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Health Care Reform Report Card: “B” Grade Overall

An interactive graphic in yesterday’s New York Times looks at the three “Rs” of health care reform: Roll-out, Reaction (by the public and the two political parties), and Results (cost-lowering and increased coverage) and gives a solid “B” grade to the overall effort. This factors in an “F” grade for support by the Republican Party, and a “D” grade based on rulings in recent federal court challenges to the individual mandate component of PPACA. Federal activity to implement reform was given the sole “A” grade. The piece notes that portions of the law’s budget are already “embedded in mandatory tax and spending provisions” and hence would not be affected by Republican measures to “de-fund” PPACA implementation – more details on that point (e.g., what reform measures remain unfunded) would be helpful. It also observes that 27 of the 28 states whose attorneys general or governors have challeneged the constitutionality of PPACA in federal courts have also accepted federal funding towards establishment of insurance exchanges. In all the piece does a good job of differentiating the political rhetoric from the nuts and bolts of reform implementation.

Repeal of the “Job-Killing Health Care Law”: Political Theater or Legitimate Threat?

Today the Republican-controlled House of Representatives begins debate on H.R. 2 – a bill titled “Repealing the Job-Killing Health Care Law Act.” The provocative title of the bill signals that this is political theater, although proponents of the bill sincerely, for dollar-and-cents reasons, want to roll back reform, specifically the Patient Protection and Affordable Care Act of 2010 (PPACA) and its companion reconciliation act.

The full, two-paragraph text of the bill is available here.

The chances repeal will happen are slim. The Democrats still control the Senate. The President has put in writing his intention to veto H.R. 2. Even the Democrats who voted against enactment of PPACA (and who remain in office) don’t intend to support repeal. For a more trenchant analysis of the repeal movement’s chances at success, read Alvin D. Lurie’s piece here.

Even without full repeal, health care reform in the U.S. will almost certainly not unfold precisely according to the PPACA. The House of Representatives can thwart appropriations measures need to fund reform implementation. The rapidly increasing national debt will continue to dominate political discussions and make costly reform look like extravagance. The debate over health care reform may continue to be divisive, but I would like to think that it will more closely resemble the compromise (however uneasy) that the two parties recently reached on extending Bush-era tax cuts. Time will tell and I will continue to keep you apprised.

Top 12 Key Players in 2011 Health Care Reform Debate

Employee Benefit Adviser, a website/blog targeted at benefit brokers and other advisors, just published a slideshow of the top 12 players in Washington D.C. on the health care reform debate that has already begun in this new year. (One time registration for the EBA site may be required to view.) I briefly summarize the list, below; more analysis is available in the slideshow itself:

• Sen. Fred Upton (R-Mich.) – Chair to House Energy and Commerce Committee.
• Rep. John Kline (R-Minn.) – Chair of the House Education and Labor Committee.
• Rep. Dave Camp (R-Mich.) – Chair of the House Ways and Means Committee
• Rep. Paul Ryan (R-Wis.) – Chair of the House Budget Committee (this committee will oversee funding of health care reform; if House Republicans stymie appropriations needed to implement reform, as is widely expected, Rep. Ryan will be instrumental in this process).
• Sen. Chuck Grassley (R-Iowa) – Ranking minority member of the Senate Finance Committee.
• Rep. John Boehner (R-Ohio) – Speaker of the House.

• Donald Berwick – Head of the Centers for Medicare and Medicaid Services
• Sen. Harry Reid (D-Nev.) – Senate Majority Leader.
• Jacob Lew – Director of the Office of Management and Budget, replacing Peter Orszag
• Sen. Max Baucus (D-Mont.) – Chair of the Senate Finance Committee
• Kathleen Sebelius, Secretary of Health and Human Services
• President Obama (natch).

Nondiscrimination Rules for Insured Health Plans Put On Hold

The Internal Revenue Service just issued Notice 2011-1 today, stating that compliance with nondiscrimination rules for insured group health plans, otherwise slated to go into effect on January 1, 2011 for non-grandfathered plans, will not be required (and no excise tax for failure to comply need be reported) until after regulations or other administrative guidance on the nondiscrimination rules issues.   The Notice has the support of the other agencies that enforce health care reform, the Department of Labor and the Department of Health and Human Services.

Further, the Service anticipates that any such regulations or guidance will not apply until plan years beginning after a specified period following publication of the new guidance (often this is a 6-month period).   Before the beginning of those plan years, employers will not need to file IRS Form 8929 reporting excise taxes as a result of plan designs that discriminate in favor of highly compensated individuals.   

This is extremely welcome relief for plan sponsors and advisors.   In essence, the Notice appears to bring back the status quo before the Patient Protection and Affordable Care Act by essentially stating that employers with insured health plans cannot realistically be expected to comply with laws that are “similar to” existing nondiscrimination rules for self-funded plans.  For employers that maintained executive carve-out plans prior to the Affordable Care Act, maintenance of those plans in 2011 would not appear, from the Notice, to subject them to any enforcement efforts or excise taxes. 

What does this mean for employers going forward? Employers who already redesigned their group health plan in anticipation of the January 1, 2011 compliance deadline should hesitate before rolling back any newly-compliant, nondiscriminatory plan designs.  Reversing steps taken in order to comply with the law is never a good idea, and nondiscrimination rules eventually will apply so it is unwise to get re-attached to a plan design that ultimately will be obsolete, especially now that employees may be aware that discriminatory plan designs are disfavored.  For employers with a discriminatory insured plan that was never redesigned, maintenance of the plan “as-is” should not result in any excise tax penalties or other enforcement action. Again, however, this grace period will end as of the first day of the plan year first following the year in which nondiscrimination regulations are published, and if regulations issue later this year then nondiscrimination compliance could be required as soon as January 1, 2012. Employers that are subsidizing former executives’ COBRA or other continuation group health coverage through this year and into the next (e.g., under a severance plan) should be aware that maintenance of the plan into 2012 could violate the nondiscrimination rules and result in excise taxes.

As an indication of how complex the nondiscrimination issue is, the Notice requests further commentary from the public on no fewer than 13 different topics, ranging from “safe harbor” plan designs for automatic compliance, application of different rules for plans offered in different geographic regions by the same employer, what constitutes “benefits” for purposes of nondiscriminatory plan design (e.g., rate of employer contributions, versus percentage or amount of employee contributions), and whether compliance can be met merely by making coverage available to employees, whether or not they enroll (as applies in the 401(k) context).  Notably, none of the requests for commentary refer to the transition period beginning with publication of the Notice, and ending with publication of final regulations on nondiscrimination rules for insured plans.  This further confirms that, for pre-existing, discriminatory plans, we are entering a “no enforcement” zone for the immediate future at least.