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Supreme Court of the United States
Decision regarding the
Patient Protection and Affordable Care Act
June 29, 20121:00 p.m.
Webinar Sponsors
Individual and Employer Responsibilities
Medicaid and CHIP Expansion
Premium Subsidies for Lower Income Health Insurance Exchanges
Insurance Market Reforms
Quality and Delivery System Reforms
Key Elements of Health Care Reform
In a 5 – 4 decision the Supreme Court upheld the Constitutionality of the Patient Protection and Affordable Care Act.
The Court ruled that the Individual Mandate is a tax and that Congress therefore has the authority.
The Court limited, but did not invalidate, the pieces that expand Medicaid.
Supreme Court Decision
"Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it." The Court holds that the mandate violates the Commerce Clause, but it becomes irrelevant because five Justices find the mandate to be constitutional under the taxing power.
On the Medicaid issue, the Medicaid expansion is constitutional, but it is unconstitutional for the federal government to withhold Medicaid funds for non-compliance with the expansion provisions. "Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding."
In Their Own Words – 193 pages
Michigan Attorney General
National Small Business Association Vice President and General Counsel, David Burton
Small Business Association of Michigan President and CEO, Rob FowlerVice President, Small Business Services, Scott Lyon
Clark Hill, PLC Kristi Gauthier, Esq.
Presenters – Reactions, Next Steps
For Small Businesses and Individuals
Individual Mandate Employer “Mandate”/Play or Pay Individual Subsidies and Small Business Tax
Credit Health Insurance Exchanges Expansion of Medicaid and CHIP Dependent Coverage to age 26 Summary of Benefits and Coverage (not an SPD)
What is Preserved = Everything
New Fees
Pharmaceutical Companies - $16 billion between now and 2019 and then $2.8 billion/year thereafter
Insurance Carriers - $47.5 billion between 2014 and 2018 and then indexed to inflation
Medical Devices taxed at 2.9% Changes to FSAs for over-the-counter drugs Contributions to FSAs limited to $2,500 Medicare Part A tax increase for individuals earning
$200,000+ and couples earning $250,000+ Cadillac Tax - 2018
What is Preserved = Everything
Insurance Carrier Related Changes
Loss ratios hold at 80% for individuals and 85% for small businesses
Guarantee issue and renewability (no recession) No lifetime limits Modified community rating “Precious Metals” - Platinum, Gold, etc. and Essential Benefits Deductibles limited to - $2,000/$4,000 Waiting periods limited to 90 days Children with medical conditions – No pre-ex Preventive Services - Immunizations for children and cancer
screenings for women No salary discrimination for eligibility CO-OPs in market
What is Preserved = Everything
Michigan Senate Passed - Still Needs Action in Michigan House
Orbitz for Health Insurance Spreadsheet comparison of products from various insurers Uniform enrollment Assign a rating based upon relative quality and price to each
qualified health benefits plan Inform individuals of eligibility requirements for the state's
Medicaid program, CHIP program and any applicable state or local public program and screen and enroll eligible individuals in these programs
Establish a navigator program Assist qualified employers in facilitating the enrollment of
employees in small group qualified health benefits plans
SHOP Exchange (2014)
Premium assistance based on Federal Poverty Level (FPL)◦ Those earning under 133% of FPL generally eligible for
Medicaid◦ Premium assistance to those from 133% to 400% of
FPL Cap on individual premium cost for 2nd-Lowest Cost
Silver Plan – 70-%/30%
In addition, those with lower incomes get better benefits (Cost Sharing)◦ 100-150% of FPL 70% value raised to 94%
◦ 150-200% of FPL 70% value raised to 87%
◦ 200-250% of FPL 70% value raised to 73%
Exchange Subsidies - 2014
Small Business Tax Credit (Part 2) – Tax credit equal to 50% of the employer’s health insurance costs, if:
◦ 10 or fewer full-time equivalent employees◦ Average annual wages of less that $25,000 (not including owner’s or
owner’s family member wages)
◦ Employer pays 50% or more of the premium
Companies with between 11 and 25 workers and an average wage of less than $50,000 are eligible for partial credits
Credit only available for two years Credit only available if small employer purchases coverage
from the SHOP Exchange
Small Employer Tax Credit - 2014
Individual Mandate - Requires all U.S. citizens and legal residents to have qualifying health coverage or face a penalty/tax if they do not. Those under FPL or those that do not file a tax return – no penalty
The percentage will be 1.0% in 2014, 2.0% in 2015, and 2.5% thereafter, or a flat dollar amount assessed on each taxpayer and any dependents (e.g., family)
The annual flat dollar amount phased in—$95 in 2014, $325 in 2015, and$695 in 2016 and beyond (adjusted for inflation), assessed for each taxpayerand any dependents.
The amount is reduced by one-half for dependents under the age of 18.
The total family penalty is capped at 300% of the annual flat dollar amount.
Percentage of the “applicable income,” defined as the amount by which an individual’s household income exceeds the applicable filing threshold for the applicable tax year. The filing threshold comprises the personal exemption amount (doubled for those married filing jointly) plus the standard deduction amount.
Individual Mandate - 2014
Employer “Mandate”/Free Rider - Employers with more than 50 FTE must offer either “affordable” coverage or potentially be subject to a “free rider” penalty
The Penalty
$2,000/FTE after the first 30 employees
The Calculation
Employees scheduled to work at least 30 hours per week in a typical month, plus
For all those under 30 hours a week, the aggregate of all hours worked in a typical month divided by 120, (do not include any seasonal employees that work fewer than 120 days in the prior year).
Take the total number of full-time employees in Step 1 and add that to the number of Full time equivalents that results from the calculation in Step 2 above.
If the number is 50 or below then there is no “free-rider” penalty.
◦ Employers with more than 200 employees will be required to auto enroll employees into the health plans offered.
Employer “Mandate”
In 2018
An excise tax on insurers or employer health insurance plans with aggregate values that exceed $10,200 for an individual and $27,500 for a family takes effect.
Tax is indexed to the CPI-U beginning in 2020.
Cadillac Tax is 40% of the value above the threshold.
Cadillac Tax
