Changes brought about by Heath Care Reform look like a lop-sided barbell. There was an immediate bubble with several smaller items, then a few years with very little happening, followed by the Big Tamale that is scheduled to happen in 2014. The Big Tamale being the Individual Mandate.
There is not a whole lot going on in HCR that will affect your business over the coming months, but I wanted to give you an update on what is upcoming, the status on a few other provisions, and to make you aware on a likely Supreme Court Decision, which could come as early as next summer.
Let’s look at some recent and upcoming items:
1. CLASS Act – it has been all but officially killed. This is the Federal Government Long Term Care insurance plan that your employees were going to be able to buy using their own money but it would be billed through your business.
The LTC plan did not have stated benefits or certain premium costs, which would have kept almost everyone from enrolling, and was to have started in 2011, but it did not come to pass. The Government had not allocated sufficient resources to its development and has, or shortly will have, reassigned the staff to other positions. I do not expect this provision to be resurrected any time soon, or at all, for that matter.
2. Employer Reporting of Medical Insurance Premiums on Employee W-2’s – This is moving forward but on a delayed basis.
• For employers who issue 250 or morer W-2’s, they will have to report the premiums (Employer + Employee cost) on the W-2’s for their tax years that begin in 2012.
• For employers who issue fewer than 250 W-2’s, they will have to report the premiums (Employer + Employee cost) on the W-2’s for their tax years that begin in 2013.
3. Uniform Benefit Summaries – These will begin with plan years starting after March 2012. Insurance companies will not only be allowed to, but will be required to, provide Benefit Summaries that follow a standard form. There is nothing you will need to do as the insurance companies will change their Benefit Summaries to an industry-wide standardized format. (The quirky thing is that prior to HCR, insurance companies were prohibited from collaborating with each other to make their documents similar).
4. 60 Day Notice on Benefit Changes – this requirement begins with plan years that begin after March 2012 and does not apply to renewal changes. For those very, very few businesses that make benefits changes mid-year (many carriers do not permit this), you will have to give your employee’s 60 days of advance notice.
5. FSA Limit on Contributions to $2,500 – this begins with plan years beginning on or after January 1, 2013. Believe it or not, there is not currently a legislated cap on the maximum FSA contribution allowed to employees. That cap is determined by the Employer. This will all change in 2013. No FSA will be permitted to allow contributions in excess of $2,500 per employee. (I have never worked with a client that permitted a higher maximum and so this should go in relatively unnoticed).
6. Health Benefit/Insurance Exchanges – these will likely start rolling out in 2013. In certain circumstances some employees may opt to enroll in them if the employer’s premium is considered unaffordable. I do not foresee this impacting many, if any clients. (I will keep you up to date on this).
7. Mandatory Purchase of Health Insurance By All People in the US aka the Individual Mandate – this is of course the Big Tamale. In 2014, with the exact date yet to be announced, all people in the US will have to own a health insurance policy. Many will continue to get their insurance through good businesses like yours, but if people are not employed, or self-employed, or do not get benefits at work, they will have to buy health insurance or will pay a Federal Penalty.
The Individual Mandate , The Missing Severability Clause, and The Supreme Court
Let me take a minute to expand on this. This provision is part of the HCR legislation (which is more than one bill), but I want you to look at it unemotionally, detached from its particular legislation. (Let’s me get out front and get this aspect behind us before we start: Every single reasonable minded person I’ve spoken to, or even heard of, in the last 5 years believes that the US Health Care system needs serious help in several key areas – I fully support fixing those areas. I just don’t care for the solution Congress came up with. If I am wrong, I apologize in advance).
The Meat of It
Many states are suing the Federal Government over the Individual Mandate provision because it is a provision never before put into law by the US Congress. It dictates that every single person must purchase a specific type of product regardless of any activity. Remember, people who are required to purchase car insurance are only required to if they own and drive a car. If the car is sitting in their garage, they are not required to have insurance. This is a big difference.
The concern that most everyone I’ve spoken to about this is that such a law is unconstitutional. I read the Constitution several times a year (yes, I am that kind of history nerd), and I agree the provision is unconstitutional. But the issue is much bigger than simply buying health insurance. If the Supreme Court upholds the Mandate, will the Government then use it as a precedent to impel people to purchase other products? That is a very valid concern.
However you feel, this is a Constitutional Challenge as big as Roe v. Wade or Brown v. Board of Education and these were decisions with enormous impacts.
The Severability Clause
Severability Clause. Most Federal and state, but particularly Federal, legislation covers much, much more than the title of the bill may imply. For example there may be a bill that is mostly about interstate water regulation but it may have an amendment that deals with wiretapping (this is a fictitious example). Because of this, in most Federal and State Legislation, the last clause in the bill is called a Severability Clause. These clauses say that if any one part of the bill is found to be illegal or unconstitutional, then the rest of the bill is okay and can stand.
But guess what? The HCR legislation did not contain such a clause. So the big fear is that if the Individual Mandate is struck down, will the rest of the bill fall as well? The 6th Circuit Court says “yes, the Individual Mandate clause is illegal and the rest of the bill must fall” but the 11th Circuit Court of Appeals says not. It said, just this August in Atlanta, “yes, the Individual Mandate clause is illegal, but in spite of the absence of a Severability Clause, the rest of the bill can stand.”
Why did Congress not include the Severability Clause? I am not certain but it is for sure not a mistake. I believe the reason is one of two things:
1. They wanted to add pressure to any judge who might strike down the Individual Mandate clause not to do so because he or she would have to throw away the entire bill; or
2. The insurance companies insisted upon it in exchange for their support. Without the Individual Mandate in the bill, as the bill stands now, most all health insurance companies would be insolvent within 2-3 years. (So if the insurance companies did support the missing clause, it was a good thing for all of us).
What The Supreme Court May Do
Many legal experts believe the Individual Mandate suit could be argued in front of the Supreme Court as early as March 2012 with a decision as early as June 2012, just 8 months away. And for those a little rusty on our Constitutional Law processes, consider this:
• The Supreme Court can decide not to hear the case. There are no laws or rules which state which cases the Supreme Court hears. Generally though, they tend to hear issues on which there are inconsistent lower court decisions and/or would have great impact on the country;
• The Supreme Court could hear the case, and rule that the Individual Mandate is unconstitutional and that the rest of the law is therefore thrown out;
• The Supreme Court could hear the case, and rule that the Individual Mandate is unconstitutional and that the rest of the law is not thrown out even though there is no Severability clause;
• The Supreme Court could rule that the Individual Mandate is Constitutional and leave the balance of the law intact as well; and
• The Supreme Court could hear the case and remand it back to a lower court to make the decision.
Very few people believe the Supreme Court will not hear the bill and very few believe that if they do they will send it back to a lower court. Many believe the court is evenly divided, 4 yes, 4 no, and one undecided. Whatever plays out, please keep a watch and encourage your schools civic teachers to discuss the issue. Whatever the decision will be, it is history in the making.
Thank you for listening.