Thursday, June 28, 2012

Supreme Court Upholds Mandate as a Tax - Medicaid Restrictions Detailed

With the release of the Supreme Court ruling today you are likely to see a flurry of emails and updates on PPACA. The Court upheld the Sections of the law related to employers entirely. We are committed to providing accurate and timely information to our clients. We believe today’s ruling is merely the end of the beginning of the debate on the future of healthcare. Given the significant nature of the ruling we want to take some time to review and discuss internally what we believe are the best strategies going forward.
We will have a position paper out within the next day or two. Additionally we will have a comprehensive webinar to review the key elements of the law along with a calendar of compliance dates. No employer can afford to wait any longer before beginning the work of total compliance.
We fundamentally still think employers are likely to bear the majority of future costs associated with healthcare increases. The governments budgets are stretched to a breaking point and cost will be shifted to the private sector. Benefits remain a competitive business priority in today’s business climate.
We continue to emphasize that employers who proactively help their employees stay healthy and manage known conditions, have medical cost increases which are about half of their peers who do nothing. We will continue to bring new services and support you in these areas.
Today's ruling is approximately 200 pages and it will take us some time to read, synthesize and digest.  (Ruling linked here). 
In short, the Supreme Court upheld the health care law in a splintered, complex opinion.  The justices said that the individual mandate -- the requirement that most Americans buy health insurance or pay a fine -- is constitutional as a tax.  In 2014, the penalty will be; 
  • $285 per family or 1% of income, whichever is greater;
  • by 2016, it goes up to $2,085 per family or 2.5% of income, whichever is greater. 
Chief Justice John Roberts provided the key vote to preserve the landmark health care law, which figures to be a major issue in the upcoming Presidential election.
The government had argued that Congress had the authority to pass the individual mandate as part of its power to regulate interstate commerce; the court disagreed with that analysis, but preserved the mandate because the fine amounts to a tax that is within Congress' constitutional powers. 
Justice Anthony M. Kennedy, the usual swing vote, spoke for the conservative dissenters and said the entire law should have been struck down.
Medicaid Issue
The ruling was not a total victory for the Obama administration.
Roberts said the law's required expansion of Medicaid violates states' rights.  In essence PPACA expanded a citizen's right to Medicaid if that person made up to 133% of the federal poverty limit (as opposed to 100% prior to the law).  The law further stated that if states did not take on this extra burden, all federal Medicaid assitance could be fully extracted from that state.  This appears to be a significant issue and we will be addressing it further in the upcoming weeks. 
"The states are given no choice in this case. They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding," he wrote.
He said the federal government cannot require the states to follow this part of the law. States that want to take extra federal money may do so, he said, but they cannot be threatened with the loss of all federal funds if they refuse to expand the program as required by Washington.
Market Response
Since the decision issued, stocks have been dropping sharply.
The Dow Jones industrial average, which was down about 100 points before the court ruled, was down 133 points at 12,494 shortly before noon EST Thursday.
Stocks of major insurance companies fell sharply as analysts sorted through the ruling. Hospital chains rose.
Bank stocks were the biggest losers in the market. JPMorgan fell 4 percent after the New York Times reported that its loss from a complex trade could swell to $9 billion.
The Standard & Poor's 500 index fell 14 points to 1,318 and the Nasdaq composite index was off 40 points at 2,834.

Tuesday, June 19, 2012

Quantification of the Regulatory Burden on U.S. Business

The current regulatory environment places an enormous burden on the American economy by crushing small businesses with nonsensical rules and making the United States a toxic country in which to locate a business. 

  • Last year alone, 3,807 new final rules were published in the Federal Register -- more than 10 per day.
  • During that same period, Congress passed only 81 new laws. 
  • Big businesses with more than 500 employees pay about $7,755 per employee to comply with federal rules each year, according to the SBA.
  • But small businesses with fewer than 20 employees pay $10,585 per employee per year -- that's a built-in competitive advantage for big business of nearly $3,000 per employee.

For text: 

Source: Ryan Young and Wayne Crews, "Washington's Ten Thousand Commandments,"American Spectator, June 5, 2012.