New Health Care Regs, Court Rulings

August 17, 2011

The last week has been a busy one in the world of health care reform. On Friday, a federal appeals court in Atlanta ruled the Patient Protection and Affordable Care Act’s (PPACA) individual mandate unconstitutional. Also late last week, health care grants were issued, and three new regulations were released offering guidance on the health exchanges and eligibility for participation, the health insurance premium tax credit and Medicaid eligibility changes.

Individual Mandate Ruled Unconstitutional

In one of the biggest legal challenges thus far to PPACA, the three-judge panel of the 11th Circuit Court of Appeals sided 2-1 with the decision by a federal district court in Florida that the individual mandate piece of the law is unconstitutional. The panel also stated the law overstepped its boundaries in enforcing the mandate through a penalty which was seen as different from a tax. The individual mandate, along with the penalty, were the only pieces of the law highlighted as unconstitutional, as the appellate court overturned the remainder of district court’s contention that the entire law is unconstitutional.

This most recent ruling is actually the second federal appellate decision on the law, and counters the first ruling by the Sixth Circuit Court of Appeals which did not rule the individual mandate unconstitutional. In the most recent case, the federal government has the option of seeking a review of the three-judge decision by the full 11judges serving on that court. Baring that review changing the ruling, it is almost certain the fight will end up in the Supreme Court.

Please click here for more details and specifics on the case.

Despite predictions the law ultimately will end up in the Supreme Court’s next term, which begins October 2011 and ends in June 2012, there are two other rulings expected in coming months: the Fourth Circuit Court of Appeals which is likely to rule by the end of September; and the Third Circuit Court of Appeals which has scheduled arguments to begin Sept. 23. President Barack Obama has remained confident that the Supreme Court will uphold the individual mandate piece of PPACA.

New PPACA Regulations

On Friday, the departments of Health and Human Resources and Treasury unveiled three new proposed regulations offering guidance on exchange eligibility and employer standards; the health insurance premium tax credit; and Medicaid eligibility. NSBA is continuing to evaluate the rules and will provide additional details on how small businesses are likely to be impacted, but has provided the following brief summaries on each of the three rules.

The first rule on exchange eligibility and employer standards holds the greatest implications for small businesses as it spells out the process for certifying qualified health plans and outlines the minimum standards for employers to participate in Small Business Health Options Plans (SHOPs). Specifically, the rules point to utilizing information technology to expedite the process for individuals and states to determine eligibility for exchanges and various subsidy programs. This process will enable states to tap into federal databases in real-time to acquire information on income levels and other eligibility factors, and allows individuals to make updates to their information where appropriate.

The rule also offers greater specificity for how the SHOP will operate, such as a provision allowing continued participation in a SHOP by a small firm whose employee size grows thus rendering it technically ineligible, in order to prevent reverse incentives to job growth.  Additionally, the rule calls for multi-state employers to be serviced by the shop in their primary place of business, but urges these employers’ participation ought not be impeded by a SHOP’s geographic limitations.

The second rule elaborates on the premium tax credits for which individuals and families are eligible. While the credit will be tailored to income and the insurance plan selected, the average tax credit will be $5,000 for individuals once fully phased-in. Eligibility for the tax credit is individuals and families who earn between 100 and 400 percent of the federal poverty level. The third rule expands and simplifies Medicaid eligibility under PPACA, and ensures that Medicaid uses the same eligibility standards as other insurance affordability programs available through the Exchange.

State Grants Awarded

Also on Friday, HHS awarded $185 million in grants to 13 states for assistance in building their exchanges. These Exchange Establishment grants supplement previous grants awarded in 2010 to 49 states. States can choose when to apply for grant funding based on their needs and planned expenditures, and will have multiple opportunities to apply for funding.  Back in May, HHS issued grants to three other states.

The proposed rules have a comment period of 75 days and HHS and Treasury plan to hold public forums for comment in Atlanta, Chicago, Denver, New York, Portland, and Sacramento.