Lawmakers Reach Deal to End Government Shutdown, Raise Debt Ceiling

by Andrea M. Bergman, Karen S. Sealander, Erica Stocker and Eric Zimmerman

While the focus over the past 16 days has been on the shuttered government and the prospect of the United States defaulting on its debt obligations, there are subtexts that are relevant to the health care industry.  This On the Subject details five key health care takeaways.

Read the full article here.

New Developments Regarding ACA Contraception Coverage Requirements

by Amy M. Gordon, Anne W. Hance and Susan M. Nash

The U.S. Department of Health and Human Services (HHS), the U.S. Department of Labor’s Employee Benefits Security Administration and the U.S. Department of the Treasury’s Internal Revenue Service issued a proposed rule on February 1, 2013 presenting a revised approach for the coverage of women’s contraception by certain religious employers under the Affordable Care Act. The proposed rule, which is open for public comment through April 8, 2013, has significant implications for employers, health insurers and third-party administrators (TPAs). 

The Landscape

The Affordable Care Act requires non-grandfathered group health plans and health insurance issuers offering individual and group health insurance coverage to provide first-dollar coverage for select preventive services. For women with reproductive capacity, this includes FDA-approved contraceptive, sterilization procedures and patient education, as prescribed by a health care provider. The agencies adopted an exemption from this requirement for group health plans sponsored by religious employers. The agencies also established a temporary enforcement safe harbor for non-grandfathered group health plans sponsored by certain nonprofit organizations with religious objections to providing contraception coverage for plan years beginning before August 1, 2013. The proposed rule is the agencies’ latest attempt to balance access to these health care services and accommodation of organizations’ religious beliefs.

The Proposed Rule

Exemption for Religious Employers

The proposed rule simplifies the definition of a “religious employer” that is exempt from the contraceptive coverage requirement to mean any nonprofit entity referenced in Sections 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code.

Accommodation for Eligible Organizations

A separate accommodation will be established for group health plans sponsored by an “eligible organization,” defined as an organization that: (1) opposes providing coverage for some or all of any contraceptive services required to be covered on account of religious objections; (2) is organized and operates as a nonprofit entity; (3) holds itself out as a religious organization; and (4) self-certifies that it meets these criteria and specifies the contraceptive services for which it objects to providing coverage.

Contraceptive coverage will still be made available to women participating in group health plans sponsored by an “eligible organizations” on a no-cost basis.  The proposed rule will require health insurance issuers providing fully-insured coverage to group health plans sponsored by eligible organizations to enroll participants into separate individual health insurance policies that provide contraception coverage without cost sharing or additional premiums. For self-insured group health plans, the applicable TPA would arrange for the enrollment of participants into individual health insurance policies that provide contraception coverage without cost sharing or additional premiums, whether through voluntary enrollment, automatic enrollment or by the TPA becoming the plan administrator for this purpose.

HHS proposes to recognize contraception-only policies as a new category of “excepted benefit” coverage, although certain consumer protections, such as guaranteed renewability and annual/lifetime limit prohibitions, still would apply. 

The proposed rule anticipates that health insurance issuers would offset the cost of providing contraceptive coverage under individual policies issued to participants of self-funded group health plans by claiming a reduction to user fees imposed on issuers participating in Federally Facilitated Exchanges (FFEs).

Next Steps

  • Entities that may qualify for the “eligible organization” accommodation, including religious institutions of higher learning, will need to consider whether they can self-certify to this new status. They also will have to work with their insurer or TPA to address how coverage will be provided to participants.
  • The proposed rule raises numerous legal, financial and operational issues for health insurance issuers, including development of a new type of excepted benefit coverage, coordination of enrollment and benefits with self-funded group health plans, the cost of providing this coverage, and the potential risks associated with requesting a reduced FFE user fee based on costs relating to these new policies. 
  • TPAs will need to consider how they will arrange for contraception coverage to participants of self-funded plan customers that certify to being an eligible organization, a challenging process if different customers seek different approaches. TPAs also will have consider how to recover administrative costs from issuers issuing coverage policies (and receiving FFE reductions). An additional consideration is how to fund contraception coverage from the coverage effective date, September 1, 2013, until dollars become available in connection with the FFE user fees. 

New ACA Regulations Address Minimum Essential Coverage and Exemptions

by Anne W. Hance and Amy M. Gordon

The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) released on January 30, 2013, two proposed rules and a final rule relating to the Affordable Care Act’s (ACA) requirement that individuals maintain “minimum essential coverage” (MEC) or be subject to a “shared responsibility” payment.

  • IRS Final Rule: The IRS issued final regulations in May 2012 addressing eligibility for the health insurance premium tax credit, which is available to certain low-income individuals purchasing a qualified health plan on a health insurance exchange.  The January 30, 2013 final rule supplements these regulations by finalizing the requirement that “affordability” of coverage available for the employee under an employer-sponsored group health plan is determined based on self-only coverage (and not family coverage).
  • IRS Proposed Rule: The proposed rule addresses (1) the obligation each taxpayer has to make a “shared responsibility payment” for himself, herself and any dependents who, for a calendar month, do not have MEC, and (2) exemptions to this payment obligation.  The limited exceptions for this payment obligation include individuals who lack access to affordable MEC.  The proposed rule addresses the difference in determining affordable MEC for an employee eligible for coverage under a group health plan (as described above) versus affordability for a “related individual.”  A “related individual” is one for whom an Internal Revenue Code Section 151 deduction can be claimed.
  • HHS Proposed Rule: The HHS proposed rule sets forth standards and processes by which a health insurance exchange will make eligibility determinations and grant exemptions from the shared responsibility payment.  This proposed rule also (1) identifies certain types of coverage deemed to be MEC , and (2) sets forth standards by which HHS may designate certain health benefits coverage as MEC. 

    For example, self-funded student health insurance coverage and Medicare Advantage Plans are proposed to be designated as MEC.  Additionally, sponsors of other types of coverage that meet designated criteria, such as providing consumer protections required by the Affordable Care Act, may apply to HHS for recognition as MEC.

Next Steps

Health insurance issuers will want to consider whether the various products they offer or administer will meet the MEC requirements set forth in HHS’s proposed rule, in order to respond to inquiries from customers, to meet notice requirements (including inserting model statements into existing plan documents, as applicable), and potentially to respond to exchanges making eligibility determinations.  If a product does not constitute MEC, issuers may want to consider whether to continue to offer the product in its current form or revise the coverage to meet the MEC requirements.

Sponsors of group health plans will need to consider the separate affordability standards for employees and for related individuals and the implications for group health plan participants, and either modify coverage to meet the MEC standards, or consider the consequences of the shared responsibility payment.

CMS Issues Proposed Rule Implementing the "Federal Sunshine Law" Reporting Requirements

by Bernadette M. Broccolo, Emily J. Cook, Lesley N. DeRenzo, Susan S. Lee and Joan Polacheck

The U.S. Centers for Medicare & Medicaid Services (CMS) released a proposed rule implementing the "Sunshine" provisions of the Affordable Care Act (ACA) that requires annual public reporting by certain drug and device manufacturers of payments made by them to physicians and teaching hospitals and of physician ownership interests in such manufacturers.  The "Sunshine" provisions of the ACA also require group purchasing organizations to make annual public reports of physician ownership interests in such organizations.  CMS is accepting comments on its proposed rule through February 17, 2012.

To read the full article, please click here

House End of Year Package Would Cut Hospital Funding More than $17 billion

by Karen S. Sealander and Erika Stocker

As the clock ticks down on Congress’ 2011 session and lawmakers look to wrap up outstanding FY 2012 appropriations bills, leaders in both the House of Representatives and the Senate continue to look for a path forward on priority legislation to extend unemployment benefits, renew the expiring Social Security payroll tax cut and prevent a steep cut in Medicare physician reimbursements as part of a large year-end “extenders” package. 

House Republicans released their extenders package, HR 3630, late last week and are working to build support for the measure, with a vote expected early this week. This 369-page legislation would reduce Medicare payments to hospitals by more than $17 billion in order to finance other of the bill’s provisions. Highlights of the health-related provisions are set forth below and a more detailed summary of the health-related provisions can be found here

Should HR 3630 pass the House, it is expected to be soundly rejected in the Senate. Further, President Obama has already indicated his displeasure with certain of the bill’s provisions. As such, we believe that there are two options for an extenders package to make its way to the President’s desk for a signature: (1) House and Senate leaders will need to have an earnest negotiation to agree on a compromise that can pass muster in a Republican-led House, can garner 60 votes in the Democratically-controlled Senate and can avoid the veto pen of President Obama, or (2) the Senate will approve its own extenders package in the nature of a substitute to the House bill, which the House would have little choice but to accept.

Highlights of some of the health-related provisions are as follows:

Extenders and Other Changes

  • The bill heads off a 27.4 percent cut in Medicare physician payments, and provides that for CYs 2012 and 2013, physician payments would increase 1 percent in each year. The Congressional Budget Office (CBO) scores this provision as costing $38.9 billion over 10 years.
  • The bill would extend several expiring Medicare ambulance add-on payments, including a 2 percent adjustment for urban ground ambulance services, a 3 percent adjustment for rural ground ambulance services and the 22.6 percent increase for ambulance payments for trips originating in “super rural areas,” through December 31, 2012,. CBO scored this provision at $0.1 billion over 10 years.
  • The bill would extend with modifications a program that provides an exceptions process to outpatient therapy caps through December 31, 2013. CBO scored this provision at $1.7 billion over 10 years.
  • The bill would extend the physician fee schedule's work relative value units (RVU) geographic floor through December 31, 2012.  CBO scored this provision at $0.5 billion over 10 years.
  • The bill would re-open physician-hospital ownership restrictions imposed under the Affordable Care Act (ACA) to allow physician-owned hospitals that were under construction, but did not have Medicare provider numbers as of December 31, 2010, to open and operate and qualify for grandfather protection.  The bill also would make it significantly easier for hospitals that were grandfathered under the ACA provisions to expand capacity (presently, grandfathered hospitals are allowed to expand bed and OR capacity only if they meet very limited criteria). CBO scored this provision at $0.3 billion over 10 years.

Offsets

 The bill utilizes a number of offsets, including several that come directly from hospital payments:

  • Reducing hospital outpatient prospective payment system (HOPPS) facility fee payments to hospitals for evaluation and management (E/M) services to be equal to the Medicare payment for the same service when furnished in a physician office. CBO estimates that this provision saves $6.8 billion over 10 years.
  • Reducing the reimbursement hospitals and other providers can receive for bad debts from 70 percent to 55 percent, phased in over 3 years.  CBO estimates that this provision saves $10.6 billion over 10 years. Of note, the President had proposed that the percentage be reduced to 25 percent.
  • Rebasing Medicaid disproportionate share hospital (DSH) payments.  CBO estimates that this provision saves $4.1 billion over 10 years.
  • Increase Medicare Part B and D premiums for high-income individuals by 15 percent, and increase the number of individuals considered to be high-income by lowering brackets from $85,000 for individuals to $80,000, and from $170,000 for couples to $160,000.  CBO estimates that this provision saves $31 billion over 10 years.
  • Reducing by $8 billion the Prevention and Public Health Fund created in the ACA.

Omitted Provisions

The bill is also noteworthy for what it does not include, including:

  • Sole community hospital and small rural hospital hold harmless or “TOPS” protections under the outpatient PPS, which will expire December 31, 2011.
  • Section 508 wage index reclassifications, which expired September 30, 2011.
  • Physician pathology technical component payments that allow independent laboratories to receive payments from Medicare for the technical component of pathology services performed for a hospital patient.
  • Reasonable cost payments for clinical laboratories in low density population areas, which expires July 2012.
  • The Medicare-dependent hospital designation program, which expires September 30, 2012.
  • Low-volume hospital payment adjustments, which expires September 30, 2012.

Obama Administration Asks Supreme Court to Take Up Health Reform Case

by J. Peter Rich and Webb Millsaps

The Obama Administration has asked the U.S. Supreme Court to consider the constitutionality of the individual mandate, a provision in the Affordable Care Act (ACA) that the Administration once referred to as the “linchpin” of the sweeping 2010 health reform law.   As we wrote previously, there are numerous challenges to the ACA that are in various stages of litigation, but the most significant case, Florida et al. v. United States Department of Health and Human Services et al. (Florida v. HHS), is the one that the Administration has petitioned the Supreme Court to review.

The challengers in Florida v. HHS, including 26 states, the National Federation of Independent Business and two individual citizens, originally were victorious in the U.S. District Court for the Northern District Court of Florida.  That decision by Judge Roger Vinson found that the individual mandate was unconstitutional and also found that the whole of the ACA must fail as a result because the individual mandate was not deemed severable from the rest of the law.  Judge Vinson’s decision was then upheld in part and reversed in part when the Eleventh Circuit Court of Appeals ruled August 12, 2011.  A three-judge panel of the Eleventh Circuit Court found, in a 2-1 decision, that the individual mandate is unconstitutional, but that it is severable from the remainder of the ACA and therefore that the rest of the health reform law should survive.

The Administration, which could have requested that the Eleventh Circuit re-hear the case en banc, filed their Petition for a Writ of Certiorari (the Petition) on September 27, 2011. By not pursuing the potential interim step of an en banc re-hearing the Administration has made it more likely that the Supreme Court will hear the case and make its ultimate ruling on the matter prior to the November 2012 election. Politically, this could be risky as some observers felt the Administration would not want to have a final decision by the Supreme Court come prior to the election. However, an en banc re-hearing would have carried some risk to the Administration since the Eleventh Circuit would have been free to fully affirm Judge Vinson’s original decision that if the individual mandate is unconstitutional then all of the ACA must be struck down.

The Petition argues that the Supreme Court should resolve the case because the decision by the Eleventh Circuit Court of Appeals “conflicts with a decision of the Sixth Circuit and involves a question of fundamental importance.” The Administration argues in the Petition that the decision by the Eleventh Circuit on the issue of the individual mandate is “fundamentally flawed and denies Congress the broad deference it is due in enacting laws to address the Nation’s most pressing economic problems and set tax policy.”

Pennsylvania Federal Judge Finds the Individual Mandate Unconstitutional and Strikes Down Closely Related Provisions

by J. Peter Rich and Webb Millsaps

On September 13, 2011, a federal district court judge in Pennsylvania ruled that the individual mandate under the Affordable Care Act (ACA) is unconstitutional and that certain provisions closely linked to the individual mandate must also be struck down.

Judge Christopher C. Connor’s decision differed from all of the prior judicial rulings on the question of severability, finding that certain provisions of the ACA which are closely tied to the individual mandate should fail as well, including provisions on guaranteed issuance of health insurance coverage irrespective of pre-existing conditions.  However, Judge Connor ruled that the bulk of the ACA should remain intact, notwithstanding the unconstitutionality of the individual mandate. In this regard, Judge Connor’s decision took a middle path between the previous two district court decisions that had found the individual mandate unconstitutional.  Judge Hudson in Virginia had struck down the individual mandate, but had ruled that all other provisions of the ACA could stand intact.  Judge Vinson in Florida had struck down the individual mandate and had ruled that the entirety of the ACA must fail.

Six federal district courts have now ruled on the constitutionality of the individual mandate: three finding it constitutional and three finding it unconstitutional (two of those decisions, one on each side of the scorecard, were vacated last week by the Fourth Circuit Court of Appeals).  Aside from those six courts, other federal district courts have also ruled in cases involving challenges to the ACA, but those rulings have been on legal grounds not related to the constitutional questions, such as whether the challengers have standing.

Three federal circuit courts of appeals have now considered lower court decisions on the individual mandate.  The Eleventh Circuit Court of Appeals in Atlanta, reviewing Judge Vinson’s opinion, found the individual mandate to be unconstitutional, but overturned Judge Vinson on the severability issue, ruling that the remainder of the ACA should not be struck down.  The Sixth Circuit Court of Appeals in Cincinnati upheld a lower court decision that found the individual mandate to be constitutional.  Last week, on September 8, 2011, the Fourth Circuit Court of Appeals in Richmond vacated two federal district court decisions, finding that the judges did not have standing to reach their decisions (for legal reasons related to standing of the challengers and ripeness of the injuries).  Separately, briefs have been filed in another case which is before the Circuit Court of Appeals for the District of Columbia.

There are approximately 30 cases involving challenges to the ACA that are in various stages of litigation.  Due to the circuit split between the Eleventh Circuit and Sixth Circuit, the U.S. Supreme Court will ultimately resolve the issues of the individual mandate and its severability from other provisions of the ACA.

Eleventh Circuit Strikes the ACA's Individual Mandate as Unconstitutional, Setting Up a Circuit Split and Making Supreme Court Review More Likely

by Webb Millsaps and J. Peter Rich

In a 2-1 decision on August 12, 2011, the Eleventh Circuit Court of Appeals in Atlanta ruled that the individual mandate in the Affordable Care Act (the ACA) is unconstitutional. (See opinion.) In a reversal from the original federal district court decision on appeal, however, the circuit court found that the individual mandate was severable from the remainder of the ACA, and therefore concluded that the remaining parts of the ACA should stand.

By contrast, in the original district court opinion, Judge Roger Vinson, after noting that the individual mandate had been referred to as the “linchpin” of the ACA by the President and others, found that the whole of the ACA was not severable from the individual mandate, and that since the individual mandate was unconstitutional the entire ACA must be struck down.

While the Eleventh Circuit found that the “district court placed undue emphasis on the [ACA’s] lack of a severability clause,” it did acknowledge the closeness of the severability question, particularly with regard to two reforms under the ACA: guaranteed issue health insurance, 42 U.S.C. § 300gg-1 (effective January 1, 2014) and the prohibition on preexisting condition exclusions, id. § 300gg-3.

The Eleventh Circuit Court’s opinion is of significant interest to stakeholders for a variety of reasons. Importantly, this decision sets up a circuit split (the 6th Circuit in Atlanta previously upheld the constitutionality of the individual mandate in a 2-1 decision), which means that Supreme Court review is virtually inevitable. Further, this decision marks the first time that a judge appointed by a democrat ruled against the Obama Administration on the constitutionality of any aspect of the ACA. In addition, the Eleventh Circuit case has been regarded as perhaps the most significant legal challenge to the ACA, in part because the challengers include 26 states, as well as the National Federation of Independent Business. In related ACA legal action, the Fourth Circuit has yet to rule in two other pending challenges.

The Obama Administration has 90 days from August 12, 2011, to decide if it wishes to request an en banc re-hearing before the full Eleventh Circuit Court of Appeals or instead appeal the decision directly to the Supreme Court. The Administration’s decision will likely involve legal and political considerations. In an en banc re-hearing, there is a potential legal risk that the full Eleventh Circuit could affirm the unconstitutionality of the individual mandate, but reverse the panel on the severability issue. Alternatively, if the case moves more swiftly to the Supreme Court and the Court agrees to take up the ACA challenge in the term that begins in October 2011, then a decision would be expected no later than June 2012, a scant five months before the presidential election. From a political perspective, an en banc re-hearing could delay a final Supreme Court decision on health care reform until after the November 2012 election. However, even if requested by the Administration, an en banc re-hearing is not guaranteed because en banc re-hearings are disfavored under federal court rules and the Eleventh Circuit could only order an en banc re-hearing if a majority of all the eligible Eleventh Circuit Judges agree to hear it. 

Meanwhile, President Obama has expressed confidence that the ACA will be upheld and the Administration is continuing to press ahead with implementation of its provisions.

Supreme Court Receives New Request to Consider Constitutionality of Health Reform Law

by Webb Millsaps and J. Peter Rich

The Supreme Court of the United States received a new request today that it consider the question of whether the “individual mandate” under the Affordable Care Act (the ACA) is constitutional or not. The petition of certiorari was filed by the Thomas More Law Center, one of several plaintiffs challenging the ACA on constitutional grounds in various litigation now working through the federal courts. The filing today requesting Supreme Court review took less than a month after the Sixth Circuit Court of Appeals handed down a 2-1 decision that rejected the Thomas More Law Center’s challenge to the ACA and declared that the individual mandate was constitutional. After losing the Sixth Circuit decision before the three-judge panel, the Thomas More Law Center could have made a request that the Sixth Circuit rehear the case en banc, meaning that all of the Sixth Circuit judges (as many as 26 judges, depending on factors such as current vacancies) would rehear the case and issue a decision. En banc hearings are somewhat rare and are usually reserved for especially complex cases or ones of considerable public importance.

The July 27, 2011 filing is not the first time one of the litigants challenging the ACA has requested that the Supreme Court take up the matter. In April of this year, the Supreme Court refused a request from the State of Virginia that its challenge to the individual mandate and the ACA be heard by the high court on an accelerated basis. Virginia’s request was different in an important respect from the July 27 petition by the Thomas More Law Center because Virginia sought to leap frog the intermediate step of going before a U.S. Circuit Court of Appeals, preferring instead to ask for the extraordinary step of immediately proceeding to the Supreme Court. Accordingly, Virginia’s request represented a departure from the normal course of review and at the time no one was surprised that the Supreme Court preferred that the Virginia matter first be heard by the Fourth Circuit Court of Appeals.   It is also worth noting that Virginia’s request was different from the July 27 request by the Thomas More Legal Center in the sense that Virginia won in its original petition (at least in large part) because the original federal district court had sided with Virginia in its position that the individual mandate was unconstitutional, whereas the Thomas More Law Center has now lost before a federal district court and the Sixth Circuit. 

Throughout the legal battle, the Obama Administration has taken the position that the legal process should play out methodically and go through the appropriate stages of appeal. This may be a political preference and a legal strategy that the Administration views as beneficial to it. Regardless, the Supreme Court itself has a strong, historical preference that, absent extraordinary urgency, it only consider matters after a complete review has taken place in applicable lower courts. 

It is highly unlikely that the Supreme Court will consider taking up the challenges to the ACA until both the Fourth Circuit Court of Appeals and the Eleventh Circuit Court of Appeals have rendered decisions on the ACA cases currently before them. As we have stated previously, if either of those circuit courts strike down the individual mandate or, possibly even the ACA entirely, that would establish a circuit split given that the Sixth Circuit ruled in support of the individual mandate. And if there is a circuit split after decisions are rendered in the other pending cases, it is likely that the Supreme Court will take up the matter more quickly.  In that event, if the high court takes the case this fall, it will likely decide the constitutionality of health care reform just months before the 2012 election.

Split Decision: U.S. Appellate Court Finds Health Reform Law is Constitutional

by J. Peter Rich and Webb Millsaps

The Obama Administration enthusiastically embraced a legal victory yesterday when, in a 2-1 split decision, a federal appeals court panel upheld a lower federal court decision finding that the federal Health Reform Law is constitutional.  Some observers quickly seized on the fact that one of the two votes upholding the Health Reform Law was a conservative Republican judge, Jeffrey Sutton, who once clerked for Supreme Court Justice Antonin Scalia.  The third judge, a Reagan appointee, dissented on the substantive issue, arguing that the Health Reform Law is unconstitutional.

The core question remains an extremely close one.  The three judges on the panel were not unanimous and the opinion itself gives some further indications that the matter could go either way when it is finally decided by the Supreme Court.   For example, Judge Sutton, who concurred in part and wrote the majority opinion in part, indicated that his opinion is just one step in the process – at one point he essentially refers to the appeals court as a “middle management judge” and then later goes on to observe that he is “[m]indful that we at the court of appeals are not just fallible but utterly non-final in this case…” 

Whether today's decision has any ultimate impact will turn on its persuasive power and, in particular, whether the logic of the opinion is deemed compelling by the Supreme Court of the United States.  Even before this case approaches the high court, several additional steps will occur. First, the challengers could request the Sixth Circuit Court of Appeals to re-hear the case en banc, although information posted on the lead challenger’s website indicates that this option will not be pursued and that the challengers prefer that the case proceed directly to the Supreme Court.  In any event, the Sixth Circuit decision is just the first of the three appellate court reviews; two other federal appeals courts are currently considering similar challenges to the Health Reform Law.  In contrast to the Sixth Circuit’s decision in which the lower court had already found the Health Reform Law to be constitutional, the other two circuits, the Fourth and the Eleventh, would have to reverse lower courts that have previously rejected the Health Reform Law as being unconstitutional.   If either of those circuit courts decides the opposite way of today’s decision, the odds will increase that the Supreme Court will take up the matter more quickly.   If the high court takes the case this fall, it could decide the constitutionality of health care reform just months before the 2012 election.

Letter From Twenty-One GOP Governors Emphasizes Uncertainty of ACA's Future While Also Seeking Targeted Modifications That Would Improve ACA

On February 7, 2011, Republican Governors sent a letter to Secretary of Health and Human Services (HHS), Kathleen Sebelius, emphasizing that the future of the Affordable Care Act (ACA) is uncertain and suggesting a short of list of “improvements” to ACA.   On January 31, 2011, a Florida court ruling in favor of twenty-six states found that ACA’s “individual mandate” (IM) and in turn the whole of ACA is unconstitutional.  The case will almost certainly reach and ultimately be decided by the U.S. Supreme Court. 

The Governors’ letter says that the States now “face the decision of whether to participate in [ACA] by operating state [insurance] exchanges, or to let the federal government take on that task,” even though the States cannot know at present whether ACA will be in force in 2014.  Although the IM does not take effect until 2014, the ACA requires states to establish insurance exchanges ready to operate January 1, 2014.  If a state does not set up its own insurance exchange, the Federal government must step in and set up an exchange in that state, which could occur in 2012 or earlier.  As a result, states cannot wait to see what happens with the litigation concerning the constitutional questions.  ACA provides that HHS can set up and operate an exchange in any state that “the Secretary determines on or before January 1, 2013” will not be able to meet the 2014 deadline for setting up its own exchange.

Although the Governors' express “grave concerns” about ACA and note their belief that it contains “constitutional infringements,” the letter nonetheless urges the following targeted ACA modifications:

  • Provide states with complete flexibility on operating the exchange, most importantly the freedom to decide which licensed insurers are permitted to offer their products
  • Waive the bill’s costly mandates and grant states the authority to choose benefit rules that meet the specific needs of their citizens.
  • Waive the provisions that discriminate against consumer-driven health plans, such as health savings accounts.
  • Provide blanket discretion to individual states if they chose to move non-disabled Medicaid beneficiaries into the exchanges for their insurance coverage without the need of further HHS approval.
  • Deliver a comprehensive plan for verifying incomes and subsidy amounts for exchange participants that is not an unfunded mandate but rather fully funded by the federal government and is certified as workable by an independent auditor.
  • Commission a new and objective assessment of how many people will end up in the exchanges and on Medicaid in every state as a result of the legislation (including those “offloaded” by employers), and at what potential cost to state governments. The study should be conducted by a neutral third-party research organization approved by the signatory states.

AMA Establishes New Principles for ACOs

The American Medical Association has established new principles to guide the development and operation of accountable care organizations, which emphasize physician leadership and patient participation.

To read the full article, click here.