The Broccoli Question: Can the Supreme Court Make You Eat Your Vegetables?

In analyzing the constitutionality of Obamacare's individual mandate, the Supreme Court must address just how far it's authority under the Commerce Clause extends.

David Fisher from Forbes asks an interesting question in one of his recent articles, a question he says the United States Supreme Court must answer when analyzing the constitutionality of the individual insurance mandate under the healthcare reform legislation enacted by the Obama administration:

If Congress can order you to buy health insurance, why can't it order you to buy (and eat!) broccoli?

As discussed in a previous article, the Supreme Court has just agreed to hear legal challenges to Obama's health care reforms, including the provision that requires individuals to purchase and maintain a minimum level of health insurance coverage. Fisher explains that the answer to the broccoli question isn't quite as simple as it seems:

If the Supreme Court finds the insurance mandate in the healthcare reform act is constitutional, it is endorsing a very expansive view of Congress’ power to regulate interstate commerce under Article I of the Constitution.

Those arguing for the individual mandate assert that Congress is authorized under the so-called Commerce Clause to regulate the business of health insurance because it is an interstate industry in which almost every American will participate at some point in his or her life. Additionally, proponents argue that the millions of the uninsured significantly impact all American citizens because of the billions of dollars of costs created by those who go without health insurance, according to Fisher's article.

But that same argument works for broccoli, the eating of which is believed to protect against colon cancer. Reducing the rate of colon cancer would reduce healthcare costs and thus have a direct economic impact on the interstate healthcare market.

Fisher quotes David Kopel, a constitutional law expert with the Cato Institute, who suggests that Obamacare advocates have "had trouble articulating anything that makes the health-care insurance market special." Kopel suggests that there are lots of products that almost every Amercan consumes, such as clothing and food, about which the same kind of argument can be made.

In fact, health insurance is one of the few products that by law can’t be purchased on an interstate basis (the states zealously protect their power to regulate the insurance industry). So on that basis, Kopel said, healthcare might be one of the least interstate markets Congress can regulate, Kopel said.

Fisher cites Michael Dorf of Cornell University Law School to help proponents of the individual mandate bolster their arguments with jurisprudence:

The key cases are U.S. vs. Lopez and U.S. vs. Morrison, two modern decisions that set limits on Congress’s Commerce Clause powers. In Lopez, the court struck down a law prohibiting guns near schools as being too disconnected from any reasonable concept of interstate commerce. And in Morrison, the court did the same. Congress tried to tie both laws to the aggregate effects of criminal acts on the economy, but in Morrison the majority held that was constitutional overreach.

"Petitioners’ reasoning …will not limit Congress to regulating violence but may …be applied equally as well to family law and other areas of traditional state regulation since the aggregate effect of marriage, divorce, and childrearing on the national economy is undoubtedly significant."

In Morrison, Justice Steven Breyer penned a dissent making the very point Obamacare critics make. It’s impossible to formulate a rule, he wrote, that allows Congress to, say, outlaw growing marijuana for your own consumption but not violence against women. “Virtually every kind of activity, no matter how local, genuinely can affect commerce, or its conditions, outside the State,” Breyer wrote. Instead of being a defect, the idea of almost unlimited Commerce Clause powers is a fact of the modern world.

"Since judges cannot change the world, the “defect” means that, within the bounds of the rational, Congress, not the courts, must remain primarily responsible for striking the appropriate state/federal balance."

But Breyer lost that fight. The majority “wanted a limiting principle” on Congress, Dorf said, and came up with one by deciding that federal laws can regulate a lot of seemingly uneconomic activity but must have a firm economic basis at their core. Even the Civil Rights Act of 1964 was passed under Commerce Clause powers because it targeted employers, schools and businesses, all arguably economic actors.

Thus, because the pro-individual mandate is directed at the person engaging in the behavior, it's more constitutionally palatable, according to Dorf's reasoning. Further, proponents could successfully argue that requiring citizens to buy health insurance is part of an overall interstate regulatory scheme including health insurance and the health care industry.

A particular "oddity" about the health care reform legislation, according to Fisher and Dorf: if Congress had made the mandate a tax, then it would have been clearly valid under congressional taxing authority. However, the political liability of asserting a health care tax in the economic climate of Obamacare's passage made proponents of the mandate classify it as anything but a tax, leaving it subject to constitutional attack.

Read the full article:

Obamacare Judges Must Answer The "Broccoli Question"
Daniel Fisher | Forbes
November 18, 2011

The $195 Million Man and the Woman with $1 Billion Legs

Valuable and unique assets mean unique and high-dollar insurance coverages

The insurance industry is no stranger to providing unique coverages for specific and individual risks. Not surprisingly, many of the larger and more noteworthy of these specialized risks come from the world of Hollywood. Typically these specialty lines transactions are incredibly complex and highly customized, in large part because so much money is at stake.[1]

With that in mind, 24/7 Wall St. has listed nine of the more striking insurance policies taken out by or on behalf of celebrities.

Some of the more notable entries as reported by Daily Finance:

• Singer Mariah Carey's $1 billion insurance policy covering her famous legs;
• International soccer star David Beckham's $195 million policy covering his entire body;
• Football great Troy Polamalu's $1 million policy on his trademark hair;
• Musician Bruce Springsteen's $5.5 million policy covering his vocal chords; and
• Baseball slugger Mark McGwire's $120 million policy on his fragile left ankle.[2]

Some honorable (but not entirely confirmed) mentions:

• Dutch winemaker Ilja Gort's $7.8 million policy on his nose;
• Actress and singer Jennifer Lopez's $1 million policy on her famed rear-end; and
• Artist Andy Warhol's $1 million policy on his eyes.[3]

1. Insuring the Absurd, Matt Villano, InsWeb, August 2, 2010.
2. The 9 Craziest Celbrity Insurance Policies, Douglas McIntyre, Daily Finance, November 28, 2011.
3. Insuring the Absurd, Id.

Supreme Court Agrees to Hear Health Care Reform Challenges, But Health Care Reform Already Fundamentally Changing the Health Care and Health Insurance Industries

Although the Supreme Court has agreed to hear challenges to health care reform, the debate is unlikely to be settled by the high court's decision, and the landscape of health care and health care insurance is already undergoing major and lasting changes.

As reported by a number of news outlets, the United States Supreme Court has indicated that it will hear legal challenges to the Obama administration's health care reform initiatives, which were set forth primarily in the Patient Protection and Affordable Care Act of 2010 and related legislation ("PPACA"). Arguments before the Supreme Court justices in the health care reform matter are scheduled for March of 2012.

The justices announced they will hear an extraordinary five-and-a-half hours of arguments from lawyers on the constitutionality of a provision at the heart of the law and three other related questions about the act.[1]

PPACA includes a number of different reforms relative to the health insurance industry as well as public health programs with the stated goal of increasing individual health insurance coverage while decreasing health care and health insurance costs.

The law's "individual mandate" is a principal point of contention.

A number of states and other parties have filed challenges to PPACA, with one of the principal points of contention being the so-called "individual mandate" under PPACA that legally requires individuals to obtain a minimum level of health insurance coverage. However, other issues will also be before the Supreme Court when it hears the matter in March.

The questions the Supreme Court asked lawyers to argue when the justices consider appeals of President Barack Obama’s health care overhaul in March:

• Does Congress have the power to mandate that Americans buy health insurance or pay a penalty?
• If the requirement to buy insurance is unconstitutional, is the whole law unconstitutional? What other parts of the law, if any, could survive?
• Is Congress illegally coercing states to expand Medicaid, the subsidized health care for the poor and disabled, by threatening to withhold funding from states that refuse?
• Since the penalty for not buying health insurance doesn’t go into effect until federal income taxes are due in 2015, are legal arguments currently brought against the health care overhaul premature?[2]
  

Observers are predicting a Supreme Court decision on President Obama's health care reform sometime next summer, just before the November presidential election. As such, health care reform is expected to become a major political issue in the presidential race.

The Supreme Court's decision on the constitutionality of the individual mandate is unlikely to finally settle the matter.

However, both sides of the argument agree that the Supreme Court's decision on PPACA and the constitutionality of the individual mandate is unlikely to finally settle the matter. Opponents of the health care reform initiatives say that, even if the Supreme Court upholds the individual mandate and other matters at issue, they will continue to challenge other provisions and seek repeal of the Obama administration's health care reform legislation in Congress.

But if the Supreme Court strikes down the individual mandate as unconstitutional, proponents have indicated their commitment to continue pressing forward with the rest of Obama's health care reform agenda.[3]

The health insurance industry has already begun to change because of these initiatives and other forces.

Additionally, the health insurance industry has already begun to shift as a result of legislative initiatives such as PPACA and other forces, including economic pressures and consumer demands. Consider the following from a recent New York Times article suggesting that health care in the United States is inexorably changing, despite the legal uncertainties:

No matter what the Supreme Court decides about the constitutionality of the federal law adopted last year, health care in America has changed in ways that will not be easily undone. Provisions already put in place, like tougher oversight of health insurers, the expansion of coverage to one million young adults and more protections for workers with pre-existing conditions are already well cemented and popular.

—

From Colorado to Maryland, hospitals are scrambling to buy hospitals. Doctors are leaving small private practices. Large insurance companies are becoming more dominant as smaller ones disappear because they cannot stay competitive. States are simplifying decades of Medicaid rules and planning new ways for poor and rich alike to buy policies more easily.

—

Other changes influenced by the legislation may leave some patients and doctors lost in the new land of giants. As medicine moves from a cottage industry to one dominated by large organizations, some patients with insurance will probably find their choices more limited. But their care may be better coordinated, as hospitals, doctors and even insurers join to streamline services.

—

Even if the Supreme Court upholds the law’s requirement for many employers to offer coverage to workers, it is not clear that Congress will want to keep the requirement in its current form or see it vigorously enforced. With the nation’s unemployment rate stubbornly stuck around 9 percent, businesses often cite the costs of providing health care coverage as one of the reasons they cannot hire or expand their work force.

—

Despite opposition in some corners and lukewarm reception in others, a wholesale repeal of the law by Congress may be unlikely. Lawmakers may find it unpalatable to abandon the entire effort, given the fact that critics of the law have not agreed on one comprehensive proposal that would offer coverage to anywhere near the 50 million Americans who are still without coverage. Even if the law goes into effect, an estimated 20 million will still be without insurance. [4]

1. Supreme Court Will Hear Health Care Case This Term, Jesse J. Holland and Mark Sherman, Associated Press, Business Week, November 14, 2011.
2. A Quick Look At The 4 Questions At Issue In The Supreme Court’s Health Care Overhaul, Associated Press, November 15, 2011.
3. Justices Unlikely To Have Last Word On Health Care, Ricardo Alonso-Zaldivar, Associated Press, November 15, 2011.
4. Whatever Court Rules, Major Changes in Health Care Likely to Last, Reed Abelson, Gardiner Harris and Robert Pear, New York Times, November 14, 2011.

Election Impact on the Insurance Industry: More of the Same – A LOT MORE

Recent articles and opinions suggest that the recent election means a lot more of the same for the insurance industry – including a new flood of regulations.

A number of insurance industry observers and pundits have recently discussed the potential impact of the recent election upon the insurance industry and insurance regulation.

FIO is likely to play expanding role in insurance regulation

An article from Insurance Networking News, for example, suggests that the Federal Insurance Office (FIO) will likely play an expanding role in insurance regulation, particularly on the international front. The article quotes industry observers who agree, including the following comments from Peter Kochenburger, executive director of the Insurance Law Center at the University of Connecticut:

The federal government absolutely has the right to regulate insurance. That has been decided since 1944, but it has consistently declined the opportunity to do so. * * * It’s a long overdue office, but it has not exercised its jurisdictional authority in any kind of way that assumes it’s going to override the states.[1]

Kathy Burger, Editorial Director of Insurance & Technology, predicts that "for the insurance industry the results appear to be... more of the same."

With Barack Obama reelected, continuation of a Republican House and Democratic Senate, and the so-called "fiscal cliff" looming, it looks as if insurers will be facing pretty much the same kinds of challenges as before the elections. The Affordable Care Act will stay in place, meaning health insurers must navigate the transformation of their industry. Dodd-Frank isn't going away, which means stepped up efforts around reporting, risk management and navigation of "too big to fail" definitions. The world hasn't gotten any less risky, as evidenced by the devastation caused by Superstorm Sandy and this week's Nor'easter. And the competitive landscape in financial services continues to be unsettled, with new kinds of competitors and consumer-driven channels creating new opportunities for education, interaction and service.[2]

Healthwatch, the Hill's Healthcare Blog, seems to agree but also seems to emphasize more.

The new waiting game in healthcare isn’t about the political future of the Affordable Care Act, but rather the huge amount of work that still has to be done to implement it. As expected, the Health and Human Services Department is moving ahead quickly on several key regulations that had been held until after the election.

Since Election Day, HHS has submitted regulations to the Office of Management and Budget on essential health benefits, insurance regulations, wellness programs and quality initiatives.

* * *

With the healthcare law’s political future now assured, the focus over the next few months will be on the states and the rule-making process, and all signs indicate that a new flood of regulations is about to begin.[3]

Unfortunately, according to the Hill and Moody's, more of the same is not good news for insurers:

President Obama’s reelection is... bad news for insurance companies, according to the latest analysis from Moody’s. The Affordable Care Act “will have negative credit implications for insurers based mainly on the additional regulations and restrictions it imposes on insurers,” Moody’s wrote. [4]

PropertyCasualty360 also sees the status quo continuing, and that means that the Affordable Care Act (ACA) is here to stay. However, some insurance industry analysts suggest the health insurance exchanges required under the ACA may be delayed:

Beth Mantz-Steindecker, a health regulatory analyst at Washington Analysis, is suggesting that implementation of the exchanges may be pushed back because so few states are prepared to implement the program.[5]

Other implications of the 2012 elections on the insurance industry, according to the PropertyCasualty360 article, potentially include the following:

Designation of certain insurers as systematically significant by the FSOC could happen soon.

• The release of the FIO's report on proposals to modernize the regulation of insurance regulation is likely imminent;
• The Financial Stability Oversight Council will likely begin designating certain non-banks such as insurers as systemically significant, and potential insurer candidates include American International Group, MetLife and Prudential Insurance;
• Implementation of consolidated regulation of insurance companies which operate thrift holding companies will move forward, although it could be delayed due to insurer objections; and
• The Terrorism Risk Insurance Act may not survive, at least in its current form.[6]

1. Election Brings New Faces and an Expanding Role of the FIO, Chris McMahon, Insurance Networking News, November 8, 2012.
2. Impact of 2012 Election on Insurance: More of the Same?, Kathy Burger, Insurance & Technology, November 9, 2012.
3. Overnight Health: HHS Moving Quickly on Key Regulations, Sam Baker and Elise Viebeck, The Hill, November 12, 2012.
4. Overnight Health..., id.
5. The Election's Impact on Insurance Issues, Arthur D. Postal, PropertyCasualty360.com, November 7, 2012.
6. The Election's Impact..., id.

Heath Insurance Reform Lobbying Intensifies

The health care and insurance industries lobby the Obama administration to shape the rules and regulations that will govern the creation and operation of the forthcoming health insurance exchanges.

The federal Department of Health and Human Services has received thousands of comments on the preliminary rules it issued earlier this year on the new insurance markets and exchanges established under the Patient Protection and Affordable Care Act, also known as Obamacare. As the 2014 deadline for institution of the state-based exchanges looms, just about any industry involved in the nation's health care system is trying to get its voice heard on how the new reforms should ultimately be implemented.[1]

The exchanges will be "online hubs for individuals and businesses to compare and purchase health insurance plans.

The health insurance exchanges are intended to be state-run "online hubs for individuals and businesses to compare and purchase health insurance plans."[2] However, if an individual state does not establish an exchange compliant with the Affordable Care Act by 2014, the federal government will create and operate that state's exchange instead.

While the Affordable Care Act provided some basic guidelines for the exchanges, much remains unknown, including some of the fundamentals such as the minimum health insurance coverage and benefits that exchange health plans will be required to provide.

America’s Health Insurance Plans, which lobbies for the insurance industry, has pushed the Obama administration to leave much of the regulation to the states, which have traditionally overseen insurance market functions.[3]

But it is not just hospitals and insurance companies that are lobbying to have their voices heard. Many industries could potentially be impacted by the new health system, including the pharmacy industry.

[Pharmacy chain CVS Caremark] has petitioned the Obama administration for rules that would allow its employees, such as pharmacists and nurse practitioners, [to] help consumers navigate the exchange and purchase health insurance.[4]

State insurance commissioners will play a significant part in the creation and operation of the exchanges.

The National Association of Insurance Commissioners is paying close attention to regulatory developments associated with the Affordable Care Act, as well. State insurance commissioners will play a significant part in the creation and operation of the exchanges, and thus, they have a vested interest in the federal rules and regulations coming out of the Obama administration.[5]

1. A scramble to shape the new health insurance exchanges, Sarah Kliff, Washington Post, November 2, 2011.
2. A scramble to shape…, Id.
3. A scramble to shape…, Id.
4. A scramble to shape…, Id.
5. A scramble to shape…, Id.

Idaho Reclaims Review of Health Premium Rate Increases from Feds

The Idaho Governor has issued a waiver to the Idaho Department of Insurance, allowing it to comply with the Affordable Care Act despite his previous executive order stopping the Act's implementation; subsequently, federal officials have approved the state's request to resume its own rate review process.

The Associated Press is reporting that Idaho has reversed the federal takeover of health insurance rate increase reviews in the state.

Federal officials stepped forward to assume rate review of health insurance premium rate increases earlier this year

Earlier this year, Idaho Governor C.L. "Butch" Otter issued an executive order prohibiting the implementation in the state of the Patient Protection and Affordable Care Act, also known as "Obamacare," as well as the laws and regulations associated with federal healthcare reform. As a result of that executive order, federal officials indicated that they would usurp rate review of health insurance premium increases of ten percent (10%) or more by private insurance companies in Idaho as authorized by the Affordable Care Act.

From the Associated Press article:

The Idaho Statesman reports (http://bit.ly/qc8rci) the state Department of Insurance was already was reviewing some health plan rates filed by insurance companies, as part of its regular procedures, but the executive order Otter issued in late April had made it impossible for the Idaho Department of Insurance to meet new standards under the federal health care law.

The Associated Press indicates that Governor Otter has now issued a waiver allowing the Idaho Department of Insurance to comply with the provisions of the Affordable Care Act, thereby preventing the federal takeover.

The Director of the Idaho Department of Insurance, Bill Deal, indicated that the Department established a premium reporting and review process according to the Affordable Care Act after Governor Otter issued the waiver.

Subsequently, the federal Center for Consumer Information and Insurance Oversight granted the state's request to operate its premium reporting and review process in lieu of federal oversight.

Read the full article:

Idaho reclaims insurance rate reviews from feds
Associated Press | Deseret News
September 11, 2011

Brace Yourself... Health Reform, Rising Insurance Costs and the PPACA-yderm in the Room

The New York Times breaks down the legal challenges facing PPACA, the Des Moines Register warns of looming rate increases, the Buffalo News thinks PPACA can still do a lot of good while the Washington Times says its doing more harm than good, and the Heritage Foundation suggests there's a PPACAyderm in the country's economic woes room.

As mentioned in a previous article, the Department of Health and Human Services and the Treasury Department continue issuing guidelines and handing out establishment grants for the Patient Protection and Affordable Care Act ("PPACA") health insurance exchanges even as the constitutionality of PPACA's individual mandate requiring U.S. residents to purchase health insurance seems to be on the fast track to the Supreme Court.

The "core fight is whether Congress... can require people to buy private health insurance."

A New York Times editorial breaks down the current legal challenges facing PPACA and its individual mandate, asking: Will Health Care Reform Survive the Courts?

The legal battle over the constitutionality of the health care reform law will determine how far government can go in helping to improve people’s lives. Ultimately, the Supreme Court will have to decide this question. Until then, the pileup of lower federal court rulings — responding to some of the more than two dozen lawsuits filed against the law — is confusing and sharply divided, especially on the requirement that individuals buy or obtain health insurance or pay a penalty.

* * *

The core fight is whether Congress, under its powers to regulate interstate commerce, can require people to buy private health insurance if they don’t want to. Although the law has many elements, the mandate is an important tool for reaching the goal of near-universal coverage — and needed to make health insurance reforms work.

The editorial ends by calling for judicial restraint, urging the Supreme Court to "let political leaders determine what health care reform should be."

Read the full editorial: Will Health Care Reform Survive the Courts?

Bad luck? Within two months of Congress passing PPACA, "the trend in job growth dropped sharply."

With respect to the country’s current economic woes, James Sherk of the Heritage Foundation points out what may be the elephant in the room – an elephant President Obama has named “Bad Luck” but Sherk calls PPACA – asserting that private-sector job creation stopped improving almost as soon as Congress passed the health reform legislation last year.

In May private sector job growth dropped sharply to less than 50,000 net jobs. Thereafter, monthly improvement in private job growth averaged just 6,500 jobs.

What else happened in the spring of 2010? Despite obstacles that many believed would kill the bill, Congress passed the Affordable Care Act. Within two months, the trend in job growth dropped sharply. Monthly job creation had been on pace to top out in the hundreds of thousands. Post-Affordable Care Act, it has barely kept pace with population growth.

Correlations do not - of course - prove causation. The fact that job growth slowed after Congress passed the Affordable Care Act does not prove that the legislation is at fault. There are, however, good reasons to believe that the law applied the brakes to hiring.

Read the full editorial: Did Health Law Bring Economic Doldrums?

LTC insurers request premium rate increases of up to 30% in Iowa.

On a related note, the Des Moines Register’s editorial warns Iowans to brace themselves for rate increases, stating that insurance companies have asked the State of Iowa for permission to increase premium rates as much as 30% this year, primarily with respect to long-term care insurance. While the editorial notes that long-term care policies are relatively new, it blames insurance companies for failing to accurately predict future costs and expenses.

Now that people are living longer and filing claims for care, insurance companies are increasing premiums on others to pay those expenses.

The editorial asks why insurers are seeking rate increases for as much as twice what Iowa state regulators have determined are necessary. Apparently without any research or analysis to try to answer that question, the editorial concludes that insurers “cannot justify raising rates as much as they want” based on a quote from an Iowa state regulator.

Ominously, the editorial concludes:

In Iowa, state regulators are the only thing standing between Iowans and huge rate increases. Yet the increases the state approved can still add up to a lot of money for Iowans. If premiums become unaffordable, they may have to drop their coverage and walk away from a large investment in premiums.

Watch out for that elephant, too, Iowans.

Read the full editorial: Brace Yourself for Rate Increases.

Despite its drawbacks, PPACA "has done and can do a lot of good."

In his column for the Buffalo News, Douglas Turner suggests that PPACA can still do a lot of good.

While so-called Obamacare is a disappointment, the administration and many states like New York are working to squeeze what good they can out of it as the nation waits to see how the U. S. Supreme Court will rule on the sweeping law.

Turner suggests that the Supreme Court will, more likely than not, disallow PPACA’s health insurance individual mandate, but the rest of the law will survive. He goes on to explain his opinion that PPACA will help consumers even without the mandate.

Despite its drawbacks, the Affordable Care Act has done and can do a lot of good. Medicare clients can get wellness exams without co-pays. Americans now have freedom from worry about lifetime limits on coverage. The law has funded state programs to keep customers from being ripped off. No child can be denied coverage because of a pre-existing condition, a provision that will be extended to all in 2014.

Read the full editorial: Affordable Care Act Can Do a Lot of Good.

A "rationally devised formula developed and administered by government bureaucrats will not reduce costs and improve efficiency."

Tracy Miller at the Washington Times disagrees, positing that policy pressures and government subsidies will result in a pricey government-run program that is Doing More Harm than Good.

Insurance could become affordable for most of the uninsured via the subsidies included in the PPACA, but the amount spent on subsidies likely would far exceed the government’s cost projections, adding considerably to government deficits. Many healthy people will choose not to buy health insurance.

* * *

Thus, those who buy insurance will be sicker than average, and many will wait until they get sick to purchase insurance. Premiums will rise to reflect the higher health care costs of those who purchase insurance, making insurance too costly for young, healthy people who do not qualify for government subsidies.

The problem with the PPACA is that a rationally devised formula developed and administered by government bureaucrats will not reduce costs and improve efficiency. Rather, demand and the costs of meeting health care needs would be controlled more effectively with decentralized decision-making in a market economy.

Read the full editorial: Obamacare: Doing More Harm than Good.

HHS and Treasury Issue PPACA Rules and Grants as the Constitutionality of the Health Reform Individual Mandate Ripens for the Supreme Court

HHS and Treasury continue issuing guidelines and handing out establishment grants for PPACA health insurance exchanges even as the constitutionality of PPACA's individual mandate requiring U.S. residents to purchase health insurance seems to be on the fast track to the Supreme Court.

The Department of Health and Human Services (“HHS”) and the Treasury Department are pushing forward the establishment of the health insurance exchanges mandated by the Patient Protection and Affordable Care Act (“PPACA”), despite the recent challenges to the constitutionality of parts of PPACA, according to an article from Reuters. In recently released guidelines, the HHS and the Treasury Department said that "states need to provide a 'one-stop shop' system" that will provide consumers with information regarding the insurance programs and tax credits for which they are eligible, including Medicaid. [1]

HHS awarded $185 million in grants to 13 states and the District of Columbia to establish exchanges.

Additionally, the HHS awarded $185 million in grants to 13 states and the District of Columbia to help establish the exchanges. HHS already awarded $35 million in these "establishment grants" to three other states in May. Additionally, more than $50 million in planning grants went to most states last year, and another $241 million in grants were paid to help seven states establish exchanges that others could use as a model.[2]

PPACA requires the individual state governments to establish health insurance exchanges, or open marketplaces where competing insurance companies can offer health insurance plans with certain minimum requirements to consumers. If the states haven’t submitted detailed plans of their health insurance exchanges by January 1, 2013, the HHS will move in and begin establishing the exchanges to ensure they are established by 2014.[3]

Meanwhile, a U.S Court of Appeals has ruled PPACA's health insurance mandate unconstitutional.

Meanwhile, the United States Court of Appeals for the 11th Circuit ruled on Friday that PPACA’s mandate requiring U.S. residents to purchase and maintain health insurance was unconstitutional. The decision contradicts the ruling of the 6th Circuit Court of Appeals in June, setting the stage for the U.S. Supreme Court to settle the matter in 2012.[4]

The 11th Circuit decision stated that, while Congress has broad power under the Commerce Clause of the U.S. Constitution to regulate interstate commerce, Congress cannot "mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die."[5]

Additionally, the 11th Circuit "raised federalism concerns, saying the mandate intruded on health-insurance matters traditionally a concern for the states."[6]

The Politico has pointed out two strong reasons to believe that the Supreme Court will weigh in on the constitutionality of the PPACA mandate:

First, there are two circuit courts that have ruled in opposite directions on the constitutionality of the law's individual mandate. And second, because the Obama administration lost in the latest ruling, it is going to be the one filing the appeal. The Supreme Court rarely turns down such requests from the federal government, especially on an issue with the scope of the health reform law. [7]

Thus, the issue of the constitutionality of the PPACA mandate appears to be on the fast track to the Supreme Court, and it may be before the Court in the 2012 term.

1. Government lays out health insurance exchange details, Alina Selyukh and Anna Yukhananov, Reuters, August 12, 2011.
2. Government lays out… , Id.
3. Government lays out… , Id.
4. Health Overhaul is Dealt Setback, Brent Kendall, Wall Street Journal, August 13, 2011.
5. Health Overhaul…, Id.
6. Health Overhaul…, Id.
7. Lawsuits hit faster track to Supreme Court, Jennifer Haberkorn, Politico, August 15, 2011.

New Healthcare Landscape for Businesses under the Affordable Care Act

Rachael Jeanfreau analyzes how the Patient Protection and Affordable Care Act, having recently survived the Supreme Court (mostly) intact, will affect employer-sponsored health plans and potentially increase healthcare costs.

Rachael Jeanfreau
rachael.jeanfreau@bswllp.com
504.584.5467

Rachael Jeanfreau is an associate in the New Orleans office, practicing in the areas of labor and employment law and commercial litigation. Ms. Jeanfreau received her Juris Doctor from Tulane University Law School, magna cum laude, in 2011 where she was a member of the Tulane Law Review. She received her Bachelor of Arts from Louisiana State University, summa cum laude, in 2007.

Rachael Jeanfreau's profile

On June 28, 2012, the Supreme Court upheld key provisions of the Patient Protection and Affordable Care Act (ACA), signed into law by President Obama in March 2010. Although the Court struck the Act’s Medicaid expansion provision, it upheld the individual mandate, the key feature of the Act. The Act includes several provisions that will affect employer-sponsored health plans and also mandates several new requirements for employer healthcare plans that will increase employers’ costs.

Certain provisions have already gone into effect as of September 23, 2010, such as the requirement that adult children may stay on their parents’ healthcare policies until the age of 26. For all plans created after the law was enacted in March of 2010, young adults are eligible for coverage regardless of: whether they reside with a parent, their financial dependency, their eligibility to enroll in their employer’s plan, and student and marital status. However, until 2014, certain employer plans that existed before the law’s enactment (“grandfathered plans”) are not required to provide young adults coverage until age 26 if they qualify for coverage under an employer-issued plan. Currently, the ACA also prohibits lifetime limits on the dollar amount of coverage and imposes restrictions on annual coverage limits, which limits will be prohibited beginning in 2014. Further, for plans issued after March 23, 2010, insurers cannot deny coverage to dependent children of plan participants because of pre-existing conditions. Beginning in 2014, this practice will be banned as to all insured individuals. The ACA also requires all new policies created post-March 2010 to cover the cost of most preventive without cost-sharing.

The Act will change the insurance environment.

The Act will also change the insurance environment through its creation of Health Benefit Exchanges. By January 1, 2014, the Act requires the States to establish “Health Benefit Exchanges,” one for individuals and one for small employers with 100 or fewer workers. In 2017, the States may choose whether to open the exchanges to large employers as well. Employees may opt out of the employer’s plan and choose to participate in the exchange. Those who opt out of the employer’s plan may receive a tax credit if the employer’s coverage is not affordable, i.e., (1) if the employee’s required contribution to the insurance premium is greater than 9.5% of his income or (2) if the employer plan pays less than 60% of the cost of covered care, the ACA’s standard of “qualified coverage.”

In addition, the ACA introduces other new regulations and reporting requirements that may increase costs on businesses. As of 2018, employers will be required to pay an excise tax of 40% on high cost health insurance that exceeds a certain cap. The cap has been set initially at $10,200 for individuals and at $27,500 for families. Effective 2013, contributions to flexible spending accounts will be capped at $2,500. As of 2014, employers with more than 200 full-time employees to automatically enroll all new full-time employees in the employer’s health insurance plan. The Act also contains new disclosure and reporting requirements. For example, for new plans, employers must offer an external appeals process for employee appeals of benefit decisions, and beginning in 2012, employers must report the cost of employer-sponsored health insurance on employees’ W-2 statements.

Other costs include an annual fee on health insurance providers effective 2014, an annual fee on manufacturers and importers of brand-name pharmaceuticals effective 2011, and an excise tax on manufacturers and importers of certain medical devices effective 2013.

Under the Act, employers with more than 50 full-time employees or their equivalent will be required to offer healthcare coverage to their full-time employees or pay a penalty.

Notably, as of 2014, “large” employers with more than 50 full-time employees or their equivalent will be required to offer healthcare coverage to their full-time employees or pay a penalty, and full-time employees are defined as those who work at least 30 hours per week. Two basic rules affect employers’ obligations under this system. First, if a large employer does not offer healthcare coverage that complies with certain standards to all full-time employees, and any employee obtains tax-subsidized coverage on an individual exchange, the employer must pay $2000 for every full-time employee, not counting the first 30 employees. Second, if an employer offers coverage but the plan is not affordable (i.e., it does not cover 60% of the cost of covered expenses or if the employee’s contribution for single coverage is greater than 9.5% of the employee’s income), the employee can receive tax-subsidized coverage on the exchange; if this occurs, the employer must pay a $3000 penalty for that employee.

Small employers with 25 or fewer employees and wages of $50,000 or less per employee are eligible for a tax credit if the employer offers health insurance and pays at least 50% of the premium cost. For firms of no more than 10 workers and wages of $25,000 or less per employee, the maximum credit is 35% of the employer’s contribution for tax years 2010 through 2013 and 50% for tax years 2014 and 2015. As employers increase in size and wages per employee, the credits decrease, and none are available after 2015.

Even so-called "grandfathered" plans are still subject to certain requirements under the ACA.

Some of the new rules will not apply to “grandfathered” plans, defined as individual or group health plans in effect before the Act was enacted on March 23, 2010. For example, employers with “grandfathered” plans may require employees to pay a share of preventive healthcare costs and are not required to establish the appeals procedure to review employee claims. They are also not subject to the Act’s new requirements regarding patients’ choice of health care providers and access to emergency care. Nevertheless, even grandfathered plans may not impose lifetime dollar limits on coverage or cancel coverage because of an “honest mistake” on an insurance application. In addition, grandfathered employer, but not individual, plans may not deny children coverage based on pre-existing conditions.

However, to maintain “grandfathered” status, an employer may not: change insurers, significantly reduce benefits, decrease employer contributions by more than 5%, raise copayment charges by more than $5 (adjusted each year for inflation), raise deductibles by a certain percent, increase co-insurance charges, or impose a new or harsher annual limit.

In light of these changes to the healthcare landscape, employers should consult with their insurance brokers to develop a plan for the future and with their legal counsel to ensure compliance with the Affordable Care Act.

U.S. Government Operated Hospitals and Federally Mandated Socialized Healthcare, Part II: Back to the Future

In 1798, the U.S. Congress established a system of maritime medical facilities for merchant marines funded by a mandatory payroll tax; the federally operated Marine Hospital System appears to set a precedent for modern initiatives like PPACA.

More than 200 years before the Patient Protection and Affordable Care Act ("PPACA"), the U.S. government endorsed, created and maintained a socialized medical program for seamen which later came to be known as the Marine Hospital Service. The first part of this article discusses the European antecedents of the Marine Hospital Service and traces its history through the modern U.S. Public Health Service.

Some suggest that there is no distinction between the 1798 Act and the modern PPACA.

Rick Ungar's article from Forbes.com, also discussed in the first part of this article, suggests that there is ultimately no constitutional distinction between the federal socialized healthcare program created in 1798 by the An Act for the Relief of Sick and Disabled Seamen (the "1798 Act"), and the modern PPACA passed in 2010.

In a follow-up to Ungar's article, Greg Sargent quotes Adam Rothman, an associated professor of history at Georgetown University, as stating that the 1798 Act is "a good example that the post-revolutionary generation clearly thought that the national government had a role in subsidizing health care."[1]

Many of the nation's founders were serving in Congress in 1798 when the 1798 Act creating the Marine Hospital Service was passed

Ungar goes even further, suggesting that the 1798 Act and the Marine Hospital Service are proof that a federal mandate requiring all citizens and legal residents to maintain qualifying health care coverage is clearly constitutional. He dismisses a constitutional challenge to the legality of mandated healthcare based on the number of people who are required to purchase the coverage, and states that the nation’s founders, many of whom were serving in Congress when the 1798 Act was passed, believed that mandated health insurance coverage was permitted under the Constitution.

During its early years, Ungar notes, the nation’s leaders realized that foreign trade was vital to the country’s economy, and that "a healthy maritime workforce was essential to the ability of our private merchant ships to engage in foreign trade."[2]

The postcolonial American mariner played a crucial part in the survival of the fledgling country.

However, the vital role that the early American seaman played in the survival of the fledgling country is difficult to understate. The postcolonial merchant mariner was "a crucial laborer in an early American economy that was deeply dependent on foreign commerce."[3]

Consider the following:

Why did Anglo-American society lavish such attention on health care for the merchant marine? First, mercantilist economic theory emphasized the importance of a healthy maritime labor force. In mercantilism, economic dominion was the extension of war by commercial means. Countries vied with one another for control of the most markets, over the broadest expanse of land. Mariners were the foot soldiers in this race for global power.[4]

Over time, the safety net provided by the Marine Hospital Service actually became an incentive for early Americans to join the merchant marine trade despite its harsh, demanding and dangerous lifestyle. This ensured that "a stable supply of healthy maritime workers" was available to keep the fundamental engine of the young country’s economy at full steam.[5]

Thus, the concern for the health of merchant mariners loomed large in postcolonial America because "the United States economy remained tethered to European markets and long-distance maritime trade" and American "society realized the great significance of the merchant marine" in maintaining that vital tether.[6]

The essential role of the American seamen in the country’s economy may be a significant distinction between the 1798 Act and PPACA that justified federal intervention

An argument could be made that the essential role of the American seamen in the country’s economy is a significant distinction between the 1798 Act and PPACA that justified federal intervention for the general welfare of the nation. Further, the argument could be made that the 1798 Act was closer to federal initiatives like the regulation of workplace health and safety through the Occupational Safety and Health Administration ("OSHA").

Additionally, the long and well-established tradition of federal legal and regulatory supremacy in the maritime and admiralty arenas cannot be ignored when analyzing the legal distinctions between the 1798 Act and PPACA.

Nevertheless, the establishment and operation of Marine Hospital Service suggests that the United States has a long history of taxing individuals to fund federal institutions to provide public healthcare services.[7]

1. Newsflash: Founders Favored "Government Run Health Care", Greg Sargent, Washington Post, January 20, 2011.
2. Congress Passes Socialized Medicine and Mandates Health Insurance – In 1798; Rick Ungar, Forbes.com.
3. Sailors' Health and National Wealth, Gautham Rao, Common-place.org, Vol. 9, No. 1, October 2008.
4. Id, Rao.
5. Id, Rao.
6. Id, Rao.
7. Id, Rao.

Obamacare Health Insurance Regulations and Exchanges Could Be Here to Stay

Efforts to legislatively dismantle the reforms and requirements of the Affordable Care Act may nevertheless leave behind significant remnants of Obamacare provisions, such as limits on exclusions for pre-existing conditions as well as the health insurance exchanges.

The Politico has an article suggesting that, even if Republicans find a way to repeal the Patient Protection and Affordable Care Act, many of the insurance rules and regulations issued as a result of the Obamacare legislation could be here to stay.[1]

Obamacare is more focused on the health insurance industry than the health care industry.

Although Obamacare is styled as a health care law and described as reform for the health care industry, the legislation is actually more narrowly focused on health insurance law and reform of the health insurance industry. As discussed in a previous Insurance Regulatory Law article, the health insurance industry has already begun to shift as a result of legislative reforms like Obamacare.

The Politico suggests that, even if a new administration takes a "legislative wrecking ball" to the Affordable Care Act, what remains after the dust clears could nevertheless "cause some pretty serious policy headaches."[2]

From the Politico:

GOP Hill aides are still working through the details of what they can rip out of the Affordable Care Act through budget reconciliation — the same complex process used more than two years ago to usher through final passage of the health law.

There’s broad agreement Republicans could use the legislative maneuver to go after the law’s individual mandate — and it doesn’t matter whether it’s a tax or a penalty; either is fair game under reconciliation.

Health policy analysts are split on what else can stay under reconciliation and what can go. There’s uncertainty, in particular, on what would happen to the new insurance rules — such as requiring insurers to cover people with pre-existing conditions. The Senate parliamentarian — Congress’s rule maker — will be at the center of any decision.

Keith Hennessey, a research fellow at Stanford University’s Hoover Institution, agreed that much of the law could be unspooled under reconciliation but predicted that some discretionary programs could remain intact.[3]

The Politico questions whether Congress would seek the repeal of Obamacare's health insurance market reforms "including a requirement for insurers to offer coverage to anyone who seeks it and a ban on charging customers based on their medical histories."[4]

Insurers have warned that allowing those market reforms to stay without mandating that virtually everyone have insurance would encourage people to wait until they’re sick to seek coverage, driving up the cost of insurance.[5]

Another important consideration is the health insurance exchanges that the individual states are required to develop under Obamacare. The exchanges have been described as health insurance markets where individuals and small businesses can shop online for competitively priced health insurance coverage. Each state must have its own exchange up and running by January 1, 2014, or else the federal government will step in and set up an exchange for the state.[6]

Health insurers likely to press forward with health insurance exchange development.

IT industry experts see the recent Supreme Court decision upholding the individual mandate as a sign that health insurers will abandon their "wait-and-see phase" and press forward with health insurance exchange development. In order to be ready to participate in the new online marketplaces, health insurers will have to integrate "their back-end electronic enrollment, fulfillment, billing and reconciliation systems" with the exchanges.[7]

The clock is ticking, according to those experts, in part because open enrollment for the health insurance exchanges will have to begin in late 2013 to be ready for the January 1, 2014 deadline.[8]

Some argue that Affordable Care Act subsidies are not available to those who buy insurance through federally-run exchanges.

The Affordable Care Act also includes certain subsidies to help consumers pay for health insurance bought through the exchanges. But the issue of whether those subsidies are available only to consumers who purchase insurance through a state-run exchange, or if they are available to all consumers including those that purchase through a federal exchange, is already turning into a brawl according to the New York Times.[9]

The law states that “each state shall” establish an exchange and that subsidies will be provided to residents of a state with respect to health plans offered “through an exchange established by the state.”[10]

Some say that means that only people who purchase coverage through an exchange set up and run by a state are eligible for the subsidies. Others say that Congress clearly intended the subsidies to be available for those who purchase through federal as well as state exchanges.[11]

According to the New York Times, the federal government could be running the exchanges in one-third, or even one-half, of the states because "local officials have been moving slowly or openly resisting" the exchanges.[12]

The dispute has huge practical implications. The Congressional Budget Office predicts that 23 million uninsured people will gain coverage through exchanges and that all but five million of them will qualify for subsidies, averaging more than $6,000 a year per person. Subsidies, in the form of tax credits, will be available to people with incomes from the poverty level up to four times that amount ($23,050 to $92,200 for a family of four).[13]

The one thing that is clear with respect to the future of the Affordable Care Act is that it will likely continue to produce just as much legislative, political, administrative and industry turmoil (and expense) despite the Supreme Court's decision on the individual mandate.

1. Insurance rules might stay even if ACA repealed, Jason Millman and Matt Dobias, Politico, July 8, 2012.
2. Insurance rules might stay..., id.
3. Insurance rules might stay..., id.
4. Insurance rules might stay..., id.
5. Insurance rules might stay..., id.
6. Feds release health overhaul blueprint for U.S. statesThe Associated Press, NJ.com, March 13, 2012.
7. Supreme Court 'Obamacare' Decision Will Speed Health Insurance Exchange Growth, Brian T. Horowitz, eWEEK, June 28, 2012.
8. Supreme Court…, id.
9. Brawling Over Health Care Moves to Rules on Exchanges, Robert Pear, New York Times, July 7, 2012.
10. Brawling Over Health Care..., id.
11. Brawling Over Health Care..., id.
12.  Brawling Over Health Care..., id.
13.  Brawling Over Health Care..., id.

U.S. Government Operated Hospitals and Federally Mandated Socialized Healthcare, Part I: The Present... or the Past?

More than 200 years before PPACA, the U.S. government created a socialized medical program known as the Marine Hospital Service which later evolved into the modern Public Health Service.

As Rick Ungar notes in his article from Forbes.com, the "ink was barely dry" on the Patient Protection and Affordable Care Act ("PPACA") signed into law by the Obama administration when "the first of many lawsuits to block the mandated health insurance provisions of the law" was filed.[1] One of the arguments advanced against PPACA is that a federal mandate requiring all U.S. citizens and legal residents to purchase minimum healthcare insurance coverage abrogates the United States Constitution.[2]

The 1798 Act authorized a federal system of hospitals and services to provide healthcare for sick and disabled seamen in the ports of the United States.

In 1798, President John Adams signed into law An Act for the Relief of Sick and Disabled Seamen (the "1798 Act"), which authorized the federal government to create and operate a system of hospitals and services to provide healthcare for sick and disabled seamen in the ports of the United States. The Act also required "the master or owner of every ship or vessel of the United States" to pay a tax, retained from the wages of the seamen in his employ, to the federal treasury to be used to fund these marine healthcare services.[3]

Thus, more than 200 years before PPACA, the U.S. government endorsed, created and maintained a socialized medical program which later came to be known as the Marine Hospital Service.[4]

Interestingly, the U.S. Marine Hospital Service has its roots in British and colonial traditions. Great Britain supported hospitals with taxes from the monthly wages of seamen and merchant mariners. The Virginia colony funded a hospital for Mariners in Hampton from a tax on exports in 1710, and Pennsylvania taxed seamen’s wages for a marine hospital in Philadelphia in 1729.[5]

The Marine Hospital Service grew rapidly after its creation in 1798, and annual admissions consistently exceeded 10,000 during the 1850s.

The Marine Hospital Service grew rapidly after its creation in 1798, with the government establishing federal marine hospitals in Boston, Philadelphia, Baltimore, Charleston and New Orleans by 1809. The system expanded to include twenty-six (26) hospitals and medical facilities by 1818, and ninety-five (95) by 1858. Annual admissions to Marine Hospital Service facilities "consistently exceeded ten thousand during the 1850s."[6]

Establishing these marine medical services was considered so important, in fact, that President Thomas Jefferson called on Congress in 1802 to create "a marine hospital in New Orleans even before the United States officially assumed control of the Louisiana Purchase." Congress complied and, in 1803, the New Orleans Marine Hospital treated over four hundred (400) American sailors.[7]

The Service focused more on sailors aboard river and coastal ships as the economy shifted towards domestic concerns.

The Marine Hospital Service expanded as the country expanded, evolving as the country’s economy and political environment changed. As the country moved westward, the American economy shifted away from foreign commerce to domestic agriculture and manufacturing. The Marine Hospital Service shifted, as well, focusing more on sailors aboard river steamboats and coastal transports than transatlantic trading ships. [8]

The Marine Hospital Service administration was centralized in Washington, D.C., in the 1870s, and it adopted a military model as part of a systematic reform. After the passage of the national Quarantine Act in 1878, the "task of controlling epidemic diseases through quarantine and disinfection measures, as well as immunization programs, fell to the Marine Hospital Service."[9]

The Marine Hospital Service became the U.S. Public Health Service in the early 1900s.

Eventually, the Marine Hospital Service evolved into the United States Public Health Service in the early 1900s. Today, the Public Health Service continues "to protect, promote, and advance the health and safety" of the nation under the supervision of the Surgeon General.[10]

1. Congress Passes Socialized Medicine and Mandates Health Insurance – In 1798; Rick Ungar, Forbes.com.
2. Florida et al v. United States Department of Health and Human Services, Case 3:10-cv-00091-RV-EMT, United States District Court, Northern District of Florida, Pensacola Division.
3. An Act for the Relief of Sick and Disabled Seamen, U.S. Congress, 1798.
4. Id, Ungar.
5. Sailors' Health and National Wealth, Gautham Rao, Common-place.org, Vol. 9, No. 1, October 2008.
6. Id, Rao.
7. Id, Rao.
8. Id, Rao.
9. U.S. Public Health Service Commissioned Corps; About the Commissioned Corps; History.
10. U.S. Public Health Service Commissioned Corps.

Top 10 Regulatory States for P&C Insurers

Vermont and Ohio had the best property and casualty insurance regulatory environments in the U.S. in 2010, followed by Illinois, Maine, and Wisconsin, according to a report recently released by the Heartland Institute.

The Heartland Institute, a national nonprofit research and education organization, has issued its 2011 Property and Casualty Insurance Report Card (available in PDF), a state-by-state analysis of insurance regulatory burden.

The report ‘asks fundamental questions about the nation’s property and casualty insurance regulatory environment’ such as the following:

• ‘How free are consumers to choose the property and casualty insurance products they want?’ and


• ‘How free are insurers to provide the property and casualty insurance products consumers say they want?’[1][2]

Vermont and Ohio had the best property and casualty insurance regulatory environments in the U.S. in 2010, followed by Illinois, Maine, and Wisconsin, according to the report.

The report notes that federal regulatory reforms of the financial services industry and health care did not have any major effects on property and casualty insurance, despite the fact that both the Patient Protection and Affordable Care Act (PPACA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act included provisions affecting property and casualty insurance.

Reviewing the data on insurance in 2011, we see once again a modest, uneven, but nonetheless real trend towards more freedom for consumers and businesses in the homeowners’ and automobile insurance realms. Although state-level insurance bureaucracies make it difficult, sometimes impossible, for insurers to offer consumers the products they need, want, and deserve, burdensome regulation shows signs of easing.[3]

State insurance regulation is graded in the report based on a number of factors, including politicization, regulatory clarity, residual insurance markets, market concentration and rate regulation.

For the fourth year in a row, Florida was ranked last on the list with an ‘F’ letter grade.

For the fourth year in a row, Florida was ranked last on the list with a letter grade of ‘F’ and a numerical score of -35. The report is very critical of the Florida regulatory environment, but notes that Florida’s legislature, with bipartisan majorities, did attempt ‘to reduce the size and scope of the state’s extensive insurance market interventions.'

The report also indicates that Florida ‘experienced a wave of insurer insolvencies mostly from over-regulation of the market’ including many insolvencies that ‘the Florida Office of Insurance Regulation kept secret from consumers in the early months of the year [that] ended up sending consumers and regulators scampering to other companies and the state’s residual market, the Florida Citizens Property Insurance Corporation.'

1. 2011 Property and Casualty Insurance Report Card, The Heartland Institute, May 2011.
2. See also the Heartland Institute's article regarding the report, written by Eli Lehrer, Vice President of Heartland.
3. 2011 Property and Casualty Insurance Report Card, The Heartland Institute, May 2011.

Supreme Court Upholds Constitutionality of Obamacare and the Individual Mandate

The U.S. Supreme Court upholds the constitutionality of the Patient Protection and Affordable Care Act, and related healthcare reform legislation. The Court determined that the most controversial aspect of Obamacare, the individual mandate, was constitutional because it is a tax.

The Supreme Court of the United States has released its ruling in the matters of National Federation of Independent Business v. Sebelius, U.S. Department of Health and Human Services v. Florida and Florida v. Department of Health and Human Services. These three cases were decisions out of the 11th Circuit of the United States Court of Appeals that challenged the constitutionality of some or all of the Patient Protection and Affordable Care Act, and related healthcare reform legislation, known colloquially as Obamacare.

The principal issues set forth in the 11th Circuit cases that the Supreme Court agreed to review can be simplified and summarized as follows:

• Whether Congress has the power under the Constitution to require virtually all Americans to obtain health insurance or pay a penalty;
• Whether, if the Court concludes that the provision of the Act requiring virtually all Americans to obtain health insurance or pay a penalty is unconstitutional, the rest of the Act can remain in effect or must also be invalidated;
• Whether Congress can require states to choose between complying with provisions of the Patient Protection and Affordable Care Act or losing federal funding for the Medicaid program; and
• whether the Anti-Injunction Act, which prohibits taxpayers from filing a lawsuit to challenge a tax until the tax goes into effect and they are required to pay it, prohibits a challenge to the Act’s provision requiring virtually all Americans to obtain health insurance or pay a penalty until after the provision goes into effect in 2014.[1]

The most controversial matter has been what is known as the "individual mandate" issue — whether the federal government can compel practically all Americans to acquire health insurance coverage or pay a penalty.[2]

The Supreme Court's ruling today generally upholds the constitutionality of Obamacare, although it narrowly reads the federal government's authority to terminate Medicaid funds. The individual mandate is upheld as a tax, and the Court reinforces that individuals can simply refuse to pay the tax.[3]

1. Remaining Merits Cases: In Plain English, SCOTUSblog, Amy Howe, June 15, 2012.
2. Health care: Time to sum up, SCOTUSblog, Lyle Denniston, June 26, 2012.
3. SCOTUSblog, live blog coverage of public reading of the Court's opinion, Amy Howe, Lyle Denniston, Tom Goldstein, June 28, 2012, 9:45 AM CST.

‘Twist’ in Health Care ‘Simplification’ Provisions: 3 Million More Eligible for Medicaid in 2014

Up to three million more people, mostly middle-class retirees, will qualify for Medicaid in 2014 under provisions of PPACA meant to simplify health care law, in addition to the estimated 16 million to 18 million additional people that PPACA will already bring into the program.

The Associated Press is reporting that the Patient Protection and Affordable Care Act (‘PPACA’) signed into law by the Obama administration will qualify up to three million more, mostly middle-class, people for Medicaid, a program originally intended for the poor.

In 2014, a married couple earning as much as $62,000 a year could still qualify for Medicaid.

This new ‘twist’ was only recently ‘discovered’ nearly a year after PPACA was signed into law. Described as part of PPACA's effort at 'simplification' of federal health care law, the twist is this: in 2014, Social Security benefits will no longer be counted as income for determining Medicaid eligibility.

According to an example cited by the Centers for Medicare and Medicaid Services ('CMS'), a married couple retiring at age 62 in 2014 and each receiving the maximum Social Security benefit of $23,500 could get $17,000 from other sources, for a total income of $64,000, and still be eligible for Medicaid. A $64,000 income is about four times the federal poverty level for a two-person household.

Read the full article:

A twist in Obama's health care law
Ricardo Alonso-Zaldivar | Associated Press | Yahoo News
June 21, 2011

HHS Issues Final Rule Regarding Federal Review of “Unreasonable” Health Insurance Premium Rate Increases Under PPACA

On May 19, 2011, the HHS issued the final rule establishing the process and standards by which the HHS will review increases in health insurance premium rates to determine whether such increases are “unreasonable” as required by PPACA.

As discussed in a previous article on the history of insurance regulation in the United States, the Patient Protection and Affordable Care Act ("PPACA") is one of several recent federal legislative efforts that encroaches into the traditionally state-run insurance regulatory scheme.

A number of the insurance regulatory provisions of PPACA are already in effect, such as the mandated minimum loss ratios: effective January 1, 2011, health insurers must spend at least 85% of large group and 80% of small group and individual plan premiums on healthcare and improving healthcare quality, or else rebate the overage to policyholders.[1]

The federal review of health insurance premium increases is another insurance regulatory provision of PPACA that will likely have significant repercussions in the health insurance industry, and may have a lasting impact on the future of insurance regulation as a whole.

The federal review of health insurance premium increases is an insurance regulatory provision of PPACA that will likely have significant repercussions in the health insurance industry.

PPACA authorizes and directs the United States Department of Health and Human Services (“HHS”) to establish a process for the annual review of “unreasonable” increases in premium rates for health insurance coverage. Additionally, health insurers must submit to the HHS a written justification for an “unreasonable” premium rate increase prior to the implementation of that increase, and must prominently post that information on their Internet websites.[2]

The HHS issued proposed regulations relative to health insurance premium rate increase disclosure and review on December 21, 2010. The Proposed Regulations were open for public comment until February 22, 2011. The final rule (the “Rule”), with a sixty (60) day comment period, was issued by the HHS on May 19, 2011, and published in the Federal Register on May 23, 2011.[3] The Rule becomes effective on July 18, 2011.

The Rule subjects any rate increase to review by the Centers for Medicare & Medicaid Service (“CMS”) if the average increase for all enrollees weighted by premium volume is ten percent (10%) or more, or if certain other standards apply.[4] However, the Rule is only applicable to individual and small group health insurance coverage, and it is not applicable to health plans that are grandfathered under PPACA or to certain excepted benefits such as dental or vision coverage.[5]

A health insurance rate increase is “unreasonable” if it is “an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase.”

Under the Rule, a health insurance rate increase will be deemed “unreasonable” by CMS if the rate increase is “an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase.”[6] An “excessive rate increase” is described as a rate increase that “causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided under the coverage.” To make this determination, the Rule requires CMS to consider:

1. Whether the rate increase results in a projected medical loss ratio below the Federal medical loss ratio standard in the applicable market to which the rate increase applies, after accounting for any adjustments allowable under Federal law;
2. Whether one or more of the assumptions on which the rate increase is based is not supported by substantial evidence; and
3. Whether the choice of assumptions or combination of assumptions on which the rate increase is based is unreasonable.”[7]

A rate increase will be deemed an “unjustified rate increase” if the insurer provides data or documentation to CMS regarding the rate increase that does not provide a basis upon which the reasonableness of the increase may be determined, or if the information provided is incomplete or inadequate to establish such reasonableness.[8]

Finally, the CMS will find a rate increase “unfairly discriminatory” if the increase “results in premium differences between insureds within similar risk categories that:

1. Are not permissible under applicable State law; or
2. In the absence of an applicable State law, do not reasonably correspond to differences in expected costs.”[9]

CMS will adopt a state regulator's review of a rate increase only if it determines that the regulator has an "Effective Rate Review Program" under the Rule.

Significantly, state insurance regulators are to submit their findings to CMS on any health insurance rate review they undertake. The Rule indicates that CMS will adopt the determination of a state regulator as to whether a rate increase is unreasonable if the state has “an Effective Rate Review Program” and if the state regulator provides a written explanation of its analysis of the relevant factors for “unreasonableness” under the Rule.[10]

Finally, the Rule also sets out lengthy considerations that CMS is to evaluate in determining whether a state rate review program qualifies as “Effective” under the Rule.[11]

1. PPACA, Pub L. No. 111-148 § 10101(f).
2. PPACA, Pub L. No. 11-148 § 1003.
3. 45 CFR Part 154; Rate Increase Disclosure and Review; Department of Health and Human Services; http://www.gpo.gov/fdsys/pkg/FR-2015-05-23/pdf/2015-12631.pdf.
4. 45 CFR § 154.200.
5. 45 CFR § 154.103.
6. 45 CFR § 154.205(a).
7. 45 CFR § 154.205(b).
8. 45 CFR § 154.205(c).
9. 45 CFR § 154.205(d).
10. 45 CFR § 154.210(b).
11. 45 CFR § 154.301(a). YVAFZ3Z94HDR