Supreme Court Decision: We're Moving On

Individual Mandate
The Supreme Court’s decision confirms the constitutionality of the individual mandate.  The fact that the Court upheld the mandate under Congress’ taxing power rather than the commerce or "necessary and proper" powers changes nothing about the language of the ACA or how the individual mandate will function.  The mandate will go into effect in 2014 as Congress intended. Below is a flowchart of how the individual mandate will work.

Medicaid Expansion Revised
The Supreme Court’s decision on the Medicaid expansion does not change or invalidate the language in the ACA about the new eligibility group – it still exists in the law as a new mandatory coverage group beginning in 2014. However, the practical effect of the Court’s decision makes the Medicaid expansion optional for states because, if states do not comply with the Medicaid expansion, the Secretary may withhold only ACA Medicaid expansion funds; she may not withhold all or a part of a non-compliant state’s federal funds for the rest of the Medicaid program. In addition, the Court’s decision did not disturb other Medicaid-related provisions of the ACA. And, the Court’s decision leaves intact the existing Medicaid statute and the Secretary’s long-standing authority to withhold all or a portion of a state’s federal Medicaid funds for non-compliance with existing federal program rules.

Health Insurance Exchange Status
Many states have initiated planning activities and have been awarded federal grants to design the state-based health insurance exchanges that will serve as the marketplaces for people to purchase qualified health plans and gain access to premium tax credits and cost-sharing reductions. 

However, 12 states halted exchange planning while awaiting the Supreme Court’s decision on the constitutionality of the ACA, and another five states indicated that, while they would continue exchange planning, they would not pursue state exchange legislation until after the Court’s decision.  Now that the Court has upheld the individual mandate, states that have delayed exchange planning have only a few months left to meet the November, 2012 deadline to submit a blueprint for approval to either run their own exchange or participate in a federal-state partnership exchange.  If states do not establish their own exchanges, the default is a federal exchange or a federal-state partnership model.  Regionally, SC made the decision not to create an exchange, TN, VA and NC are studying the options, and Georgia has had no significant activity.

What You Need to Know About the Employer Mandate

Looking beyond the Supreme Court decision, the Patient Protection and Affordable Care Act (PPACA) imposes financial penalties on large employers who do not provide health insurance coverage, as well as financial penalties on employers who provide coverage that is considered “unaffordable.”  This begins January 1, 2014.

Coverage is “unaffordable” if either one of the following two conditions is present.

1) The employee’s required contribution under an employer-sponsored plan exceeds 9.5% of the employee’s household income, OR
2) The employer-sponsored plan pays less than 60% of the cost.

Employers with 50 or more full-time employees (or full-time equivalents) on business days during the preceding calendar year are liable for a penalty tax if the employer fails to offer full-time employees the opportunity to enroll in an employer-sponsored plan AND any full-time employee having enrolled in coverage through a State Exchange is certified to receive a premium tax credit or “cost-sharing reduction.”

The penalty tax is calculated on a monthly basis by multiplying 1/12 of $2,000 by the number of full-time employees less 30. Only one 30-employee reduction per controlled group of employers is allowed. After 2014, the $2,000 amount will be adjusted for inflation.

The penalty is pro-rated by the number of months without coverage, though there is no penalty for a single gap in coverage of less than 3 months in a year. The penalty cannot be greater than the national average premium for Bronze level coverage in an exchange. After 2016, penalty amounts are increased annually by the cost of living.

Below is a flow chart that illustrates the conditions under which an employer will pay a penalty tax as part of the Employer Mandate.

 PPACA Preventive Care Services for Women

The Patient Protection and Affordable Care Act (PPACA) requires that, for plan years beginning on or after August 1, 2012, non-grandfathered plans will be required to cover the following additional preventive care services for women with no cost-sharing:

• Annual well-woman visits
• Screening for gestational diabetes
• HPV DNA testing for women 30 years and older
• Sexually-transmitted infection counseling
• HIV screening and counseling
• Screening and counseling for Interpersonal and domestic violence
• FDA-approved contraception methods and contraceptive counseling
• Breast-feeding support, supplies, and counseling

An enforcement safe harbor is available to non-exempted, nongrandfathered group health plans established or maintained by non-profit organizations whose plans have not covered contraceptive services for religious reasons at any point from February 10, 2012 onward, consistent with any applicable State law (and any group health insurance coverage provided in connection with such plans).  The safe harbor provides an additional year for these group health plans and group health insurance issuers (i.e., until the first plan year beginning on or after August 1, 2013).

Please call us at 704-525-9666 if you have any questions.