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.”
Obamacare Challengers Eye Supreme Court Date
Source: https://insurancenewsnet.com - Originally posted by Kimberly Atkins of the Boston Herald.
Aug. 03--The legal battle over Obamacare federal subsidies could land before the nation's top court as soon as next year after challengers asked the U.S. Supreme Court to take up the case.
If the high court grants the request and ultimately rules that the Obama administration lacked authority under the law to authorize subsidies for individuals who purchase health care through the federal exchange rather than state-created exchanges, it would gut a crucial source of funding for the law and severely threaten its viability.
The Supreme Court petition, filed late Thursday, comes just more than a week after federal appellate courts in Virginia and Washington, D.C., issued conflicting opinions as to whether the text of the law, which allows individuals to qualify for subsidies if they purchase insurance on exchanges "established by the state," applies to those in the 36 states that either refused to set up an exchange or for some other reason require residents to go to the federal exchange to enroll.
The Virginia plaintiffs, who claim that they would have qualified for the unaffordability exemption from the law requiring them to purchase health care but for the existence of the federal exchange subsidy, went directly to the Supreme Court instead of asking a full panel of the Virginia federal appellate court to rehear that case "because it's important to get a resolution as soon as possible," said Sam Kazman, general counsel at the Washington-based Competitive Enterprise Institute, which coordinated and funded the challenges to the federal subsidy.
Kazman said the case, one of several legal challenges to various provisions of the law that was largely upheld by the U.S. Supreme Court in 2012, was legal and not political.
"Once you get agencies going beyond the implementation of the law to actually rewriting it, one, it spells trouble and two, it's unconstitutional," Kazman said.
The Justice Department declined Friday to seek immediate Supreme Court review of the D.C. federal court that struck down the administration's interpretation of the law the same day the Virginia court upheld it. Instead, it asked a full panel of the D.C. Circuit to review the three-judge ruling.
Does the employer mandate matter?
Originally posted June 27, 2014 by Kathryn Mayer on www.benefitspro.com.
Over the past few years, the Patient Protection and Affordable Care Act has had no shortage of scrutiny.
But the employer mandate, perhaps more than any provision, has become a lightning rod for criticism of the law. The provision — once thought of as a key, if not essential, part of PPACA — since its inception has been vehemently attacked by employer groups and business owners. Originally scheduled to go into effect in 2014, the mandate has twice been delayed by the administration, which says it needs more time to implement the provision.
Under the latest delay, announced in February of this year, employers with between 50 and 99 employees have until January 2016 to offer health insurance or pay a fine, and employers with more than 100 employees must offer insurance or pay a fine of $2,000 per worker by January 2015. Companies with fewer than 50 employees are exempt.
Attention to the mandate hit a new high at the Benefits Selling Expo back in April, when Robert Gibbs predicted during a keynote address that the mandate would never be put into effect.
“I don’t think the employer mandate will go into effect. It’s a small part of the law. I think it will be one of the first things to go,” he said to a notably surprised audience.
Gibbs, a former longtime advisor to President Barack Obama, noted there aren’t many employers who fall into the mandate window. He said the delays point to the fact that the mandate “will never happen.”
Media outlets quickly ran with the news, prompting the White House to respond.
House Minority Leader Nancy Pelosi, D-Calif., maintained that PPACA’s employer mandate will — and must — remain part of the law.
Appearing on CNN’s “State of the Union,” Pelosi said that the “employer mandate, the individual mandate, are an integral part” of PPACA, “This is an initiative that has strong pillars in it that relate to each other.”
Even if it’s nothing more than political fodder over the often controversial law, the latest debate raises the question: Will PPACA’s employer mandate really go into effect? And perhaps more importantly, does it matter?
Mandate doesn’t matter
Experts at the Urban Institute researched this very idea. Their overall consensus? Eliminating the mandate “certainly wouldn’t spell disaster.”
Overall, the Washington, D.C., based think tank said, eliminating the mandate would have little effect on employer-sponsored coverage, would “remove labor market distortions” in the law, and might even squash some of the political opposition.
First of all, it would “scarcely affect the total number of Americans who have coverage.” Even without the mandate, 250.9 million people will have coverage, compared to 251.1 million — only 200,000 more — if the mandate remains intact, researchers said.
“So many people have coverage through their employer now, and no one is requiring them to do,” says Linda Blumberg, a health economist and senior fellow at The Urban Institute. “But there are still incentives for [employers] to do it. It’s a way for them to retain and attract the kinds of workers they want. What we did [in our report] was analyze the tradeoff — firm by firm, worker by worker — and look at how employers make these decisions. And for most of them, they will continue to do this to keep employees happy.”
Frankly, Blumberg says, the employer mandate isn’t central to PPACA’s overarching goals.
“The employer mandate isn’t what’s driving the increase of health insurancecoverage; the individual mandate is,” she says. “And also the subsidies. You don’t want to think about the employer and the individual mandate in the same breath. They are very different. One is really essential to it achieving its goal, and one really isn’t.”
Another advantage of eliminating the employer mandate is simply to please employers. Groups such as the U.S. Chamber of Commerce and the National Retail Federation have been asking for the mandate to be repealed all along. They’ve argued over detrimental effects: that numerous companies would downsize or cut hours for their employees to dodge the rule. So not only will killing the mandate subdue those concerns, but, Blumberg says, it could get employers to focus on more important issues — and potentially get them on board with supporting the controversial law.
By taking away those requirements for employers, Blumberg says, “you lessen, significantly, the political resistance to the law from employers.”
“If we could get employers more involved with making sure that the workers have coverage, instead of them worrying about how to avoid [the mandate] or being angry about a requirement that might not even affect them, this could be more successful,” she says. “You take away that friction that the employer community has felt, and I think that’s an advantage for broad-based implementation of the law.”
The mandate matters
Still, there are reasons to be cautious about repealing the mandate. One significant one is funding.
By eliminating the employer penalties and the expenses for employee subsidies, the repeal would open a giant hole in PPACA’s financing. The Congressional Budget Office has estimated that gap at $140 billion through 2023, while the Urban Institute places it lower, at about $46 billion.
“What we found was smaller than what the CBO estimated, but still, penalties make the revenue,” Blumberg says. “That helps support the cost of the program. I would expect it would have to be replaced by another revenue source.”
Of course, there is the issue of what’s best for employees and employers. Without the requirement of offering employees coverage, will employers simply dump their employees into the exchanges? That’s the fear — one that’s been supported by various studies and reports.
The CBO has predicted that as many as 1 million more people may be uninsured in the absence of the employer mandate, though others argue the number will be much smaller. And those dropped from employer-sponsored coverage would likely face paying more for coverage on the exchanges, some argue.
Tim Jost, a professor at Washington and Lee Law School who supports the law, outlined some issues in a post in Health Affairs.
“The end of the employer mandate, and the reporting requirements that accompany it, would also make the exchanges’ job of determining eligibility for premium tax credits and for exemptions from the individual mandate more difficult,” Jost said. “Eligibility for tax credits and for the individual mandate exemption turns on employee coverage offers and enrollment. If employer reporting were eliminated together with the mandate, precise verification of whether an employee is eligible for coverage and the extent and cost of that coverage might not be possible.”
Killing the mandate, too, many industry insiders say, wouldn’t quash political wrangling. Killing it may bring up legal questions—the government could face lawsuits over not implementing the law, for example--and it might also be an admission from the administration that Obamacare is failing. Democrats may suffer in the next election cycle. PPACA opponents may call for more repeals in the law. Arguments are endless.
Other alternatives
Of course, because of the revenue hole, there needs to be an alternative if the employer mandate is repealed.
Jost suggested one way: to not just repeal the mandate, but replace it—by requiring employers to spend a certain percentage of their payroll on health benefits. He noted that the House passed a similar version of the employer mandate in 2009.
“The House bill required all employers to spend at least 8 percent of payroll on health benefits,” Jost wrote for Health Affairs. “Small employers were required to pay a smaller percentage of payroll, which rose as total payroll increased. Employers who spent less than the minimum paid the difference between what they actually spent and 8 percent of payroll to the federal treasury as a tax.”
The new version of the mandate, Jost said, would “dramatically” reduce the complexity of the current approach.
“Employers would only need to know two numbers: the amount of their payroll and the amount they spent on health benefits,” Jost said.
Of course, it’s not easy to simply repeal and replace.
Still, even without the employer mandate, industry insiders note, employers would need help from brokers on other areas of PPACA compliance, including market reforms and notice requirements.
And, of course, the political environment might not allow for any changes.
“There are certainly a lot of revenue sources, like a payroll tax assessment,” Blumberg says. “There are lots of options for revenue; the problem is you’re going to have political agreement to do that. But that puts us back in the place of, can we get folks to reach across the aisle and say, ‘this isn’t an essential component of this law; it’s a revenue-raising tool causing enough grief and concern among employers that we’d like to find a different revenue source.’ I think the chances are low because of the political reactions these days.”
Looking forward
Whatever the decision, industry folks want to know it — and soon.
Delaying the mandate — though praised by some — has caused more anxiety in the community, because no one knows when, or if, the requirement will really go into effect. And the mandate, whether in place or not, can have an effect on future premiums under the law.
“There’s a real fear, there’s a lack of understanding and there’s confusion — it’s a complicated law,” Blumberg says. “You take a complicated law and you layer on top of it delays and implementing pieces of it — it creates more confusion and angst.”
Glenn Dunehew, director of health and benefits at the Barrow Group in Atlanta, agrees.
“We need to know, now, that the law is either going to be implemented or postponed,” he says. “The longer that the administration waits on starting it, the more money it costs companies and brokers.”
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."
How US health care reform will affect employee benefits
Shubham Singhal, Jeris Stueland, and Drew Ungerman
Source: Healthcare Systems and Services Practice
US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.
Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response. See more information about the survey methodology.
- Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.
- Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.
- At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
- Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.
In this new world, employers must quickly examine the implications of health care reform on their benefit and workforce strategies, as well as the opportunities and risks that reform generates. Of course, the type and extent of the changes employers make will vary by industry, collective-bargaining agreements, and other constraints. Most employers, however, will find value-creating options between the extremes of completely dropping employee health coverage and making no changes to the current offering. Even employers that intend to provide benefits similar to those they currently offer can take no-regrets moves, like tailoring plans to maximize what their employees will value most about ESI after 2014. Employers pursuing more radical changes will have to rethink benefit packages for higher-income employees.
And all employers must continue to keep in mind their employees’ health and wellness needs, even as insurance coverage levels evolve. To serve employers, insurers must retool their business models to provide more consultative support during the transition and develop innovative approaches to support employers’ new benefit strategies (see sidebar “Implications for health insurers”). For employers and insurers, success after 2014 will require a better understanding of employee and employer segments, and the development of the right capabilities and partnerships to manage the transition.
A transformed employer market
Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market. Reform preserves the corporate tax advantages associated with offering health benefits—except for high-premium “Cadillac” insurance plans.
Starting in 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies. The highest subsidies will be offered to the lowest-income workers. That reduces the social-equity advantage of employer-sponsored insurance, by enabling these workers to obtain coverage they could not afford on today’s individual market. It also significantly increases the availability of substitutes for employer coverage. As a result, whether to offer ESI after 2014 becomes mostly a business decision. Employers will have to balance the need to remain attractive to talented workers with the net economics of providing benefits—taking into consideration all the penalties and tax advantages of offering or not offering any given level of coverage.
What the law says
Health care reform imposes several new requirements on employer health benefits. Some changes will be incremental; for example, annual and lifetime limits on care must be eliminated, and coverage must be offered to dependents through age 26. Plans with premiums above certain levels will be subject to a so-called Cadillac tax.1
Other requirements are game changing and could prompt employers to completely reconsider what benefits they offer to employees. Reform requires all employers with more than 50 employees to offer health benefits to every full-timer or to pay a penalty of $2,000 per worker (less the first 30). The benefits must provide a reasonable level of health coverage, and (except for grandfathered plans) employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. These requirements will increase medical costs for many companies. It’s important to note that the penalty for not offering coverage is set significantly below these costs.
Reform also offers options for workers to obtain affordable insurance outside the workplace. Individuals who are unemployed or whose employers do not offer affordable health coverage, and whose household incomes are less than 400 percent of the federal poverty level,2 are eligible for subsidies toward policies they will be able to purchase on newly created state insurance exchanges. These will offer individual and family policies of set benefit levels (bronze, silver, gold, and platinum) from a variety of payers.
The subsidies will cap the amount lower- and middle-income individuals and families will have to spend on health coverage, to 9.5 percent of household income for those at 400 percent of the federal poverty level and less for those at lower income levels. The subsidies will keep the cost of insurance coverage from the exchanges below what many employees now pay toward employer-sponsored coverage, especially for those whose earnings are less than 200 percent of the federal poverty level.
A bigger effect than expected
As we have seen, a Congressional Budget Office report estimated that only 9 million to 10 million people, or about 7 percent of employees, currently covered by ESI would have to switch to subsidized exchange policies in 2014. Most surveys of employers likewise show relatively low interest in shifting employees from traditional ESI.
Our survey found, however, that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014. Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees. More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop coverage after 2014.
Our survey shows significantly more interest in alternatives to ESI than other sources do, for several reasons. Interest in these alternatives rises with increasing awareness of reform, and our survey educated respondents about its implications for their companies and employees before they were asked about post-2014 strategies. The propensity of employers to make big changes to ESI increases with awareness largely because shifting away will be economically rational not only for many of them but also for their lower-income employees, given the law’s incentives.
We also asked respondents questions about their philosophy and decision-making process for benefits: the current rationale for providing them, which employee group is considered most when decisions are made about them, their importance in the respondent’s industry, and geography. These questions prompted the respondents to consider all the factors that will influence their post-2014 decisions. Finally, we tested options beyond dropping coverage outright. These alternatives will probably be the most effective ones for delivering a reasonable return on a company’s investment in benefit programs after 2014. We would therefore expect to see a level of interest higher than that generated by surveys asking only about plans to keep or drop ESI.
Estimating the employer impact
As employers consider their post-2014 options, they should take a dynamic view by considering how competitors for talent—other employers—and their own employees will react. Many employers will be shifting from ESI; it is unlikely that only one company in an industry or geography will move away from it.
ESI might also be less valuable than most employers assume. Among employers not likely to drop ESI, three of the top five reasons given (and two of the top three) were concerns about talent attraction, employee satisfaction, and productivity. Among employees, however, McKinsey consumer research found that more than 85 percent—and almost 90 percent of higher-income ones—say they would remain with an employer that dropped ESI. Overall, employees value cash compensation several times more than health coverage. Further, many younger employees also value career-development opportunities and work–life balance more than health benefits.
Making employees whole
To make up for lost medical insurance, most employers that drop ESI will increase employee compensation in other ways, such as salary and other benefits like vacation time, retirement, or health-management programs. Employees think this will happen: 60 percent say they would expect employers to increase compensation if health benefits were dropped, our consumer research shows. Employers will do so to remain competitive for talent. In addition, ensuring some level of employee health, through higher investment in wellness programs or another mechanism, helps to maintain the productivity of workers.
Our research found that even with conservatively low assumptions about eligibility for employee subsidies, at least 30 percent of employers would benefit economically by dropping health coverage even if they make employees 100 percent whole. Employers could do so by paying sufficient additional compensation to help employees purchase coverage with no other out-of-pocket expense (less subsidies for employees with household incomes below 400 percent of the federal poverty level), the additional individual income and payroll taxes levied on the increased compensation, and the $2,000 government penalty.
But we believe that employers will not have to provide 100 percent of the value of the lost insurance. If so, even more employers will benefit economically. In the course of our research, we interviewed executives at Liazon, a defined-contribution-benefit company. They have found that when employees are shifted from coverage selected by their employer to a defined-contribution plan (under which the employer provides a fixed dollar amount and the employee can choose how to allocate it among a variety of benefit options), about 70 percent of employees choose a less expensive health plan.
Higher-income employees, who won’t receive subsidies and would have to pay the entire cost of individual coverage out of pocket, will have a greater need to be made whole. These higher-income employees, however, are also more likely to be satisfied with partial compensation or with tax-advantaged forms of compensation, such as retirement benefits.
The need to make employees whole will decrease over time. Subsidies will be awarded to keep premiums below a fixed percentage of an individual’s household income. As long as income continues to rise at a rate lower than that of medical inflation, even employees who initially have to pay more out of pocket toward an exchange policy than they would toward ESI will have less of a difference to make up each year, and the employer will have to provide less to make employees whole.3
This development should not suggest, however, that employers considering the elimination of ESI are focused exclusively on the bottom line, at the expense of their employees. In fact, because of the subsidies, many low-income employees will be able to obtain better health coverage, for less out of pocket, on an exchange than from their employer.
In fact, employers indicating that they will definitely or probably drop (or otherwise shift from) ESI post-2014 are more likely to consider the impact on low-income workers (as opposed to other groups of employees) when making benefit decisions and two to three times more likely to view benefits as important to attracting talent in their industry and geography. These employers are considering shifting from ESI not because they don’t care about their employees but because they recognize that, after 2014, ESI may not be the most efficient way to provide health coverage (see sidebar “The range of coverage options for employers”).
Getting ready for the new world
To prepare for 2014, employers should explore the economics of benefits after reform, maximize the return on investment (ROI) of benefit packages, design them for higher-income employees, and satisfy the health and wellness needs of the whole workforce.
Explore the economics of postreform benefits
Employers must understand, at the microsegment level, the eligibility of employees for subsidies under different scenarios—for example, when the employer provides no coverage at all, coverage defined as “unaffordable” (at a premium above 9.5 percent of the household income) for some employees, or coverage above the Cadillac-plan threshold. Companies must determine the cost of making employees whole, using market research tools to find out how much they value ESI, cash compensation for it, and a variety of other benefits. The importance for workers of a given benefit may not correlate directly with its tax-adjusted cost to the employer.
Maximize the ROI of the benefit package
The discussion to date has largely focused on dropping versus keeping coverage, but for most employers the most value-creating options lie in between. Employers should evaluate the economic impact not only of expanding ESI to every employee (compared with dropping it completely) but also of shifting toward part-time labor, allowing lower-wage employees to qualify for exchange subsidies through setting premiums above 9.5 percent of their household income, or adopting defined-contribution models. These intermediate options will probably be the most effective way to secure a reasonable ROI for benefits after 2014, because they enable employers to provide the best possible result for each segment of employees—ESI for higher-income ones not eligible for subsidies, as well as affordable coverage from a subsidized exchange for lower-income workers.
Even employers that continue to offer ESI—and many will, especially in heavily unionized industries where flexibility may be limited—could make no-regrets moves to maximize the ROI of benefits after 2014. Market research tools could be used to determine the preferences of employees, so that the benefit plan emphasizes what they value most while minimizing other features. Other strategies would involve designing plans and enrollment features to reduce costs, pricing plans to promote responsible use, and ensuring that wellness spending produces a positive return. Retiree medical benefits could be shifted from traditional ESI toward Medicare (the federal government’s health care program for those 65 and older) and Medicare Advantage (the private-sector version of the government plan).
Design benefit packages for higher-income employees
Because lower-income employees will be eligible for exchange subsidies if their employers don’t offer them affordable health coverage, we expect that ESI will shift toward higher-income employees. This group will have more demanding expectations for service levels and convenience, as well as different attitudes toward benefits covered.
Employers should tailor their ESI offering to include navigation tools that make it easier to identify and get appointments with high-quality health care providers and fast access to well-informed people for assistance with billing or coverage issues. These services could be provided through partnerships with enterprises that specialize in explaining medical bills and pricing. Higher-income employees may also value preferred-access or other enhanced-care physician services more than a traditional Cadillac ESI plan. These alternative benefits may be more cost effective for employers once the Cadillac tax comes into effect, in 2018.
Satisfy employee health and wellness needs
Even for an employer that drops ESI for all or some employees, maintaining their health, productivity, and satisfaction will continue to be important. Employers could not only expand or refine wellness programs to focus on elements that have a substantive, positive, and documentable impact on employee health and satisfaction but also provide the right incentives to encourage participation. In addition, employers could establish clinics at work sites, or partnerships with local providers or pharmacies so that employees can easily and affordably receive preventative care, such as flu shots or annual physicals. Another way to keep employees satisfied and avoid disrupting their lives would be to partner with a broker or another enterprise that helps them understand their benefit options and enroll for coverage on insurance exchanges.
Employers should recognize that as the ESI market changes after 2014, the system will react dynamically. If many companies drop health insurance coverage, the government could increase the employer penalty or raise taxes. Employers will need to be aware of actions by participants at any point along the health care value chain and prepare to adapt quickly.
Whether your company is poised to shift from employer-sponsored insurance or will continue to offer the same benefit package it does now, health care reform will change the economics of your workforce and benefits, as well as how your employees value coverage. Understanding these changes at a granular level will enable your company to gain or defend a competitive advantage in the increasingly dynamic market for talent.
Both sides poised for healthcare ruling
Source: thehill.com/blogs/healthwatch
By Sam Baker
Lawmakers and interest groups don’t know how the Supreme Court will rule on President Obama’s healthcare law, but they’re ready to respond as soon as the decision is released.
The court is expected to issue its decision shortly after 10 a.m. Thursday. Once the ruling is announced, the courthouse steps and the Capitol, just across the street, will become circuses of spin.
House Republicans will likely hold multiple press conferences throughout the day. The party leadership will likely want to address the ruling, especially if the court strikes down all or part of the law.
The GOP’s Doctors’ Caucus is also planning a news conference Thursday afternoon. And Rep. Michele Bachmann (R-Minn.) reportedly reserved space outside the Capitol to hold her own event.
President Obama is scheduled to be in meetings at the White House all day Thursday. A White House spokesman would not say whether he will have any public comments in the wake of the court’s ruling on his signature domestic achievement.
A spokeswoman for Mitt Romney’s presidential campaign did not respond to a question about Romney’s schedule Thursday.
The healthcare case has greater short-term political implications than any case since Bush v. Gore, which decided the 2000 presidential election.
A victory at the Supreme Court would be an enormous boon to either side, yet pundits and strategists from both parties have also suggested that the losing side might gain a political upper hand by using the decision to rally its base.
Speaker John Boehner (R-Ohio), however, warned his caucus last week not to “spike the football” if the court strikes down the healthcare law. Excessive celebration could detract from the party’s focus on the economy, he said.
Rep. Tom Price (R-Ga.), a physician, said focusing on healthcare as an issue doesn’t have to cross the line into cheering the demise of the Affordable Care Act (ACA).
“The reason this isn’t a cause for celebration is that the status quo is unacceptable,” Price told The Hill in an interview.
Even if the court upholds the ACA, Republican leaders plan to press ahead with another vote to repeal the law.
Sen. John Thune (R-S.D.) said at a press conference Tuesday that if the court leaves any of the law standing, Republicans will try to repeal it and replace it with “step-by-step reforms” of their own.
A Senate Republican leadership aide would not provide specifics about the party’s plans following Thursday’s decision or say whether Minority Leader Mitch McConnell (R-Ky.) has delivered the same message as Boehner about “spiking the football.”
Democrats, meanwhile, aren’t especially thrilled that the decision will come just before the weeklong July 4 recess — meaning healthcare will dominate the headlines following Thursday’s ruling and will then be back in the news once Congress returns and House Republicans move on to their repeal vote.
“If we were here, then we could then move rapidly to get something on the agenda, something in the hopper, to respond to this in a way that the American people would understand that we’re going to move ahead on this,” said Sen. Tom Harkin (D-Iowa), the chairman of the Health, Education, Labor and Pensions Committee.
Harkin and his staff have been working on contingency plans in case the court strikes all or part of the law, but they will have to hold on to those options until after the July 4 holiday.
“As it is, we have these 10 days off,” he said. “I’m just wondering if the politically motivated Supreme Court didn’t plan it that way.”
Democrats will still get in on the initial reaction, however.
Reps. Raúl Grijalva (D-Ariz.) and Keith Ellison (D-Minn.), the leaders of the House Progressive Caucus, are planning a rally just outside the Supreme Court immediately following the decision.
The plaza outside the court has been slowly filling with protesters and interested onlookers as the healthcare ruling draws nearer. Although protests Thursday aren’t expected to rival the sea of activism that surrounded the court during oral arguments, protesters had amassed a respectable presence Monday amid the crush of TV crews camped out in front of the court.
Health Care Reform: Four Companies That Are Leading Change
By Kathy Gersch
Source: Forbes.com
This week, Kathy Gersch, my Kotter International colleague, highlights four companies in the health care sector that are not waiting for a Supreme Court decision to transform their businesses.
The Supreme Court is set to rule on key provisions of the Affordable Care Act before the end of this month. With so much uncertainty around the future of the U.S. health care system, many companies have long been frozen, taking a “wait-and-see” approach to change, choosing to sit tight until the future becomes clearer.
But in a rapidly changing world, sitting tight can spell disaster.
“A leader of a large health care organization’s challenge is to play offense, not defense,” John Kotter wrote on this blog last summer. “If I were running a hospital… I would be focused on how do we make some significant change to take advantage of the opportunities that are going to be inevitable with this swirling, difficult, changing environment in health care.”
John is exactly right. And in the last few weeks alone, a number of hospitals and other health care providers have heeded his call and are taking drastic action.
The New York Times recently profiled one hospital in Brooklyn, New York — Maimonides Medical Center — whose leaders echoed John’s sentiments: “Win, lose or draw in court, administrators said, the policies driving the federal health care law are already embedded in big cuts and new payment formulas that hospitals ignore at their peril. And even if the law is repealed after the next election, the economic pressure to care differently for more people at lower cost is irreversible.”
With “value-based purchasing” programs mandated by the Affordable Care Act, where hospitals will be judged based on both cost and quality of care, Maimonides is taking major steps to boost patient satisfaction. As the Times reported, Maimonides “asked labor-management teams in every unit to invent their own improvement projects. In one initiative, nurses are making hourly rounds to offer patients extra help.” The hospital also provides valet parking and free Wi-Fi — certainly not business as usual.
Elsewhere in New York City, two of the largest hospital systems — NYU Langone Medical Center and Continuum Health Partners — are joining forces to boost their bargaining power with insurance providers and to cut costs, partly as a result of efficiency mandates outlined in the health care reform bill. Again, this is an example of medical organizations taking matters into their own hands and transforming the dynamics of the health care system, rather than allowing change to simply happen to them.
Insurance companies are also changing. As Aetna CEO Mark Bertolini explained to the Wall Street Journal last week, “If the Affordable Care Act were to go away tomorrow, we still would be better off as an organization, because who can argue with getting a lower health care delivery cost, more streamlined administrative structure, making yourself simpler and less complex to do business with? If that all happened and then health care reform went away, we would be better off and so would our customers.”
The leaders of UnitedHealthcare seem to agree. They made news recently when they pledged to keep popular coverage provisions mandated by the Affordable Care Act in place, regardless of the Supreme Court’s decision. The company said it would continue offering policyholders no-copayment preventative services and third-party appeals for cases where treatments are denied. They also vowed, among other things, not to cancel policies retroactively, except when fraud had taken place. These are marked shifts in the way insurance companies typically operate.
In each of these examples, leaders are refusing to let complacency set in. They are not resting on their laurels, being myopic or tricking themselves into thinking that the old way of doing things will suffice in the future. The world is changing quickly, and those who fail to change with it are sure to be left behind. The winners will be in front of the transformation instead of behind the curve trying to catch up when things become “clear”. One thing is certain – change in healthcare will continue, and it’s accelerating. There is no point of perfect clarity.
5 things health reform supporters don’t want you to know
By Joanna Antongiovanni
Source: ifawebnews.com
As the Supreme Court of the United States will likely rule on health reform soon, conversations about the bill’s constitutionality are once again resurfacing. Aside from this debate, there are several flaws within the bill that contribute to its inability to best protect consumers from increasing rates and provide them with affordable coverage. Below are five things that supporters of health reform don’t want you to know.
A lack of focus
The bill is more focused on insurance costs and does not adequately address the main reason health care costs go up: the actual cost of care. This is a big problem because it overlooks what could really make a difference and solve some of the health care issues in our country. The Kaiser Family Foundation report predicts that the health care rebates employers can expect to receive is minimal, an average of $127 compared to premiums of $5,400 a year for an individual and $15,100 for a family. If these predictions are close to the actual rebates, it proves the bill’s insurance reforms and current medical loss ratios do not address the true cause of increasing premiums in our country.
One size doesn’t fit all
As health reform stands now, it fails to address the unique needs of each state. One of the mostly unpublicized outcomes of the medical loss ratio (MLR) requirements has been that carriers have opted to exit specific unprofitable markets or exit health group products altogether to concentrate on lines of business not affected by health reform.
In some states this has created an unfair advantage for the one or two carriers that remain.
Other plans have eliminated specific products such as “child only policies” citing the inability to cover the cost of the additional mandates placed on these policies at an affordable cost. In addition, doctors and hospitals in wealthy areas are more likely to pass along those costs to consumers in those areas, increasing health insurance costs in those regions.
What was originally intended to increase coverage to the uninsured and lower health insurance costs has in fact done the opposite. In addition, many states that are struggling to balance their budgets following the burden of Medicaid expansion are seeing red and increasing deficits. These states are looking for alternative ways to save money and state-funded programs like education are at risk for budget cuts.
The current exchanges don’t fit
One major oversight of the bill is that there is no exchange that exists today that would satisfy health reform’s exchange requirements. An exchange is a government manufactured insurance marketplace for individuals not covered for health insurance by their employers to shop for health insurance at competitive rates. None of the current exchanges that exist for health care work under the new bill, the health reform exchange is two parts Massachusetts exchange, one part Utah exchange and one part “other”.
It’s debatable if either the Massachusetts or Utah exchanges accomplishes what they are set out to do, that is, to provide a market for people to purchase affordable insurance.
The creation of the exchange itself did not make health insurance affordable as it never addressed the cost of care. This is an obvious problem as individuals that are not covered by their employer need to have an affordable alternative for health care. Instead of looking to examples of what would work, the exchange dreamed up by health reform is a conglomeration of different ideas hastily combined.
Pennies on the dollar
Did you know that health insurance companies only make 3 cents to 6 cents on the dollar for health insurance premiums?
Health reform’s misplaced blame on insurance companies will only result in more difficulty for employers and individuals to get the specific insurance policies that they need. If the insurance companies continue to be attacked, they will lose more money and have fewer agents who will be able to help consumers find a policy that meets both their financial and health needs. Again, the cost of care resurfaces as the larger influencer on health insurance premiums.
All bark and no bite
There is only one thing worse than a mandate…a mandate without teeth. The bill mandates individuals to purchase health insurance but the consequences for not purchasing insurance is so weak it begs the question about how serious lawmakers were about actually making people purchase insurance. As the law is written now, it will accelerate the destruction of the insurance industry as people, after they have done the math, will opt to pay the penalty rather than pay for coverage.
Only time will tell the Supreme Court’s final decision regarding health reform. Regardless, so long as the legislation fails to address the above issues, the bill will be ineffective in solving the health care conundrum in our country.
Tensions rise as justices kick healthcare ruling to next week
By Sam Baker and Elise Viebeck
Source: thehill.com
The Supreme Court did not rule on President Obama's healthcare law Thursday, raising tensions before a decision next week.
The ruling was possible Thursday but not expected. The court traditionally holds its biggest decisions until the last day of the term, and the healthcare case is among the most highly anticipated decisions in decades, overshadowing the current term.
The next possible day for a decision is Monday, but justices will add more days to the schedule later next week.Television camera crews set up outside the court Thursday just in case a decision on the healthcare law was released. There is also great interest in an expected court decision on Arizona's controversial immigration law. Tha Arizona decision also was not released Thursday.
Interest in the court's docket was also reflected at the Scotusblog, which said it had 22,000 visitors on Thursday morning.
The court's public information office implemented new protocols starting Thursday in order to accomodate the vast interest surrounding the healthcare decision.
The Obama administration took the opportunity to praise one provision of the health law just an hour before 10 a.m., when the ruling might have been issued.
Health and Human Services Secretary Kathleen Sebelius said that Americans will receive $1.1 billion in rebates from insurers this summer as a result of the law's medical loss ratio (MLR). This will average about $151 per insured family, the agency estimated.
The MLR that insurers spend roughly 80 percent of all premiums on healthcare rather than marketing, executive bonuses or other administrative costs.
The Obama administration continues to talk up provisions of the law as they are implemented. Polls show that, as a whole, the Affordable Care Act remains unpopular with the public.
Legal insiders believe the justices will strike down all or part of the healthcare law, according to a survey released Wednesday.
Obama administration touts health law an hour before possible ruling
By Elise Viebeck
Source: The Hill
Federal health officials touted a popular provision of the healthcare law — which would result in $1.1 billion in insurance rebates to consumers — just an hour before the Supreme Court could issue its ruling.
A ruling could happen Thursday at 10 a.m. After that, the next possible decision date is Monday, June 25.
The Obama administration continues to talk up provisions of the law as they are implemented. As a whole, the Affordable Care Act remains unpopular with the public.
Health and Human Services (HHS) Secretary Kathleen Sebelius said Thursday morning that 12.8 million Americans will receive $1.1 billion in rebates from insurers this summer as a result of the law. This will average about $151 per insured family, the agency estimated.
The rebates will stem from the law's medical loss ratio, which mandates that insurers spend roughly 80 percent of all premiums on healthcare rather than marketing, executive bonuses or other administrative costs.
"The 80/20 rule helps ensure consumers get fair value for their health care dollar," Sebelius said in a statement.
Materials from HHS said that consumers will likely see a rebate check in the mail, a lump sum reimbursement to the account they use to pay premiums or a reduction in their future payments. Insurers must issue checks by Aug. 1, unless the law is struck down in the next two weeks.