questions echoed federalism concerns raised in an amicus brief drafted by a number of states. While Justice Kennedy aligned with the conservative block of the Court in NFIB v. Sebelius, he may be amenable to upholding the IRS rule here to the extent that the Administration’s interpretation is viable.
Justice Kennedy’s concerns regarding federalism do not flow from the impact that an adverse decision against the government will have on the newly insured public in states without state operated Exchanges. Rather, his concerns stem from his deeply held belief that the Court owes the utmost respect under the structure of the Constitution to the semi-sovereign states. In his view, Congress is not allowed to coerce states into doing something it wants. Those federalism concerns came to the fore when Justice Kennedy asked challenger’s counsel: “If your argument is accepted, the states were told to establish exchanges in order to receive money [for their citizens] or send the insurance market into a death spiral; isn’t that coercion? Under your argument, there would be a serious constitutional problem.” While the government had not raised the federalism argument, it had been raised by state amici. Citing South Dakota v. Dole, he noted that Congress is required to advise states about the conditions attached to the acceptance of federal grants. Here, clearly, Kennedy views the loss of subsidies for a state’s residents as such an unknown condition. The thinking seems to be that when interpreting a statute, given the warning by the Court about such coercion, Congress could not have intended such result. He hinted as much when later he suggested to government’s counsel that he should argue for the government’s view of the statute to avoid the constitutional concern. If Justice Kennedy is the swing-vote here, it is because he does not believe that Congress intended a reading of the statute that creates an unconstitutional coercion, similar to the Court’s reasoning in striking down the Medicaid provision in NFIB v. Sebelius.
Chevron Deference. Although the decisions of the lower courts in this and similar challenges have focused onChevron v. National Resources Defense Council, the Supreme Court spent little time discussing the potential application of Chevron deference in this case. Instead, it appeared that some members of the Court were more inclined to conclude that there is only one permissible interpretation of the statute—whether that interpretation is the one advanced by the challengers or the Administration.
A brief exchange between Solicitor General Verilli, Justice Kennedy, and Chief Justice Roberts, however, suggests that some members of the Court may be skeptical of the applicability of Chevron deference to tax credits. During this exchange, Justice Kennedy expressed skepticism that a question of this economic magnitude could be left to the Internal Revenue Service. He said, “It seems to me a drastic step for us to say that the [Internal Revenue Service] can make this call one way or the other when there are . . . billions of dollars of subsidies involved . . . . It seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.” Solicitor General Verrilli responded citing to the Court’s 2011 decision in Mayo Foundation for Medical Education & Research v. United States for the notion that “Chevron [deference] applies to the tax code like anything else.” Chief Justice Roberts, however, appeared concerned that, under this approach “a subsequent administration could change” course and adopt a contrary interpretation concerning the availability of tax credits. The Chief Justice asked very few questions during oral argument, but this exchange suggests he may be inclined to interpret the statute as unambiguous and not implicating Chevron deference, whether in favor of the Administration or the challengers.
Standing. The U.S. Constitution establishes that federal court jurisdiction extends only to cases involving an actual injury, economic or otherwise. While media coverage in recent weeks has focused on the standing of the four individual plaintiffs challenging the individual mandate, it does not appear that the Court will avoid reaching the merits of the case based on standing concerns. No fact-finding has taken place in this case because the appeal stems from a motion to dismiss filed by the Government. Therefore, Solicitor General Verrilli indicated that he believes it’s appropriate to take the plaintiffs’ attorney’s word that one or more of the plaintiffs has standing and that the dispute is not moot. While Justice Ginsburg asked early questions indicating a concern with standing, it did not appear that other members of the Court were inclined to take up the issue.
Practical Consequences. Over 85 percent of individuals who enroll in coverage on an Exchange receive subsidies to help pay for the cost of premiums and/or to reduce cost-sharing on the Exchange plan. Most of these individuals reside in the 34 states that have HHS-established Exchanges. Absent these subsidies, some individuals would be unable to afford coverage and would therefore be exempt from the individual mandate. Others may have affordable coverage options but may decline to purchase coverage given the cost. The resulting reduced enrollment would both increase the number of uninsured in states without state-run Exchanges and constrict the risk pool on those Exchanges. As the risk pool trends toward a smaller group of less healthy individuals, premiums would increase, which some believe would threaten a death spiral on the individual market.
In addition, the employer mandate’s operation depends on whether employees can purchase subsidized Exchange coverage absent affordable and sufficient employer coverage. Without subsidies, employers in states with HHS-established Exchanges would not be subject to the employer mandate unless 30 or more of its employees actually reside in a neighboring state with a state-run Exchange. While many observers believe that large employers would continue to offer coverage without the employer mandate, there is some concern that such employer-sponsored coverage might not be affordable among lower income workers, resulting in greater numbers of uninsured individuals.
During oral argument, the challenger’s counsel, Mr. Carvin, contended that there was no evidence that limitations on the subsidies would produce such disastrous consequences. But, it appeared that most of the Justices were concerned about the market consequences if subsidies were eliminated in some markets. Justice Alito, acknowledging these concerns, suggested that the Court might stay the mandate to provide states with an opportunity to establish state-run Exchanges before subsidies on HHS-established Exchanges are eliminated. On the other hand, Justice Scalia expressed confidence that Congress would act to address and mitigate destabilization of the individual market. Thus, at this stage, it is unclear how a reversal of the IRS rule might be implemented and what, if anything, the Court might do to mitigate the impact of the judgment. But certainly the potential market consequences of the elimination of subsidies on HHS-established Exchanges would be significant for plans, providers, and patients alike. Last Tuesday, HHS Secretary Burwell stated in aletter to Congress that the Administration “know[s] of no administrative actions that could . . . undo the massive damage to our health care system that would be caused by an adverse decision.”
Furthermore, if the Court concludes that the challengers’ interpretation is the only viable interpretation of the statute, the decision may prompt further litigation concerning the constitutionality of linking the availability of subsidies to a state’s establishment of a state-run Exchange. Justice Kennedy’s comments and questions during oral argument focused largely on the 10th Amendment and the concern that restricting subsidies to state-run Exchanges may constitute impermissible coercion of the states by the federal government. Judicial resolution of these issues may require a new case challenging to the statute’s constitutionality and addressing the severability of the various subsidy and market reform provisions of the ACA.
But, if the Court upholds the IRS rule and concludes that the Administration’s interpretation is the only viable interpretation of the statute—whether based on the plain text and context of the provision or because of the doctrine of constitutional avoidance—the implementation of the ACA will continue without significant change and stakeholders would have the security of knowing that a future administration would be unable to reverse the IRS rule and restrict subsidies to state-run Exchanges. On the other hand, if the Court upholds the IRS rule based on Chevron deference, a future administration could reverse course and eliminate subsidies on HHS-established Exchanges.
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IRS Begins Preparing Cadillac Tax Regulations; Public Input Requested
Originally posted February 24, 2015 on www.ifebp.org.
In Notice 2015-16, the Internal Revenue Service (IRS) outlines potential approaches for future proposed regulations regarding the excise tax on high cost employer-sponsored health coverage under section 4980I, also known as the Cadillac tax.
The notice is intended to initiate and inform the process of developing regulatory guidance regarding the excise tax on high cost employer-sponsored health coverage under section 4980I of the Internal Revenue Code. Section 4980I, which was added by the Affordable Care Act, applies to taxable years beginning after December 31, 2017.
Under this provision, if the aggregate cost of “applicable employer-sponsored coverage” provided to an employee exceeds a statutory dollar limit, which is revised annually, the excess is subject to a 40% excise tax.
The issues addressed in this notice primarily relate to:
- the definition of applicable coverage,
- the determination of the cost of applicable coverage, and
- the application of the annual statutory dollar limit to the cost of applicable coverage. The Department of the Treasury (Treasury) and IRS invite comments on the issues addressed in this notice and on any other issues under section 4980I.
This notice describes potential approaches on a number of issues which could be incorporated in future proposed regulations, and invites comments on these potential approaches.
Treasury and IRS intend to issue another notice before the publication of proposed regulations under section 4980I, describing and inviting comments on potential approaches to a number of issues not addressed in this notice, including procedural issues relating to the calculation and assessment of the excise tax.
After considering the comments on both notices, Treasury and IRS anticipate publishing proposed regulations under section 4980I. The proposed regulations will provide further opportunity for comment, including an opportunity to comment on the issues addressed in the preceding notices.
IRS Offers Relief for Small Employer Premium Reimbursement Arrangements
Originally posted February 25, 2015 by Laura Kerekes on ThinkHR.com.
On February 18, 2015, the IRS announced transition relief for certain small employers that subsidize the cost of individual health insurance policies for employees. Notice 2015-17 provides short-term relief from the $100 per employee per day excise tax that otherwise would apply to the employer.
Starting in 2014, employers of all sizes have been prohibited from making or offering any form of payment to employees for individual health insurance premiums, whether through reimbursement to employees or direct payments to insurance carriers. Employers also are prohibited from providing cash or compensation to employees if the money is conditioned on the purchase of individual health coverage. Employers that violate the prohibitions against these so-called “employer payment plans” are subject to an excise tax of $100 per day per affected employee. Exceptions are allowed for limited-scope dental or vision policies, supplemental plans, or retiree-only plans.
Small businesses in particular have been affected by the prohibition since many of them had subsidized individual policies for workers instead of offering a group health plan. Notice 2015-17 now offers short-term relief from tax penalties to give small employers additional time to comply with the prohibition. This relief applies only to small employers. Employers who are defined under the Affordable Care Act as applicable large employers (ALEs) — generally those with 50 or more full-time and full-time-equivalent employees — are not eligible for relief.
Specifically, the IRS will not impose excise taxes on employers that provide pretax reimbursement or payment of individual health insurance premiums as follows:
- For 2014, employers that are not ALEs (based on employer size in 2013).
- For January 1 through June 30, 2015, employers that are not ALEs (based on employer size in 2014).
Starting July 1, 2015, excise taxes may apply regardless of the employer’s size.
Note: This transition relief applies only to pretax reimbursement or payment of insurance premiums. It does not apply to after-tax reimbursements. It also does not apply to stand-alone health reimbursement arrangements (HRAs) or other arrangements to reimburse employees for expenses other than insurance premiums.
Additional Relief Provisions
Notice 2015-17 also provides relief for certain arrangements that reimburse premiums for 2-percent-or-more shareholders in Subchapter S corporations, and for certain employers that reimburse Medicare premiums or TRICARE expenses. These provisions are complex and affected employers should refer to their legal and tax advisors for guidance.
How Obamacare’s Progress Makes Expanding Coverage Harder
Originally posted July 21, 2014 by Drew Altman on https://blogs.wsj.com.
The Affordable Care Act’s success meeting its initial enrollment goals and the repair of HealthCare.gov seem to have calmed the political waters for Obamacare. But the job of enrolling the uninsured gets harder, not easier, because the remaining uninsured will generally be tougher to reach.
Recent surveys show, roughly in line with expectations, that 8 million to 9.5 million fewer adults are uninsured compared with last year before the Affordable Care Act went into effect. Specific data are not yet available for uninsured children who probably got covered as well, and an earlier provision of the health-care law that allowed people to stay on their parents’ insurance up to age 26 is thought to have lowered the number of uninsured young adults by as many as 3 million.
But tens of millions of Americans are not yet covered.
Those who enrolled last year during the first open-enrollment season were more likely to want coverage and were best able to navigate the process to get it. After open enrollment this fall and the one after that, the uninsured will gradually become a smaller and different group. Increasingly, they will be people who have been without insurance for a long time or who have never had it; people who are even less familiar with insurance choices and components such as premiums and deductibles, as well as unfamiliar with the tax credits offered under the ACA. These people are more likely to be men, and minorities, and have limited education or language barriers. Increasingly they will fall into harder-to-reach high-risk groups, such as the homeless, who require very targeted outreach, and Hispanics who fear that seeking coverage could endanger undocumented relatives despite assurances from government that it will not.
On the plus side for the next open-enrollment season, many of the remaining uninsured waited out the first year but want insurance; a group of unknown size has been waiting to enroll this fall. Also, the penalties for not having insurance rise from the greater of $95 per adult or 1% of income this year to $325 or 2% of income next year. That is likely to motivate more of the remaining uninsured to enroll. Early studies show that the uninsured who have attained coverage are happy with what they got, and news will spread through family, friends and word of mouth to people who are uninsured, motivating some of them to seek coverage too.
As the job of reaching the uninsured gets tougher, the need will grow for targeted community-based outreach and enrollment services and, most of all, a realization that the remaining uninsured are a somewhat different group presenting new challenges.
Conflicting Views Of Supreme Court’s Contraception Decision Cloud Other Cases
Originally posted July 8, 2014 by Julie Rovner on https://www.kaiserhealthnews.org.
The Supreme Court’s decision last week that some for-profit corporations don’t have to comply with the contraceptive coverage mandate under the Affordable Care Act may have raised more questions than it answered. Expect confusion – and arguments – as lower court judges and the Supreme Court itself apply the decision to other cases.
This became apparent soon after the Hobby Lobby ruling when the court granted a temporary injunction to Wheaton College, a Christian school in Illinois. The college argued in a lawsuit that the special provisions provided by the Obama administration allowing it to escape the mandate are still insufficient.
But the order for the college, citing the Hobby Lobby ruling earlier in the week, created some confusion over whether Wheaton employees would still get access to contraceptives under the law. And the order provoked a blistering dissent from Justice Sonia Sotomayor, joined by the court’s two other female members, Justices Ruth Bader Ginsburg and Elena Kagan. They argued that the majority was already breaking with the precedent it established only days earlier.
Here are some of the questions raised by the Hobby Lobby case and the remaining cases also challenging the contraceptive coverage mandate.
What is the contraceptive mandate?
As part of the Affordable Care Act, most health insurance plans are required to cover, with no cost-sharing beyond premiums, a wide array of preventive health benefits. For women, that includes all contraceptives approved by the Food and Drug Administration, as well as sterilization procedures and patient education and counseling.
The mandate does not include coverage of RU-486 (mifepristone), the drug used for medical abortions after a pregnancy has been established. But it does require coverage of emergency contraceptives and intrauterine devices, which some believe can prevent the implantation of a fertilized egg. (Newer research suggests that is probably not the case, by the way.)
Who has sued to try to block the mandate?
There have been two separate sets of court cases challenging the contraceptive coverage requirements.
The first set comes from for-profit corporations that, under the law and accompanying federal regulations, are required to provide the benefits as part of their insurance plans. According to the National Women’s Law Center, there have been 50 cases filed by for-profit firms, while the Becket Fund for Religious Justice, which is representing many of those suing, counts 49. Most of those companies charged that the requirement to provide some or all of the contraceptives in question violated their rights under a 1993 federal law, the Religious Freedom Restoration Act (RFRA.)
The cases filed by Hobby Lobby, a nationwide arts-and-crafts chain, and Conestoga Wood Specialties, a Pennsylvania cabinet-making firm, were the first of those to reach the Supreme Court for a full hearing.
Religious nonprofit entities, mostly religious colleges and universities and health facilities, filed the second set of cases. The NWLC counts 59 nonprofit cases; the Becket fund, 51.
The Obama administration, under regulations issued by the Department of Health and Human Services in 2013, is not requiring those organizations to directly “contract, arrange, pay for, or refer” employees to contraceptive coverage. But the organizations say the process by which they can opt out of providing the coverage, which involves filling out a form and sending it to their insurance company or third-party administrator, still violates their religious beliefs by making them “complicit” in providing something they consider sinful.
What did the Supreme Court rule in the Hobby Lobby case?
The majority opinion written by Justice Samuel Alito said that “closely held corporations,” including those like Hobby Lobby and Conestoga Wood Specialties, can exercise religious rights under RFRA. Further, because the Obama administration was requiring those firms to directly provide the coverage, rather than offer them the same accommodation it was offering religious nonprofit groups, the requirement was not “the least restrictive means” of ensuring that women can get contraception and thus a violation of the law.
In making the case for Hobby Lobby and Conestoga Wood, Justice Alito went out of his way to praise the accommodation for religious nonprofits, saying it “does not impinge on the plaintiffs’ religious beliefs that providing insurance coverage for the contraceptives at issue here violates their religion and it still serves HHS’ stated interests.”
What impact has the Hobby Lobby decision had on pending nonprofit cases?
A fairly substantial one. Later that same day the Hobby Lobby decision was handed down, a federal appeals court in Atlanta cited it in issuing an injunction against enforcing the mandate against the Eternal Word Television Network.
But the real fireworks erupted on July 3, when the Supreme Court granted its own injunction in the case filed by Wheaton College.
The unsigned order required the college to write to the Secretary of Health and Human Services, stating “that it is a nonprofit organization that holds itself out as religious and has religious objections to providing coverage for contraceptive services.” The order specifically said the college “need not use the form prescribed by the government, EBSA Form 700, and need not send copies to health insurance issuers or third party administrators.”
Justices Sotomayor, Ginsburg, and Kagan were furious.
“Those who are bound by our decisions usually believe they can take us at our word. Not so today,” Sotomayor wrote. “After expressly relying on the availability of the religious nonprofit accommodation to hold that that the contraceptive coverage requirement violates RFRA as applies to closely-held for-profit corporations, the court now, as the dissent in Hobby Lobby feared it might…retreats from that position.”
What happens now?
The court made clear that in granting Wheaton College its injunction (as it did earlier this year in a case filed by the Denver-based Little Sisters of the Poor), it was not prejudging the case. “This order should not be viewed as an expression of the Court’s views on the merits,” it said.
But what is less clear is whether people covered by the health plans of those nonprofit organizations that are still in litigation will have access to no-copay contraceptive coverage.
The Supreme Court majority appears to think they can be covered. “Nothing in this interim order affects the ability of the applicant’s employees and students to obtain, without cost, the full range of FDA approved contraceptives,” the order said. “The government contends the applicant’s health issuer and third-party administrator are required by federal law to provide full contraceptive coverage regardless whether the applicant completes EBSA Form 700.”
The Obama administration, however, seems not so sure that will happen. “An injunction pending appeal would deprive hundreds of employees and students and their dependents of coverage for these important services,” the Justice Department wrote in its memorandum to the court.
One thing that is clear: Many more of these cases are yet to be decided by many more courts.
Hobby Lobby ruling spilling over to corporate world
Originally posted July 10, 2014 by Alan Goforth on https://www.benefitspro.com.
Both proponents and opponents of the recent ruling by the U.S. Supreme Court in the Hobby Lobby contraception case agree on at least one thing: The case may be settled, but how it will play out in the workplace is far from certain.
The court ruled that the 1993 Religious Freedom Restoration Act prevents certain employers from being forced to pay for contraceptives they oppose for religious reasons. However, the definition of which types of corporations are excluded remains murky.
"Nobody really knows where it is going to go," said Richard Primus, professor of constitutional law at the University of Michigan. "I assume that many more businesses will seek exemptions, not just from the [Patient Protection and] Affordable Care Act, but from all sorts of things they want to be exempt from, and it will put courts in a difficult position of having to decide what is a compelling government interest."
About 50 lawsuits filed by corporations nationwide, which were put on hold during the Hobby Lobby appeal, must now be resolved or re-evaluated. "We don't know ... how the courts will apply that standard," Primus said.
The decision also has ramifications beyond the courtroom. Even closely held companies with sincere religious beliefs must carefully consider the potential marketplace ramifications of crafting health-care coverage according to religious beliefs.
"Many owners of companies don't want to distinguish the difference between what's good for them personally and what's good for their business," said John Stanton, professor of food marketing at Saint Joseph University in Philadelphia. "I believe that if a business owner believes something is the right thing to do — more power to them. That's his business. However, he's got to be ready for the negative repercussions."
Eden Foods of Clinton, Mich., a natural-foods manufacturer, has filed a lawsuit and is balancing religious beliefs and business concerns. Since Eden initially filed its lawsuit last year over mandates to cover birth control in PPACA, some customers have taken to social media to express disapproval and outrage, even threatening a social boycott. However, the corporation also has gained new customers who support its stance.
"It's very conceivable they could lose business," said Michael Layne, president of Marx Lane, a public relations firm in Farmington Hills, Mich. "And they could lose employees, too."
Experts agree that the myriad issues raised by the Hobby Lobby decision could take a while to play out. "I think there will be a rush of litigation in the next year or two," Primus said. "I think that the exemptions are likely to get broader before they are limited."
One-Third of Workers Say ACA Will Delay Their Retirement
Originally posted May 27, 2014 on https://annuitynews.com. 
Although the Congressional Budget Office projects a smaller U.S. workforce in coming years as a result of the Affordable Care Act (ACA), the majority of American workers don't believe that the ACA will allow them to retire any sooner, according to a new survey from https://MoneyRates.com. On the contrary, the Op4G-conducted survey indicates that one-third of workers expect that the ACA – also known as Obamacare – will raise their health care costs and thereby force them to retire later than they previously anticipated.
One-quarter of respondents felt that Obamacare would have no impact on their retirement date, and another one-quarter weren't sure how it would impact their retirement. Those who felt Obamacare would allow them to retire earlier were the smallest segment of respondents at 17 percent.
Many of the workers who indicated that Obamacare would delay their retirement said that the delay would be lengthy. Seventy percent of those respondents said they expected the delay to be at least three years, including the 39 percent who said it would be at least five years. The respondents who said they expected an earlier retirement were more moderate in their projections, with 71 percent indicating it would hasten their retirement by three years or less.
Richard Barrington, CFA, senior financial analyst for https://MoneyRates.com and author of the study, says that the purpose of the survey wasn't to determine whether Obamacare would truly delay or hasten anyone's retirement, but rather to gauge the fear and uncertainty that surround the program today.
"It's too early to tell whether Obamacare will actually delay people's retirements," says Barrington. "But what's clear at this point is that the program has created a lot of concern about health care costs as a burden on workers and retirees."
Barrington adds that whether or not these concerns are warranted, there are steps workers can take to better manage their health care costs in retirement, including budgeting for health insurance within their retirement plans, shopping regularly for better deals on insurance and using a health savings account as a way of handling out-of-pocket medical expenses.
"The poll reflects a high degree of uncertainty over the impact of Obamacare on retirement," says Barrington. "One way to reduce the uncertainty is to take active steps to manage how health care will affect your retirement."