Employee Benefits Compliance

Health Care Reform – One year old, still the law of the land, but some changes to come

By Lisa Klinger, J.D.

“The reports of my death have been greatly exaggerated,” quipped Mark Twain many years ago, and it applies today for the Health Care Reform law (formally knows as the “Patient Protection and Affordable Care Act” or PPACA or just ACA). The Health Care Reform law just turned one year old on March 23rd, 2011, and it is still the law of the land and is being implemented by the federal government and the states. In several recent surveys, however, 25-50% of the respondents thought all or part of the HCR law had been repealed. This article summarizes the current status of the Health Care Reform law.

Federal Laws and Cases

Yes, it’s true that on January 19th the House passed HR 2, repealing the HCR Law, but the Senate voted not to repeal the HCR Law on February 3. And yes, it’s true that two Federal courts have held the HCR law (or part of it) unconstitutional (Commonwealth of Virginia v Sebelius,VA, 12/13/10, and State of Florida et al v US Dept. of HHS, Florida, 1/31/11), but three other Federal Courts have upheld the law (Thomas Moore Law Center v Obama, Mich., 10/7/10, Liberty University v Geitner Virginia, 11/30/10, and M. Mead et al. v Eric Holder, Dist. Of Col., 2/22/11).

And even in the Florida case that held the entire HCR Law void (because the judge said the individual mandate is an integral part of the law and cannot be severed from it), the court did not grant the plaintiffs’ motion to suspend implementation pending appeal of the law. This means the HCR law is in effect, until and unless it is declared unconstitutional by the US Supreme Court, or repealed by Congress. The Obama administration announced immediately after the decision in Florida v HHA that it would appeal the decision, and that it intends to continue with implementation of the HCR law. Most experts believe the US Supreme Court will render a 5-4 decision in 2012 (probably before the November elections), but they disagree as to whether the majority will uphold or invalidate the individual mandate. And on the legislative front, no one really thinks Congress will repeal the law at this point.

State Health Insurance Exchanges

States are also moving forward developing their state health insurance Exchanges. Massachusetts and Utah have already implemented their state insurance exchanges (before the federal Health Care Reform law was enacted). In 2010 HHS gave $49 million to states for the planning and development of state exchanges, and HHS recently awarded seven “early innovator” grants (totaling $241 million) to six states (Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin) and a consortium of five east coast states.

HCR Provisions Already Effective

As employers are well aware, many key provisions of the HCR law are already effective (coverage of adult children to age 26, no pre-existing conditions for children to age 19, no lifetime limits on the dollar value of coverage, restricted annual limits on the dollar value of coverage, no rescissions except in cases of fraud or intentional misrepresentation, and others). Additionally, the three Federal departments with jurisdiction over implementation of the Health Care Reform law (Departments of Labor, Health and Human Services and Treasury) have issued voluminous regulations and have also delayed the effective date of some of the provisions of the new law (e.g., nondiscrimination rules, Form W-2 reporting of the cost of group health coverage) and have allowed plans to maintain grandfathered plans even if they change insurance carriers).


Waivers may be applied for, for several provisions of the HCR law. HHS has granted over 1,000 waivers to the maximum annual limits provision for 2011, to various health plans and insurers. (These annual waivers allow plans to continue even though their annual limits are below the minimum annual limit established by the HCR law — $750,000 in 2011.) Additionally, several states have been granted waivers from the Medical Loss Ratio (MLR) requirements, and more have applied for waivers. (The MLR provisions require insurers to spend at least 85% of their revenue on benefits and quality improvement, and not more than 15% on administrative costs and salaries. For small plans, the numbers are 80%/20%.)

Additionally, in mid-March legislation was proposed to allow states to opt out of several federal HCR mandates in 2014, rather than in 2017 as initially allowed under the HCR law. Regulations were also proposed on steps states may take to receive “state innovation waivers” from certain provisions of the HCR law, including requirements for insurance Exchanges. President Obama announced his support for allowing states to opt out of several mandates in 2014, including the individual mandate to buy health insurance. In order to obtain a waiver, states would be required to show they could provide coverage and cost-sharing protections against out-of-pocket costs that are at least as affordable as federal mandates, that their alternative would cover a comparable number of people as the federal plan, and that the state alternative would not increase the federal deficit.

What Lies Ahead?

We don’t have a crystal ball, but it seems likely that next March 23rd the Health Care Reform law will turn two. It will have some additional changes by then, no doubt, but it’s likely to still be around. Our experience is that most employers are doing their best to comply with the HCR law’s requirements, even if grudgingly. While there are not many existing provisions that become effective between now and 2014, a lot could change before 2014 – depending on possible legislative amendments to HCR law, regulations and/or the US Supreme Court decision.

Copyright © 2011 LGAA, Inc. All Rights Reserved. Reprint with permission only. This Benefits Compliance bulletin is general in nature and is not intended or provided as legal advice or opinion in any particular case. If you have questions, contact Lisa-Klinger@Leavitt.com. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of ( i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

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