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News for the Week of May 25, 2010


Federal News:

State News:

General News:


Federal News:

Government defends PPACA against lawsuits

As the number of court challenges to the Patient Protection and Affordable Care Act (PubLNo 111-148) (PPACA) continues to rise, the federal government contends that the court does not have the power to decide them, at least not yet. In a lawsuit filed in a Michigan federal court, the plaintiffs are including a "public interest law firm," whose mission is to "promote and defend America’s Christian heritage and moral values," and individuals with religious objections to the funding of abortion. They argue that a requirement for uninsured individuals to buy health insurance or pay a penalty oversteps the constitutional limits on the powers of the federal government.

They claim that the Commerce Clause of the United States Constitution does not support the requirement because their activities are not commerce, that the penalty is an unconstitutional tax, and the mandate violates their rights to free exercise of religion under the First Amendment.

In its response, the government contends first that the law firm has no standing to sue because its rights or the rights of its members are not affected. Second, the individual plaintiffs have not been harmed and are not threatened with imminent harm because the law does not become effective until 2014. Even if their decisions not to purchase insurance are unchanged, the law may not apply to them at all, because they may have insurance through an employer, Medicare or Medicaid, or because they may be exempt under the statute. The individual plaintiffs’ current activities are unaffected.

In addition, even if the individuals were threatened with harm, they are not entitled to an injunction against implementation of the law because they have a legal right to request a refund of any penalty that might be assessed. Because the penalty is financial, seeking a refund is an adequate remedy.

The government further responds that its power to impose the minimum coverage requirement arises not only from the Commerce Clause, but from the power to enact laws necessary and proper to promote the general welfare. Congress made specific findings that the problem of uninsured individuals seeking care for which the providers are not compensated affects interstate commerce in many ways. Healthcare spending comprises about 20 percent of the national economy. Uncompensated care amounts to more than $40 billion annually and those costs are shifted from the patients to the providers, third party payers and impose a hidden tax on other patients in the form of increased premiums. Debt for medical expenses results in thousands of personal bankruptcies.

Because the individual plaintiffs claim that they will pay for their healthcare as they need it, the individual plaintiffs are not staying out of the healthcare market entirely. Therefore, their decisions not to purchase coverage affect interstate commerce.

In addition, the government argues that the individual mandate may not be considered in isolation. The minimum coverage requirement is one part of a comprehensive regulatory plan that also includes increased Medicaid coverage, prohibition of some insurance practices that made coverage unaffordable or unavailable.

Thomas More Law Center, Inc. v. Obama, Response filed in E.D. Mich., May 11, 2010.

State News:

Paterson creates cabinet to implement federal health care reform in New York

New York Governor David Paterson last week announced the creation of the Governor's Health Care Reform Cabinet to manage the implementation of federal health care reform in the state. The Cabinet will advise and make recommendations to the governor on all aspects of federal health care reform and strategic planning to guide the implementation of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. “Federal health care reform will have a significant positive impact for New York's residents, families, small business owners and the 2.5 million New Yorkers who are currently uninsured,” Paterson said. “The Health Care Reform Cabinet will serve a critical role in ensuring the provisions of national health care reform are successfully implemented in New York State and that the actions taken reinforce the State's commitment to improving the health of all New Yorkers.”

The Health Care Reform Cabinet is charged with:

  • Identifying deadlines for the completion of interim or final steps necessary or desired to comply with the provisions of federal health care reform;
  • Identifying those provisions of federal health care reform with which the state must comply and those that are optional, and evaluating whether participation in optional programs is appropriate;
  • Assessing the state's capacity to carry out those provisions of federal health care reform that affect or potentially affect the State;
  • Identifying any changes needed to state statute, regulation, policy or procedure in order to implement such provisions and facilitating the achievement of such changes as necessary;
  • Communicating with the federal government, local governments, other states, health care providers, and other stakeholders as advisable or necessary; and
  • Providing for outreach to the public to educate them on the implementation of reforms as necessary.

“Implementing federal health care reform is a complex task, and many decisions must be made by the end of this year. The Health Care Reform Cabinet will begin that work immediately, ensuring the successful implementation of these reforms when they take full effect on January 1, 2014,” Paterson added.

Arizona joins multistate lawsuit to block federal health care mandate

Arizona has officially joined 19 other states that have filed a lawsuit in federal court challenging the constitutionality of the federal health care legislation.

"As I previously stated, by passing this onerous federal mandate, Congress has exceeded its authority and left the State of Arizona no option but to challenge its unconstitutional act in federal court," said Governor Brewer. "Health care regulation is a power reserved to the states by the Tenth Amendment of the U.S. Constitution. Congress has overreached by requiring individuals to purchase health insurance and penalizing them if they do not."

On May 14, 2010, the multistate coalition filed an amended complaint, which now features 20 state plaintiffs. Additionally, the National Federation of Independent Businesses (NFIB) joined the lawsuit as a co-plaintiff on behalf of its members nationwide. The individual mandate directly affects the NFIB and its members by requiring those individuals to obtain health care or pay a penalty, giving the NFIB a distinct basis to represent its individual members and join the lawsuit.

The original lawsuit was filed against the U.S. Department of Health and Human Services, U.S. Department of Treasury and the U.S. Department of Labor on March 23, 2010, minutes after the health care reform act was signed into law by President Obama. In addition to Arizona, the states of Indiana, North Dakota, Mississippi, Nevada, Georgia and Alaska recently joined the action.

The lawsuit, filed in federal court in the Northern District of Florida, alleges that the new law infringes upon the constitutional rights of Arizonans and residents of the other states by mandating that all citizens and legal residents have qualifying health care coverage or be investigated and penalized by the Internal Revenue Service. By imposing such a mandate, the law exceeds the powers of the United States under Article I of the Constitution. Additionally, the tax penalty required under the law constitutes an unlawful direct tax in violation of Article I, Sections 2 and 9 of the Constitution.

The lawsuit further claims the health care reform law infringes on the sovereignty of the states and Tenth Amendment to the Constitution by imposing onerous new operating rules that Arizona must follow as well as requiring the state to spend additional dollars without providing funds or resources to meet the state's cost of implementing the law. It is estimated that Arizona taxpayers will be required to provide over $11 billion to pay for the new federal mandate.

Although Governor Brewer is authorized to appear and speak on behalf of the State of Arizona in legal matters, the Arizona Legislature, at the request of Governor Brewer, eliminated any doubt by passing a law permitting the Governor to initiate a legal proceeding or appear on behalf of the state to challenge Washington’s unconstitutional action.

"The costs associated with the litigation will be minimal (under $5,000), but nothing compared to the enormous costs that this unconstitutional mandate will exact upon Arizona not only in raw dollars, but by relinquishing our precious liberties guaranteed under the U.S. Constitution," said Governor Brewer.

Source. Governor Jan Brewer Announces Arizona Has Officially Joined the Multistate, Bipartisan Health Care Lawsuit, released May 14, 2010.

Oklahoma governor vetoes health care lawsuit bill

Oklahoma Governor Brad Henry has vetoed legislation that would have prohibited the state from following the new federal health care law and authorized the legislature to file a lawsuit over the issue. In his veto message, the governor said HJR 1054 would trigger a futile legal battle and a possible loss of federal health care funding.

"By essentially stating that Oklahoma will not abide by new federal health care laws, HJR 1054 invites legal action against the state in a case it cannot win. No state has the authority to selectively ignore federal laws of its choosing, and any attempt to do so will be ruled unconstitutional by the courts, but not before a costly legal battle," Governor Henry said.

"In the final analysis, HJR 1054 will not affect the administration of federal health care reform or assist supporters or opponents of the federal legislation. It will simply trigger an exercise in legal futility that results in a hefty bill for Oklahoma taxpayers and the potential loss of federal funding for important health care programs currently in place."

Gov. Henry vetoes open carry, health care lawsuit bills, released May 14, 2010.

Mississippi joins legal challenge against federal health care reform

Governor Haley Barbour, on behalf of the State of Mississippi, has joined the multistate lawsuit challenging the constitutionality of the federal health care law passed in March.

"The health care law passed earlier this year is an unprecedented expansion of federal power," Governor Barbour said. "If Congress can constitutionally mandate that we all purchase health insurance, it can also force every American to buy a car or to invest in Treasury Bonds."

Florida, the lead plaintiff in the case, has reached an agreement with its legal counsel to cap the costs of the litigation at $50,000. Joining in the lawsuit will cost Mississippi a fraction of that amount.

The lawsuit is based, in part, on the federal government exceeding its authority by forcing citizens to buy a specific product — in this case, insurance — and controlling the marketplace by determining how the insurance policies will be structured.

"This new law will ultimately force the state to raise taxes, as hundreds of thousands of new people will be added to our Medicaid rolls," Governor Barbour stated. "The regulatory changes, and some of the accompanying costs, begin immediately."

Mississippi Code 7-1-5(n) authorizes the governor to bring suit on behalf of the state "if after first requesting the proper officer so to do, the officer refuses or neglects to do the same." Governor Barbour asked the attorney general to join the Florida lawsuit on behalf of the state, but General Hood refused to do so.

Source. Governor Barbour Joins Legal Challenge to Federal Healthcare Law, released May 14, 2010.

Nevada joins lawsuit against “ObamaCare”

On May 14, 2010, Nevada officially joined an amended federal lawsuit against the nationalized health care plan. Governor Gibbons noted that the plan marks the first time in American history that the federal government is trying to "regulate inactivity."

The lawsuit, filed in federal court in the Northern District of Florida, alleges that the new law infringes upon the constitutional rights of citizens by requiring all citizens and legal residents to have qualifying health care coverage or pay a tax penalty. By imposing such a mandate, the law exceeds the powers of the United States under Article I of the Constitution. Additionally, the tax penalty required under the law constitutes an unlawful direct tax in violation of Article I, Sections 2 and 9 of the Constitution.

The lawsuit further claims the nationalized health care plan infringes on the sovereignty of the states and Tenth Amendment to the Constitution by imposing onerous new operating rules that Nevada must follow, as well as requiring the state to spend additional dollars without providing funds or resources to meet the state's cost of implementing the law.

The plan has already cost Nevada taxpayers over $100,000, according to a governor's press release. In a few years, Nevada taxpayers will be forced to pay nearly $600 million for the program, and eventually several billion dollars when the federal government "forces the entire plan onto the backs of Nevada taxpayers."

Nevada Joins Federal Lawsuit Against ObamaCare, released May 14, 2010.

General News:

Harvard Business School faculty comment on health reform

Following Congress’ passage of historic health care reform legislation, three Harvard professors who have long been involved in health care issues, presented their views on the measure and what it bodes for the future on the Harvard Business School website.

Richard Bohmer, contends that it will lead to further debate about managing the delivery of health care. Mr. Bohmer stated that the insurance aspects are but one concern in the overall health care problem, which also includes treatment concepts, disease management innovations, personnel restructuring, and information technology. “We need to make a distinction between debating how it will be paid for and what the ‘it’ is that will be paid for,” observed Mr. Bohmer.

Bill George regards the bill as a “momentous step” toward providing insurance coverage, but believes that there needs to be focus on the attendant issues of cost, quality, and lifestyle. Unless these other three challenges are addressed, Mr. George predicts that the U.S. will continue to have a dysfunctional system with unaffordable costs.

Regina E. Herzlinger believes the bill will result in spending that will damage the U.S. economy, and that its approach will lead to a government-controlled health care system. While she is encouraged by the move toward a universal health care model, she fears that the cost control mechanisms are ineffective, relying on the public health insurance marketplace or “exchanges,” which ctually involve only shifting costs, through deficits, cutbacks, and unfunded liabilities.

For more information, visit www.hbs.edu.

Employers foresee increased costs from health reform law

Although one-fourth of employers anticipate that compliance with six major mandates of the Patient Protection and Affordable Care Act (P.L. 111-148) will boost their health care costs in 2011 by at least 3%, a greater proportion (41%) of employers see modest increases of 2% or less, and 30% could not predict the impact. These are among the findings of a recent survey by Mercer of nearly 800 employers.

In the survey, Mercer asked employers about the estimated impact of six major mandates in the Affordable Care Act. The excise tax on high-cost plans (IRC Sec. 4980I, as added by Sec 9001(a) of the Affordable Care Act), which first takes effect in 2018, is of highest concern to employers—29% view it as a significant or very significant concern, another 29% see it as a concern, and 42% think it is not an issue or of slight concern.

The dependent coverage expansion to adult children up to age 26 (PHSA Sec. 2714, as added by Sec. 1001(5) of the Affordable Care Act) and the ban on lifetime dollar limits (PHSA Sec. 2711(a)(1)), as added by Sec. 1001(5) of the Affordable Care Act, both effective in 2011, are each of significant concern to one-fifth of employers. Only 6% of survey respondents currently extend coverage to dependent children up to age 26. And although many insurers have agreed to begin to extend dependent coverage to adult children before the provisions’ effective date, for plan years beginning on or after Sept. 23, 2010, only about one-fourth (24%) of the survey respondents that don’t already cover children up to age 26 say they are likely to begin before their next renewal, which for most plans is January 2011. Large, self-insured employers are even less likely to act before they have to, Mercer reports: among respondents with 5,000 or more employees, just 16% say they are likely to implement this provision early.

To offset the potential increased cost of adding adult children to dependent coverage, half of surveyed employers would seriously consider requiring proof that adult children do not have coverage available to them through their own employers (before Jan. 1, 2014, grandfathered plans can exclude from dependent coverage adult children who have coverage available through another employer). One-fifth would seriously consider changing contribution rate tiers for example, from just two rates for employee-only and family coverage, to four or more rates based on the number of dependents covered, shifting the additional cost to employees covering the most family members. Others (16%) likely will require higher contributions for all dependent coverage.

Another major provision of concern to employers is the requirement that they offer affordable coverage to part-time workers working an average of at least 30 hours per week during one month (IRC Sec. 4980H(c)(4)(A), as added by Act Sec. 1513(a) of the Affordable Care Act). This provision is of particular concern to retailers, 24% of them expressed a high level of concern, who use mostly part-time workers. Among the 26% of respondents that currently do not comply with the part-time worker health coverage offer, which goes into effect in 2014, one-fifth say they will strongly consider changing their work force strategy so that fewer employees work 30 hours or more a week; 16% will strongly consider adding a lower-cost plan for these newly eligible employees rather than adding them to an existing plan for full-time employees. Few (8%) say they would pay the required penalty rather than make no or minimal changes to increase the number of eligible employees.

Automatically enrolling new hires in an employer-sponsored plan also is of significant concern for 16% of employers (FLSA Sec. 18A, as added by Sec. 1511 of the Affordable Care Act). Currently, the great majority of employers (88%) do not automatically enroll new hires into one of the employer’s plans. More than two-fifths (43%) of employers are strongly considering using the lowest cost plan as the default enrollment option (23% offer only one plan), and about one-fifth are considering imposing the maximum allowable waiting period (90 days) for eligibility.

Only 7% of respondents found one other provision to be of significant concern, that being that a plan pay for 60% of covered services to be a qualified plan in 2014 (Sec. 1301 of the Affordable Care Act).

“Average health benefit cost per employee has been rising consistently at about 6% for the past five years,” said Tracy Watts, a consultant in Mercer’s Washington, DC, office. “That seems to be employers’ threshold of pain. If compliance with health insurance reform pushes the cost increase up toward double digits, employers will be exploring ways to bring it back within their comfort zone.”

For further information, visit http://www.mercer.com.

2010 health care costs increase $1,303 for family of four

In 2010, health care costs increased $1,303 for a family of four, to $18,074, according to the 2010 Milliman Medical Index. While this is the third year in a row that health care costs increases have been lower than 8% (7.8% in 2010), the $1,303 increase is the highest dollar increase Milliman has seen in ten years.

Of the $18,074 cost of health care, 33% is spent on physician services, 31% on inpatient care, 17% on outpatient care, and 15% on prescription drugs. Milliman also noted that employers’ total costs increased 8.0%, while employees’ total costs increased 7.4%. Employers now spend an average of $10,744 annually to provide coverage to a typical family of four. Milliman noted this is this first time that this has surpassed $10,000 since Milliman has been tracking health care costs.

Geographical differences. According to Milliman, three cities (Miami, New York, and Chicago) continue to have costs at least 10% higher than the national average—all three now exceed $20,000 for a family of four. Phoenix and Seattle continue to experience costs much lower than the national average, with costs $5,000 to $6,000 lower than the highest cities.

2010 Milliman Medical Index provides information on medical spending for a typical family of four covered by an employer-sponsored preferred provider organization (PPO) program. For more information, visit http://www.milliman.com/expertise/healthcare/publications/mmi/pdfs/milliman-medical-index-2010.pdf.

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