Thursday, July 31, 2014

Stories Causing Atlas to Shrug, July 31st Edition

Medicare took in only $283 Bil. in 2013 but spent $583 Bil. That shortfall was 40% of the federal deficit in 2013.

Under Obamacare so far, the individual market for insurance has grown by 2.2 million subscribers while the employer-based market has declined by 1.7 million for a net gain of only 500,000. The rest is due to the expansion of Medicaid.

California insurance renewals in 2015 will be at or near decade lows for two primary reasons: (1) Insurance companies are horrified to add fuel to Proposition 45 price-control push; and (2) Obamacare bailouts.  


Tuesday, July 29, 2014

Draft Versions of IRS Forms for Health Coverage Information Reporting by Employers and Insurers (Employer Mandate)

The IRS has posted the draft forms at as information only, and will post final versions for actual filing at a later date. Most unhelpfully, the IRS did not also publish any instructions for these forms, but those are expected to be issued later in the year.

On the good news front, the first reporting isn't required until early in 2016 for the 2015 calendar year, however employers are encouraged to voluntarily report coverage information in 2015 for the 2014 calendar year.  Don't all beat down my door.  I know you are just itching to do some voluntary, early IRS reporting!

This is from CIGNA:  
Reporting on the Individual Mandate 
Insurers and employers of self-insured plans (regardless of size) must report annually to both the IRS and any individual named in the report whether the individual had minimum essential coverage. It is the means by which the IRS can confirm such individuals have complied with the “individual mandate.” When employers self-insure their plans, they may report on compliance with both the individual and employer mandates on one form. 
Reporting on the Employer Mandate 
Employers with 50 or more full-time employees (including full-time equivalents) need to report on all of the employees offered coverage during the prior calendar year. This information must be provided to the IRS and all employees identified as being offered employer-sponsored health coverage.
From the IRS:
On July 24, 2014, the IRS released draft forms that employers will use to report on health coverage that they offer to their employees. In accordance with the IRS’ normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals and software providers, prepare for these new reporting provisions and to invite comments from them. We anticipate that draft instructions relating to the forms will be posted to in August. Both the forms and instructions will be finalized later this year.
Here are the forms, from Timothy Jost at Health Affairs with a hat tip to BenefitsLink for posting them here as well:
Insurers and self-insured health plans will provide a Form 1095-B to each of their enrollees and members, and file these forms, together with a transmittal form 1094-B with the IRS. Large employers must provide a form 1095-C to each employee, and transmit these, together with a transmittal form 1095-B to the IRS. Exchanges will provide their enrollees a form 1095-A. Individuals who receive premium tax credits will file a form 8962 with the IRS, while individuals claiming an exemption from the individual mandate will file a form 8965. Though the forms are not accompanied by instructions, they are quite straightforward and track closely the earlier released rules.  

Monday, July 28, 2014

Lions and Tigers and O'Care Deductibles... Oh My!

Only in Obamacare can a $12,000 deductible costing $1,100 a month in premium be considered "affordable" for a 54 and 58 year old couple.

InsureBlog has the full story.

What Is an Employer Supposed to Do When They Get a PPACA Medical Loss Ratio (MLR) Rebate?

Insurance carriers will be sending out MLR (Medical Loss Ratio) rebate checks in the next few weeks (August 1 is the deadline for delivery set by HHS). Some of you are old pros at this, since this is our third year of MLR rebate distribution, and some of you may be new at this process. The MLR requires carriers to spend a defined percentage of premium dollars collected on clinical services and health care quality improvements. If the carrier does not spend the required percentage, then a rebate may have to be paid.

Most plans do not get rebates. Only fully insured plans are eligible for rebates, and rebates vary by product, state, and market segment. Rebates are generally provided to the employer or plan sponsor, who is then responsible for distribution of the rebate to plan participants.

Attached are two legislative alerts that address the fiduciary and tax considerations that apply to employer group health plans subject to ERISA (Employer Retirement Income Security Act) that receive MLR checks. There is a link to the IRS FAQ within the "How Employers Should Handle MLR Rebates" alert that is very helpful.
It is important that an employer or plan sponsor determine who is entitled to the MLR rebate and how the MLR rebate will be used. In addition to checks being mailed to employers, notices of the rebate also will be mailed to the subscribers/employees of those groups receiving rebates. Unlike the first MLR reporting year, no notices will be mailed to policyholders and relevant subscribers who do not qualify for a rebate.

5th Different Federal Bureaucracy Expands Obamacare - Taxpayer Subsidies for Temporary and Seasonal Worker Healthcare

So far we have seen tens of thousands of pages of regulations on Obamacare from four different federal bureaucracies.  Health and Human Services (HHS), the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Centers for Medicare and Medicaid Services (CMS) have all had their fingers in the stew.  Tomorrow, the Office of Personnel Management will get in on the action by expressly opening up taxpayer subsidies for certain temporary and seasonal workers with a new proposed regulation.

This is from The Blaze:
The Obama administration on Tuesday will publish a proposed rule that would give thousands of temporary and seasonal government workers access to the government’s health care program, even though Obamacare explicitly prohibits them from using that program. 
The rule from the Office of Personnel Management would let these federal workers sign up for coverage under the Federal Employees Health Benefits Program, and also allow some of them to enjoy a government contribution to their insurance premiums. Both steps would be done through OPM’s proposed regulation, and not through an act of Congress. ...
The proposed rule indicates that OPM is not very clear on how much these changes would cost taxpayers, and is seeking comment on that aspect of the rule. It did say it expects that the rule should not be seen as economically significant, since it believes it would cost less than $100 million. 
OPM reaches that conclusion by assuming that only 10 to 20 percent of currently ineligible federal workers would sign up for an FEHB plan. But a quick calculation using OPM’s own figures indicates that the cost could be much higher than that. ...
Here is an excerpted summary of the regulations (posted in full at the bottom of this post):
The United States Office of Personnel Management (OPM) is issuing a proposed rule that would expand eligibility for enrollment under the Federal Employees Health Benefits (FEHB) Program to certain temporary, seasonal, and intermittent employees who are identified as full-time employees. This regulation would make FEHB coverage available to these newly eligible employees no later than January 2015. ... 
OPM is proposing to expand eligibility for coverage under the Federal Employees Health Benefits (FEHB) Program to certain temporary, seasonal, and intermittent Federal employees who are expected to work full-time schedules within the meaning of section 4980H of the Internal Revenue Code (IRC) for at least 90 days. 
This proposed rule would expand eligibility by authorizing enrollment in a FEHB health plan for certain Federal employees on temporary appointments and certain employees working on seasonal and intermittent schedules. Currently, most employees on temporary appointments become eligible for FEHB coverage after completing one year of current continuous employment and, once eligible for coverage, do not receive an employer contribution to premium. ... 
Under this proposed regulation, employees on temporary appointments, employees on seasonal schedules who will be working less than six months per year, and employees working intermittent schedules would be eligible to enroll in a FEHB health plan if the employee is expected to work a full-time schedule of 130 or more hours in a calendar month.  If the employing office expects the employee to work at least 90 days, the employee is eligible to enroll upon notification of the employee’s eligibility by the employing office. ... 
The change in eligibility for coverage set forth in this proposed regulation is intended to ensure, to the greatest extent practicable, that full-time employees, within the meaning of section 4980H of the IRC and Treasury regulations thereunder (79 FR 8544, February 12, 2014) are eligible to enroll in FEHB. IRC section 4980H, enacted as part of the Affordable Care Act. ... 
[Here, OPM writes that it does not know how much this will cost but estimates it will be under $100 million; meaning no further study is required.]
Impacts of the Proposed Rule 
Agencies may incur FEHB expansion costs....
We do not know how many individuals without an offer of FEHB, which varies widely from month to month, would enroll in FEHB if it were available. ... 
[T]his expansion would generate costs to the Federal government of well below the threshold for economic significance, which is $100 million. ...

ObamaCare Turning Into Sweetheart Deal for Insurers. Losses Buoyed by Taxpayers

  • Enroll more people. 
  • Big surprise [wink, wink] they are sicker than expected.
  • No problem. Policyholders who pay for their insurance will offset insurer losses with increased premium taxes. 

Assurant's the latest to sit down at the trough. The below is from Allison Bell at Life Health Pro
... Patient Protection and Affordable Care Act (PPACA) market changes pumped up individual health sales at Assurant Inc. (NYSE:AIZ) during the second quarter but hurt profits. 
Company executives say their new insureds turned out to be somewhat less healthy than they had assumed when they priced the coverage. The company estimates it should get a total of $140 million in payments from the new PACA reinsurance an risk-adjustment programs. ...

CFO Survey on Obamacare: 1 in 5 Admit to Reducing Headcount or Hours to Address

  • 18% of CFOs say their companies have changed their staffing model/headcount management as a direct result of Obamacare
  • 43% say employee out-of-pocket expenses are up
  • 33% said employee contribution percentages are increasing
  • 58% reported that Obamacare is increasing their costs 
  • 16% aren't sure if PPACA is increasing their costs.  This one is a little scary to me.  It might be time to find a new CFO if he or she cannot tell you whether PPACA has increased or decreased your healthcare costs. 
Source: Tatum's Survey of Business Conditions Second Quarter 2014. 

Saturday, July 26, 2014

What Happens to Obamacare if Subsides in Federal Exchanges Continue to Be Disallowed?

Megan McArdle wrote an outstanding column about the status of Obamacare in the wake of the Halbig and King rulings last week.  I encourage you to read the whole article here.  Below is an excerpt of her work followed by my commentary.
... [R]ight now, [the prospect of Halbig being affirmed is] the only one possibility interesting enough to explore. So let’s hop to it.

...[H]ow many states decide to create exchanges? I’ve heard from several people today who thought it was obvious that most of the 36 states now on federal exchanges would simply withdraw and build their own in order to keep the subsidies flowing. This seems quite possible, because voters hate losing stuff, and especially subsidies. And state legislators do love them some free money.

On the other hand, that outcome is hardly inevitable. Law professor Jonathan Adler pointed out in a conference call yesterday that Ohio would have to amend its constitution to allow the government to establish a state exchange, and barriers in some other states are high as well. State exchanges cost millions to build and to run. States can still apply for federal money to build exchanges, Adler said, but the annual operating costs have to come out of either user fees or tax revenue. In lower population states, or poor states, that might be enough to keep legislators on the sidelines. So might the fear of primary challenges, even if the administration comes up with some easy administrative workarounds to lower the cost.

In the states that don’t establish exchanges, the most likely outcome is a death spiral. For one thing, without the subsidies, fewer people would be subject to the mandate, because the cost of a policy would become “unaffordable” as the Internal Revenue Service defines it for the purposes of assessing mandate penalties. Even if that weren’t the case, without the subsidies, a lot of people would find it cheaper just to pull out and pay the penalties. The most likely people to do this? Healthy youngsters paying more in premiums than they get in health services. If they exit the exchanges, premiums will rise, and the markets will spiral downhill. ...

The most interesting question, I think, is what an adverse ruling would do to the insurance companies. A lot of big insurers mostly stayed out of the exchanges for the first year, waiting to see how they’d develop. Perhaps because the administration has sweetened the pot considerably for insurers over the last eight months, this year, they seem to be wading in deeper, albeit still cautiously.

But what if the pot of subsidy money starts shrinking, rather than growing? That was always going to be a problem, because the risk corridor program, through which the government has funneled many of its pot-sweeteners, ends in 2016, and starting in 2019, the law changes its indexing formula in a way that may require subsidized families to pay a higher share of their income toward premiums. ...

In the end, some states will probably create their own exchanges, and many probably won’t. That wedge between the states with subsidies and the states without would leave an unstable fault line at the heart of the law, one that might cleave at any moment and destroy the whole thing.
I added the emphasis because I wholeheartedly concur with her conclusion.  Most states will not rush to open an exchange except, possibly, the very blue-est of the blue.  Large corporations operating in non-exchange states will have a clear competitive advantage in employee compensation and benefits.

They will be able to chose to offer healthcare benefits as they see fit for their market-segment without the herculean administrative and legal task of compliance with PPACA.  Mini-meds will be back on the table for low-wage and youth dominated industries.  And employers won't have to pay extra to TPAs, brokers and attorneys for the excessive new regulatory and plan requirements. 

Obamacare was 2,400 pages when passed.  It is somewhere in the neighborhood of 25,000 to 40,000 pages now, including regulatory releases and court decisions.  If it holds to the same reg-pages to statute-pages ratio as did Medicare and Medicaid, it will likely be north of 140,000 pages when it is fully implemented.  Let that sink in.  Granted, no one business or person would ever need to read all of that as many aspects would relate to matters not-impacting your specific situation.  But if someone did want to read the entire law, they'd have to read 383 pages a day, every single day for a year - no days off. 

John Conyers would not undertake the challenge.  Remember this?  

The economic advantages for employers in the more free, exchange-less states will be monumental.  Hiring will be better, employees won't be tethered to artificially depressed sub-30-hour work-weeks and the entirety of Obamacare would crumble as the exchange states are forced to abandon the Rube Goldberg Machine of healthcare in order to remain remotely competitive. 


Friday, July 25, 2014

New ObamaCare Loophole: Enrollees in Exchanges Only Need to Pay 11 of 12 Months, Healthy People Can Wait and Only Pay 9 of 12 Months

 * This story, originally posted on 7/24/14, has been updated with the audio from my visit on the Armstrong and Getty Show discussing the matter on 7/25/14 as well as some feedback and further material on the same subject matter from the good folks at InsureBlog.  

This is what happens when central planners try to write 140,000 pages of regulations manipulating one-sixth of the U.S. economy.  The latest regulatory release, rightfully, has insurers squirming in their chairs.

You may hear all Armstrong and Getty Show podcasts here.

This is from Sarah Kliff at VOX:
A loophole in Obamacare regulations has health plans worried that people who bought coverage on the federal marketplace could skip their December payment and insurers would have few tools available to recoup that missed premium. 
"People can get a free month of health care," says one insurance industry official, who flagged the issue and requested anonymity to speak openly about the problematic guidance. "If they knew about the rule, they functionally wouldn't have to pay for their last month of coverage." 
The loophole stems from federal guidance published July 16. The underlying regulations are meant to protect consumers' rights as health insurance shoppers — but which could have the unintended consequence of making it easier for subscribers to skip out on a payment. 
Obamacare guarantees enrollees a three-month grace period if they fall behind on their premiums. Someone who stops paying in March, for example, has through May to make good. So if they don't pay up in March but have a medical bill in May, they can get that bill covered by paying their back premiums. It's only after May that they're really uninsured. 
And if someone misses their grace period entirely — doesn't pay in March, or April or May — federal guidance published July 16 specifies that their coverage runs out on the "last day of the first month of the grace period." In this hypothetical example, the person who never paid for March, April and May would still get coverage through March 31. 
That same federal guidance has other important instructions for how to handle subscribers' payments for 2015. It says that if an Obamacare shopper goes online and re-enrolls in a new insurance plan, any payments towards that new, 2015 plan cannot be applied to outstanding debt on the old, 2014 plan. 
This, insurers worry, is what could make December a bit of a no-man's land for insurers looking to get paid. Somebody could theoretically refuse to pay up in December 2014 and then rejoin their plan — or buy a new one — in January or February of 2015. The health plan they had in December can't terminate their coverage or use their new premiums to to cover the outstanding debt. 
"What happens is you have all of December and January and February to pay that December 2014 premium," says the insurance source, describing the situation. "If you still haven't paid by February, what we would typically do is terminate your policy. But we can't do anything if you have a new, 2015 policy."... 
Note, however, that Sarah's piece only covers the case where someone truly needs coverage for all 12 months in a year.  Even more troubling is what is not reported.  An enrollee who is healthy can plan all of their care during the first nine months of the year and stop paying for October, November and December.  If the person has an emergency care situation, they have until the end of December to pay for the needed October-December coverage.  And as Pat Paule and Henry Stern at InsureBlog pointed out to me in a private email, if the claim a person faces is relatively minor (like less than three months of premium) during the October to December timeframe, the individual can simply pay cash for the claim and move on without having to pay the full three months of premium.

Hence, without a correction to these regulations, no healthy person ever needs to pay for the last three months of his or her plan-year coverage.  But carriers needn't worry too much about this shortcoming because taxpayers will help them shoulder the burden in their shortfalls during, at least, the first three years of PPACA under the Three R's "Bailout" program.  More on that here, here and here.

Also note that this new fantasy land of 90-day grace periods only applies to plans actually purchased on PPACA Exchanges with a subsidy.  Those who still pay their own premiums aren't given the same safety net, hammock.  Thanks to InsureBlog again for that clarification.

For more on the 90-day grace period here and at InsureBlog see:

Thursday, July 24, 2014

On the Michael Berry Radio Show, 7/24/14, How Will Obamacare Change Your Healthcare?

I had the honor of spending two full hours on the air with Michael Berry, The "Czar" of Texas (and Alabama, Georgia, Tennessee, Louisiana, New York, and Oregon) Radio.  Each "hour" is only about 30 minutes below with the commercials removed for your convenience.  He labeled the segment Everything You Wanted to Know and Haven't Asked About Obamacare.  We discussed premiums, subsidies, taxes, mandates, loopholes, the addition of IRS agents to enforce it, as well as the loss of doctors, drugs and freedom in healthcare.

First hour:

Second hour:

You can download a podcast the first hour here and the second hour here.

You can hear all Michael Berry Shows on iHeart radio here.

You can hear The "Czar" live mornings and afternoons on the following stations:

  • KTRH - Houston
  • KEX - Portland
  • KWTX - Waco
  • WOAI - San Antonio
  • WERC - Birmingham
  • WLAC - Nashville
  • WGY - Albany
  • WJBO - Baton Rouge
  • KLVI - Beaumont
  • WGST - Atlanta
  • iHeartRadio 

Wednesday, July 23, 2014

Financial Issue for U.S. Employers: New Actuary Tables May be 'Nail in the Coffin' for Defined Benefit Plans

  • The measured value of liabilities for most defined benefit plans will increase between 3% and 8% with the adoption of new mortality tables, said a report from Wilshire Consulting.
  • The tables, released by the Society of Actuaries in exposure draft form in February, reflect an increase in the life expectancy of Americans, resulting in increased pension plan liability values and liability durations.
  • The tables most DB plans now use to measure pension liabilities were published by the Society of Actuaries in 2000. 
  • The mortality assumption changes were anticipated even before the tables were released, leading some plan executives to raise their ending funding ratios for glidepaths to 110% and 115%. 

Source: Meaghan Kilroy writing for Pensions & Investments. 

King v. Burwell, U.S. 4th Circuit (No. 14-1158) July 22, 2014

The below is an edited version of the King case for people would would like to read enough of it to know what the issues, arguments and rules are but do not wish to read all 46 pages. For more coverage on the Halbig and King decisions see my post here and see the full text of the case here. My limited commentary below is in [blue]. The rest of the words are the court's.  My factual setup and background are skeletal in this edited version because we covered that in the prior post on Halbig which you can see here.

Overview of the Issue

Pg. 5:  The plaintiffs-appellants bring this suit challenging the validity of an Internal Revenue Service (“IRS”) final rule implementing the premium tax credit provision of the Patient Protection and Affordable Care Act (the “ACA” or “Act”). The final rule interprets the ACA as authorizing the IRS to grant tax credits to individuals who purchase health insurance on both state-run insurance “Exchanges” and federally-facilitated “Exchanges” created and operated by the Department of Health and Human Services (“HHS”). The plaintiffs contend that the IRS’s interpretation is contrary to the language of the statute, which, they assert, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges.

Short Answer

Pg. 5:  For reasons explained below, we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion. We thus affirm the judgment of the district court.


Pg. 9:  The plaintiffs in this case are Virginia residents who do not want to purchase comprehensive health insurance. Virginia has declined to establish a state-run Exchange and is therefore served by the prominent federally-facilitated Exchange known as Without the premium tax credits, the plaintiffs would be exempt from the individual mandate under the unaffordability exemption. With the credits, however, the reduced costs of the policies available to the plaintiffs subject them to the minimum coverage penalty. According to the plaintiffs, then, as a result of the IRS Rule, they will incur some financial cost because they will be forced either to purchase insurance or pay the individual mandate penalty.


Pg. 15:  Turning to the merits, “we review questions of statutory construction de novo.” Orquera v. Ashcroft, 357 F.3d 413, 418 (4th Cir. 2003). Because this case concerns a challenge to an agency’s construction of a statute, we apply the familiar two-step analytic framework set forth in Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). At Chevron’s first step, a court looks to the “plain meaning” of the statute to determine if the regulation responds to it.  Chevron, 467 U.S. at 842-43. If it does, that is the end of the inquiry and the regulation stands. Id. However, if the statute is susceptible to multiple interpretations, the court then moves to Chevron’s second step and defers to the agency’s interpretation so long as it is based on a permissible construction of the statute. Id. at 843.

Pgs. 18-19: ... [P]laintiffs assert that because state and federal Exchanges are referred to separately in § 1311 and § 1321, the omission in 26 U.S.C. § 36B of any reference to federal Exchanges established under § 1321 represents an intentional choice on behalf of Congress to exclude federal Exchanges and include only state Exchanges established under § 1311.

There can be no question that there is a certain sense to the plaintiffs’ position. If Congress did in fact intend to make the tax credits available to consumers on both state and federal Exchanges, it would have been easy to write in broader language, as it did in other places in the statute....

However, when conducting statutory analysis, “a reviewing court should not confine itself to examining a particular statutory provision in isolation. Rather, [t]he meaning – or ambiguity – of certain words or phrases may only become evident when placed in context.” Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 666 (2007) (internal citation and quotation marks omitted). With this in mind, the defendants’ primary counterargument points to ACA §§ 1311 and 1321, which, when read in tandem with 26 U.S.C. § 36B, provide an equally plausible understanding of the statute, and one that comports with the IRS’s interpretation that credits are available nationwide.

Pg 20:  [Under the terms of the ACA], [i]n the absence of state action, the federal government is required to step in and create, by definition, “an American Health Benefit Exchange established under [§] 1311” on behalf of the state.

Having thus explained the parties’ competing primary arguments, the court is of the opinion that the defendants have the stronger position, although only slightly. Given that Congress defined “Exchange” as an Exchange established by the state, it makes sense to read § 1321(c)’s directive that HHS establish “such Exchange” to mean that the federal government acts on behalf of the state when it establishes its own Exchange. However, the court cannot ignore the common-sense appeal of the plaintiffs’ argument; a literal reading of the statute undoubtedly accords more closely with their position.

As such, based solely on the language and context of the most relevant statutory provisions, the court cannot say that Congress’s intent is so clear and unambiguous that it “foreclose[s] any other interpretation.” Grapevine Imports, 636 2 F.3d at 1377.

Pg. 24: ... [W]hile we think the defendants make the better of the two cases, we are not convinced that either of the purported statutory conflicts render Congress’s intent clear.  Both parties offer reasonable arguments and counterarguments that make discerning Congress’s intent difficult. Additionally, we note that the Supreme Court has recently reiterated the admonition that courts avoid revising ambiguously drafted legislation out of an effort to avoid “apparent anomal[ies]” within a statute. Michigan v. Bay Mills Indian Cmty...slip op. at 10 (May 27, 2014). It is not especially surprising that in a bill of this size – “10 titles stretch[ing] over 900 pages and contain[ing] hundreds of provisions,” NFIB, 132 S. Ct. at 2580, – there would be one or more conflicting provisions. See Bay Mills, at 10-11 (“Truth be told, such anomalies often arise from statutes, if for no other reason than that Congress typically legislates by parts.

Pgs. 26-28:  The plaintiffs argue extensively that Congress could not have anticipated that so few states would establish their own Exchanges. Indeed, they argue that Congress attempted to “coerce” the states into establishing Exchanges by conditioning the availability of the credits on the presence of state Exchanges.

The plaintiffs contend that Congress struck an internal bargain in which it decided to favor state-run Exchanges by incentivizing their creation with billions of dollars of tax credits. According to the plaintiffs, however, Congress’s plan backfired when a majority of states refused to establish their own Exchanges, in spite of the incentives. The plaintiffs thus acknowledge that the lack of widely available tax credits is counter to Congress’s original intentions, but consider this the product of a Congressional miscalculation that the courts have no business correcting.

... [I]t is at least plausible that Congress would have wanted to ensure state involvement in the creation and operation of the Exchanges. Such an approach would certainly comport with a literal reading of 26 U.S.C. § 36B’s text. In any event, it is certainly possible that the Senators ... were ... under the assumption that each state would establish its own Exchange, and that they could not have envisioned the issue currently being litigated.

Although Congress included a fallback provision in the event the states failed to act, it is not clear from the legislative record how large a role Congress expected the federal Exchanges to play in administering the Act. We are thus of the opinion that nothing in the legislative history of the Act provides compelling support for either side’s position.

Having examined the plain language and context of the most relevant statutory sections, the context and structure of related provisions, and the legislative history of the Act, we are unable to say definitively that Congress limited the premium tax credits to individuals living in states with state-run Exchanges. We note again that, on the whole, the defendants have the better of the statutory construction arguments, but that they fail to carry the day. Simply put, the statute is ambiguous and subject to at least two different interpretations. As a result, we are unable to resolve the case in either party’s favor at the first step of the Chevron analysis.

Pg. 29:  [W]e cannot discern whether Congress intended one way or another to make the tax credits available on HHS-facilitated Exchanges. The relevant statutory sections appear to conflict with one another, yielding different possible interpretations. In light of this uncertainty, this is a suitable case in which to apply the principles of deference called for by Chevron. See Scialabba v. Cuellar de Osorio, ... slip op. at 14 (June 9, 2014) (“[I]nternal tension [in a statute] makes possible alternative reasonable constructions, bringing into correspondence in one way or another the section’s different parts. And when that is so, Chevron dictates that a court defer to the agency’s choice....

Pg. 34:  The IRS Rule became all the more important once a significant number of states indicated their intent to forgo establishing Exchanges. With only sixteen state-run Exchanges currently in place, the economic framework supporting the Act would crumble if the credits were unavailable on federal Exchanges. Furthermore, without an exception to the individual mandate, millions more Americans unable to purchase insurance without the credits would be forced to pay a penalty that Congress never envisioned imposing on them. The IRS Rule avoids both these unforeseen and undesirable consequences and thereby advances the true purpose and means of the Act.


It is thus entirely sensible that the IRS would enact the regulations it did, making Chevron deference appropriate. Confronted with the Act’s ambiguity, the IRS crafted a rule ensuring the credits’ broad availability and furthering the goals of the law. In the face of this permissible construction, we must defer to the IRS Rule. See Scialabba, at 33 (“Whatever Congress might have meant in enacting [the statute], it failed to speak clearly. Confronted with a self-contradictory, ambiguous provision in a complex statutory scheme, the Board chose a textually reasonable construction consonant with its view of the purposes and policies underlying immigration law....


Pg. 38:  I would hold that Congress has mandated in the Act that the IRS provide tax credits to all consumers regardless of whether the Exchange on which they purchased their health insurance coverage is a creature of the state or the federal bureaucracy. Accordingly, at Chevron Step One, the IRS Rule making the tax credits available to all consumers of Exchange-purchased health insurance coverage, 26 C.F.R. § 1.36B-1(k), 77 Fed. Reg. 30,377, 30,378 (May 23, 2012), is the correct interpretation of the Act and is required as a matter of law. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984).

[Amongst the 6 federal appellate judges that considered this matter and ruled on July 22, in both Halbig and King, Judge Davis, in this concurrence decided that "an Exchange established by the State" clearly and unambiguously meant and Exchange established by the federal government or the State.  To me this position the hardest to follow and the hardest to defend.]  


Halbig v. Burwell, Appeal from United States District Court for District of Columbia (No. 1:13-cv-00623), July 22, 2014

The below is an edited version of the Halbig case for people would would like to read enough of it to know what the issues, arguments and rules are but do not wish to read all 72 pages.  For more coverage on the Halbig decision see my post here and see the full text of the case here.  My edited version of King v. Burwell can be read here.  My limited commentary below is in [blue].  The rest of the words are the court's.


Pg. 4:  Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia.... But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act....

Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.”...

Pg. 8: ... [T]he IRS acknowledged that “[c]ommentators disagreed on whether the language in section 36B(b)(2)(A) limits the availability of the premium tax credit only to taxpayers who enroll in qualified health plans on State Exchanges,” but asserted without elaboration that “[t]he statutory language of section 36B and other provisions of the [ACA],” as well as “the relevant legislative history,” supported its view....

This broader interpretation has major ramifications. By making credits more widely available, the IRS Rule gives the individual and employer mandates—key provisions of the ACA—broader effect than they would have if credits were limited to state-established Exchanges. The individual mandate requires individuals to maintain “minimum essential coverage” and, in general, enforces that requirement with a penalty.... The penalty does not apply, however, to individuals for whom the annual cost of the cheapest available coverage, less any tax credits, would exceed eight percent of their projected household income.... By some estimates, credits will determine on which side of the eight-percent threshold millions of individuals fall.... Thus, by making tax credits available in the 36 states with federal Exchanges, the IRS Rule significantly increases the number of people who must purchase health insurance or face a penalty.

Issue and Summary of Arguments

Pgs. 14-16:  On the merits, this case requires us to determine whether the ACA permits the IRS to provide tax credits for insurance purchased through federal Exchanges. To make this determination, we begin by asking “whether Congress has directly spoken to the precise question at issue,” for if it has, we must give effect to its unambiguously expressed intent. Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (1984). The text of section 36B is only the starting point of this analysis. That provision is but one piece of a vast, complex statutory scheme, and we must consider it both on its own and in relation to the ACA’s interconnected provisions and overall structure so as to interpret the Act, if possible, “as a symmetrical and coherent scheme.” See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000). ...

Although both appellants and the government argue that the ACA, read in its totality, evinces clear congressional intent, they dispute what that intent actually is. Appellants argue that if taxpayers can receive credits only for plans enrolled in “through an Exchange established by the State under section 1311 of the [ACA],” then the IRS clearly cannot give credits to taxpayers who purchased insurance on an Exchange established by the federal government. After all, the federal government is not a “State,” see 42 U.S.C. § 18024(d) (defining “State” to “mean[] each of the 50 States and the District of Columbia”), and its authority to establish Exchanges appears in section 1321 rather than section 1311, see id. § 18041(c)(1). The government counters that appellants take a blinkered view of the ACA and that sections 1311 and 1321 of the Act establish complete equivalence between state and federal Exchanges, such that when the federal government establishes an Exchange, it does so standing in the state’s shoes. Furthermore, the government argues, whereas appellants’ construction of section 36B renders other provisions of the ACA absurd, its own view brings coherence to the statute and better promotes the purpose of the Act.

Short Answer

We conclude that appellants have the better of the argument: a federal Exchange is not an “Exchange established by the State,” and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges. We reach this conclusion by the following path: First, we examine section 36B in light of sections 1311 and 1321, which authorize the establishment of state and federal Exchanges, respectively, and conclude that section 36B plainly distinguishes Exchanges established by states from those established by the federal government. We then consider the government’s arguments that this construction generates absurd results but find that it does not render other provisions of the ACA unworkable, let alone so unreasonable as to justify disregarding section 36B’s plain meaning. Finally, turning to the ACA’s purpose and legislative history, we find that the government again comes up short in its efforts to overcome the statutory text. Its appeals to the ACA’s broad aims do not demonstrate that Congress manifestly meant something other than what section 36B says.


The problem confronting the IRS Rule is that subsidies also turn on a third attribute of Exchanges: who established them. Under section 36B, subsidies are available only for plans “enrolled in through an Exchange established by the State under section 1311 of the [ACA].” 26 U.S.C. § 36B(c)(2)(A)(i) (emphasis added); see also id. § 36B(b)(2)(A). Of the three elements of that provision— (1) an Exchange (2) established by the State (3) under section 1311—federal Exchanges satisfy only two: they are Exchanges established under section 1311. Nothing in section 1321 deems federally-established Exchanges to be “Exchange[s] established by the State.” This omission is particularly significant since Congress knew how to provide that a non-state entity should be treated as if it were a state when it sets up an Exchange. In a nearby section, the ACA provides that a U.S. territory that “elects . . . to establish an Exchange . . . shall be treated as a State.”2 42 U.S.C. § 18043(a)(1). The absence of similar language in section 1321 suggests that even though the federal government may establish an Exchange “within the State,” it does not in fact stand in the state’s shoes when doing so. See NFIB, 132 S. Ct. at 2583 (“Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally.” (citing Russello v. United States, 464 U.S. 16, 23 (1983))).

[Because the court concludes that the statute is clear on its face and that subsidies are only intended in state exchanges, it notes that it is arguable but doubtful that precedent requires the court to go any further.  However, for the sake of argument, the court does look briefly at the congressional intent and notes that even if they did make it to this subsequent prong of analysis, it would conclude the same way.] 

Pg. 31: [A]ssuming arguendo that it is proper to consult legislative history when the statutory text is clear, we consider what light the ACA’s history offers....

Pg. 32: [I]t would be a strange canon of statutory construction that would require Congress to state in committee reports or elsewhere in its deliberations that which is obvious on the face of a statute.”). Instead, only when “apparently plain language compels an ‘odd result’” might we look to legislative history to ensure that the “‘literal application of a statute will [not] produce a result demonstrably at odds with the intentions of its drafters.’” Engine Mfrs. Ass’n, 88 F.3d at 1088 (quoting Public Citizen, 491 U.S. at 454, and United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989)).

Pgs. 33-34: The Senate Committee on Health, Education, Labor, and Pensions (HELP) proposed a bill that specifically contemplated penalizing states that refused to participate in establishing “American Health Benefit Gateways,” the equivalent of Exchanges, by denying credits to such states’ residents for four years. See Affordable Health Choices Act, S. 1679, 111th Cong. § 3104(a), (d)(2) (2009). This is not to say that section 36B necessarily incorporated this thinking; we agree that inferences from unenacted legislation are too uncertain to be a helpful guide to the intent behind a specific provision. See Village of Barrington v. Surface Transp. Bd., 636 F.3d 650, 666 (D.C. Cir. 2011). But the HELP Committee’s bill certainly demonstrates that members of Congress at least considered the notion of using subsidies as an incentive to gain states’ cooperation. [Bold italics are mine.] 

Pg. 40: As the Supreme Court explained just this term, “an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” UARG, 134 S. Ct. at 2446. And neither may we. “The role of th[e] [c]ourt is to apply the statute as it is written—even if we think some other approach might ‘accor[d] with good policy.’” Burrage v. United States, 134 S. Ct. 881, 892 (2014) (quoting Comm’r v. Lundy, 516 U.S. 235, 252 (1996)) (third alteration in original); see also Lewis v. City of Chicago, 560 U.S. 205, 217 (2010) (“[I]t is not our task to assess the consequences of each approach [to interpreting a statute] and adopt the one that produces the least mischief. Our charge is to give effect to the law Congress enacted.”) ...

Conclusion and Holding

Pg. 41: The fact is that the legislative record provides little indication one way or the other of congressional intent, but the statutory text does. Section 36B plainly makes subsidies available only on Exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent. Cf. Ethyl Corp. v. EPA, 51 F.3d 1053, 1063 (D.C. Cir. 1995) (“At best, the legislative history is cryptic, and this surely is not enough to overcome the plain meaning of the statute.”). To hold otherwise would be to say that enacted legislation, on its own, does not command our respect—an utterly untenable proposition. Accordingly, applying the statute’s plain meaning, we find that section 36B unambiguously forecloses the interpretation embodied in the IRS Rule and instead limits the availability of premium tax credits to state-established Exchanges.

Dissenting Opinion

Pg. 71-72: The Supreme Court has made it clear that “[t]he plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.” Robinson, 519 U.S. at 341. We cannot review a “particular statutory provision in isolation . . . . It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Nat’l Ass’n of Home Builders, 551 U.S. at 666. Following these precepts and reading the ACA as a whole, it is clear that the statute does not unambiguously provide that individuals who purchase insurance from an Exchange created by HHS on behalf of a State are ineligible to receive a tax credit. The majority opinion evinces a painstaking effort – covering many pages – attempting to show that there is no ambiguity in the ACA. The result, I think, is to prove just the opposite. Implausible results would follow if “established by the State” is construed to exclude Exchanges established by HHS on behalf of a State. This is why the majority opinion strains fruitlessly to show plain meaning when there is none to be found.

The IRS’s and HHS’s constructions of the statute are perfectly consistent with the statute’s text, structure, and purpose, while Appellants’ interpretation would “crumble” the Act’s structure. Therefore, we certainly cannot hold that that the agencies’ regulations are “manifestly contrary to the statute.” This court owes deference to the agencies’ interpretations of the ACA. Unfortunately, by imposing the Appellants’ myopic construction on the administering agencies without any regard for the overall statutory scheme, the majority opinion effectively ignores the basic tenets of statutory construction, as well as the principles of Chevron deference. Because the proposed judgment of the majority defies the will of Congress and the permissible interpretations of the agencies to whom Congress has delegated the authority to interpret and enforce the terms of the ACA, I dissent.

Tuesday, July 22, 2014

Legal Alert: D.C. Appellate Court Rules Obamacare Insurance Subsidies, Employer and Individual Mandates Effectively Illegal In 36 States

Hours Later, Another Federal Appellate Court Rules Opposite Way

For approximately two years we have covered a massive legal problem embedded deep within the text of PPACA itself. The subsidies individuals use to buy Obamacare policies and the resulting fines against employers who provide inadequate or unaffordable coverage are illegal in the 36 states that opted not to set up their own health exchanges.  I spoke specifically about the legality of these subsidies on the Armstrong and Getty Radio program on December 13, 2013.  

Today the federal appellate court in the District of Columbia ruled that the subsidies are, in fact, illegal.  Despite the ruling, the subsidies will continue to flow while this case is appealed, again, to the full D.C. Appellate Court or to the U.S. Supreme Court.  On this site, you can navigate to all of our past coverage on this issue at the Oklahoma v. ObamaCare tab on the right as the case initiated in Oklahoma was one of the first fleshing out this matter.  Today's D.C. Circuit decision is Halbig vs. Burwell

Only hours after the D.C. Circuit's ruling in Halbig, a different appellate court, the 4th Circuit Court of Appeals in Richmond upheld the IRS rule permitting subsidies for the millions of Americans who receive them through a federal exchange.  In direct opposition to the D.C. Circuit, the subsequent 4th Circuit ruling says that the rule issued by the Internal Revenue Service was “a permissible exercise of the agency’s discretion.” The conflicting rulings greatly increase the possibility that the dispute will ultimately be resolved by the Supreme Court in the spring to summer of 2015.

The D.C. Circuit is widely viewed as the second-most powerful court in the land, and their edict will likely overshadow the Fourth Circuit for now.  Obama administration lawyers will appeal the D.C. panel’s decision to the full D.C. Circuit. There, seven of the 11 judges are Democratic appointees. Because of the politics behind this law, that full-panel review will likely result in a decision aligned with with 4th Circuit and deem the subsidies legitimate.  We've had enough ambiguity and uncertainty on this already, though, that I suspect we are looking at a 60% to 75% chance the Supreme Court will take this case and we'll have a final decision on the matter by June of 2015.

If It Stands, the Halbig Decision Will Have Huge Impact on Obamacare and Employers

The D.C. Circuit ruling guts the employer mandate, in those same 36 states, because the $3,000 per employee fines only kick in if one of such an employers' workers buy subsidized covered on  With no available subsidies, there will be no corresponding employer fines. 

The D.C. Circuit ruling also renders the individual mandate all but useless in the 36 states. If the amount a person is asked to pay for his insurance in an Exchange exceeds 8% of his income, he is exempted from the fines associated with the individual mandate.  Without these federal handouts to buy insurance, virtually nobody will fall under that 8% threshold, thereby freeing them from the federal rule compelling them to purchase a policy.  According to one analysis by the Constitutional Accountability Center, a think tank and law firm, without the subsidies, insurance would no longer be considered affordable by this standard for 99% of people who receive them.

California is one of the 14 states that set up its own Exchange. So while the ultimate meaning of the rulings does not impact the Golden State, on its face, it will practically impact all 50 states eventually if the subsidies are stricken.  The economy, employer costs, recruiting efforts, and competitive balance could not withstand a system whereby 14 states have to comply with all of the stringent requirements of PPACA while 36 of them, by in large, receive a pass.  I've already received a call from a senior health insurance consultant at one of the largest brokerages in the world who is looking at how an employer can take advantage of this ruling and create a significant advantage over competitors by bolstering hiring and operations in the 36 states. 
    1. a victory for the Halbig plaintiffs would increase no one’s premiums, 
    2. if federal-Exchange enrollees lose subsidies, it is because those subsidies are, and always were, illegal, and  
    3. the winners under such a ruling would outnumber the losers by more than ten to one.  

Last week, a study issued by the consultancy Avalere Health, provided that if those subsidies were removed this year from the 4.7 million people who received them in states, their premiums would have been an average of 76% higher than what they actually paid.  With that kind of a cost increase, only the very sickest in that pool of 4.7 million would find a way to purchase coverage, further speeding the Exchanges into an unsuitable spiral of aging and ill participants with skyrocketing premiums.

This is from Joe Carlson writing at Modern Healthcare about the earlier Halbig decision:
A federal appeals court has ruled the Obama administration cannot subsidize insurance premiums for nearly 7 million Americans, dealing a serious blow to the Patient Protection and Affordable Care Act.The ruling sets up an almost-certain appeal to the U.S. Supreme Court. 
Two judges with the D.C. Circuit Court of Appeals in Washington ruled Tuesday that the text of the reform law clearly forbids income-tax subsidies to go to low- and middle-income Americans who use one of the 34 federally run insurance exchanges.  [Note: Though initially intending to set up state Exchanges, Idaho and New Mexico defaulted to the federal government and bringing the total number of federally-facilitated Exchanges to 36, not 34.]  The tax subsidies have been flowing since the beginning of the year, based on a 2012 interpretation of the law by the IRS. 
The actual text of the law says the sliding-scale tax credits are only available for coverage purchased “though an exchange established by the state,” which only 16 states did. IRS officials had claimed the imprecise wording of the law contradicted Congress' overall intent to expand insurance coverage as widely as possible. But that argument did not win the day Tuesday. 
“Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges 'established by the State,' we reverse the district court and vacate the IRS's regulation,” the two-member majority wrote. ... 
The ruling does not automatically doom the subsidies. It's virtually certain that the administration will appeal Tuesday's ruling, either to a full panel of the D.C. Circuit Court or directly to the Supreme Court. Legal experts say the earliest the high court would rule is in the matter as soon as spring 2015 — setting up a period of national uncertainty, since the final word on the subsidies' legality would likely come after the re-enrollment period for next year. 
Economists have estimated that a ruling like Tuesday's, in favor of the plaintiffs in Halbig v. Burwell, would eventually cause 6.5 million people nationally to forgo insurance purchased with now-illegal tax credits. 
Nearly 7 million people used the exchanges to buy coverage in 2014, and more than 80% of them qualified for a tax credit that averaged about $2,900 per enrollee. Most of them are likely to forgo the coverage rather than pay the full price themselves, legal experts on both sides of the issue say. That would set up a situation where only people with immediate plans to use the insurance — that is, the sick or chronically ill — would be likely to find a way to pay for it. Skewing insurers' risk pools would most likely cause prices to rise, perhaps dramatically. 
The ruling could also destabilize non-group insurance markets outside the exchanges.
That's because the reform law required insurance companies to put individuals in the same risk pools for coverage, regardless of whether they use an exchange or not. In other words, the grouping of disproportionately sick individuals in the exchanges could cause non-group premiums to rise outside the exchanges as well, because individuals in each state are in the same risk pool. 
The Halbig case is not the only such lawsuit based on the legal theory that the reform law was only supposed to offer subsidies through federal exchanges. 
The Competitive Enterprise Institute, which coordinated Halbig v. Burwell, also has a case called King v. Burwell awaiting a decision before judges of the 4th U.S. Circuit Court of Appeals in Richmond, Virginia. In addition, federal lawsuits filed by state officials, Pruitt v. Sebelius in Oklahoma and Indiana v. IRS, are pending in U.S. District Courts in Oklahoma City and Indianapolis. 
Traditionally, the Supreme Court waits for two circuit courts to issue split rulings on the same question before taking up a case, though the court is free to accept cases involving urgent national questions if it chooses.

This is from the 4th Circuit's conflicting decision in King v. Burwell on pages 42-42:
In fact, Appellants’ [challengers to the subsidies] reading is not literal; it’s cramped. No case stands for the proposition that literal readings should take place in a vacuum, acontextually, and untethered from other parts of the operative text; indeed, the case law indicates the opposite. National Association of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 666 (2007). So does common sense: If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino’s, and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino’s with a ham and pepperoni pizza has still complied with a literal construction of my lunch order. That is this case: Congress specified that Exchanges should be established and run by the states, but the contingency provision permits federal officials to act in place of the state when it fails to establish an Exchange. The premium tax credit calculation subprovision later specifies certain conditions regarding state-run Exchanges, but that does not mean that a literal reading of that provision somehow precludes its applicability to substitute federally-run Exchanges or erases the contingency provision out of the statute.  

Other Coverage on Today's Decisions:

Federal Courts Zig and Zag on Obamacare Tax Credits
July 22, 2014 - National Center for Policy Analysis
Excerpt: "Both these rulings expose yet more flaws in Obamacare that need to be addressed. Many exchange enrollees will undoubtedly be angered by the uncertainty, but many others would be relieved to be able to dump health plans they didn’t want in the first place. States need to act fast to allow individuals the opportunity to enroll in health plans previously outlawed under Obamacare. While Democrats will undoubtedly blame Republicans for ‘dragging their feet’ in the creation of state exchanges, the truth is that the federal government discouraged states from operating their own exchanges with onerous regulations, inflexible deadlines, and the promise that states that could merely opt out and allow the federal government to do the job for them.”

D.C. Appeals court strikes Obamacare subsidies
July 22, 2014 – Politico
Excerpt: “Now that the court has sided with the plaintiffs, Obama administration can ask the full appeals panel to reconsider the case in an en banc hearing or appeal directly to the Supreme Court. The decision doesn’t immediately block the subsidies from the federal-run exchanges. If the subsidies are ultimately blocked, an estimated 7.3 million people — about 62 percent of those expected to enroll in federal-run exchanges by 2016 — could lose out on $36.1 billion, according to a report from the Robert Wood Johnson Foundation.”

Court Rules Against Obamacare Subsidies for Federal Exchange Insureds
July 22, 2014 – Insurance Journal
Excerpt: “President Barack Obama’s healthcare overhaul suffered a potentially crippling blow as a U.S. appeals court ruled the government can’t give financial assistance to anyone buying coverage on the insurance marketplace run by federal authorities. The decision, if it withstands appeals, may deprive more than half the people who signed up for Obamacare the tax credits they need to buy a health plan.”

BREAKING — D.C. Circuit strikes down tax credits in federal exchanges
July 22, 2014 – The Washington Post
Excerpt: “What comes next? The Administration will have to decide whether to seek en banc review of this decision or file a petition for certiorari. If I had to guess, I would say the former is more likely. Supreme Court review will likely wait until there are more decisions on this question. A decision remains pending in King v. Sebelius before the U.S. Court of Appeals for the Fourth Circuit and there are two pending cases in district courts. If this decision is upheld, it will present some three-dozen states with a choice: Establish exchanges so as to authorize tax credits for state citizens while also triggering penalties on employers and individuals who do not wish to purchase qualifying health insurance. As my co-author Michael Cannon notes, the implications of this decision go beyond its effect on tax credits.”

July 22, 2014 – The U.S. Court of Appeals for the District of Columbia
Excerpt: “On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).”

Courts Issue Conflicting Rulings on Health Care Law
July 22, 2014 - The New York Times
Excerpt: "The law 'does not authorize the Internal Revenue Service to provide tax credits for insurance purchased on federal exchanges,' said the ruling, by a three-judge panel in Washington. The law, it said, 'plainly makes subsidies available only on exchanges established by states.'  Under this ruling, many people could see their share of premiums increase sharply, making insurance unaffordable for them.  If it stands, the ruling by the District of Columbia court could undercut enforcement of the requirement for most Americans to have insurance."

Halbig v. Burwell, Edited
July 23, 2014 - Craig Gottwals
To see the full 72 pages of the case edited down to less than 6 you may read my posting here.

You can read the Fourth Circuit's King v. Burwell decision here.

Monday, July 21, 2014

Obama: Healthcare Costs to Decrease $2,500 Per Family. Reality: $18,610 Increase

America Next, a think tank headed by Louisiana Governor Jindal has toted up the cost of President Obama’s broken — and in hindsight absurd — promise to reduce the average family’s health-insurance premium by $2,500 by the end of his first term. In fact, premiums have risen by $18,610. The total cost to the economy is $1.2 trillion. 
The worst consequence: Given annual full-time private sector compensation rates, the amount spent on higher health insurance premiums equals the cost of 3.9 million jobs each year, and nearly 6 million jobs in 2013 alone.
And in terms of lost jobs, it looks like this:

Source of Images: America Next.

Friday, July 18, 2014

Media Coverage Catching Up - Employer Mandate Once Again on Thin Ice

We've been covering this topic here for nearly 13 months. PPACA's employer mandate is not going to be implemented as it was written. And even after two delays, I don't believe it will be implemented as it currently stands. There will be anther alteration somehow, someway.

The below is an excellent summary of the technical reasons for delay as well as a catalog of prominent Reform supporters who are now casting aspersions on the mandate. But it does not take into account the single most important reason for the delay: it's devastating impact on employment. It is a tax on employees working more than 30 hours a week. See more on that here and here.

This is from Elise Viebeck and Benjamin Goad writing for The Hill in a story just released today:

The White House needs to make a decision soon on whether ObamaCare's controversial employer mandate will take effect in 2015.

With the mandate set to take effect in January, businesses are awaiting final world from the administration on whether they will be required to track and report how many of their employees are receiving coverage.

Federal officials are late in delivering the final forms and technical guidance necessary for firms to comply, raising suspicions the mandate could once again be delayed. 

The mandate has been pushed back twice before, the first time in late summer. ...

Another delay to the mandate would be sure to create a political firestorm and draw charges that the administration is playing politics with ObamaCare ahead of the midterm elections.

But support for the mandate on the left has begun to soften in recent months, with influential figures and former Obama administration officials questioning whether it’s needed to make the law work.

Seven business lobbyists interviewed by The Hill said it is unlikely the administration would defer the employer mandate wholesale one more time, given the intense political pressure from Republicans.

But many groups are expecting partial relief to be announced prior to November, perhaps in the form of looser reporting requirements that would be easier to follow. ...

Almost one year ago, the Obama administration announced it would postpone enforcement of the mandate until 2015.

The move was denounced as politically driven, given that businesses were warning they were likely to layoff and cut hours for workers once they were required to either provide healthcare coverage or pay a fine.  

That same threat still exists today.  As we get closer to the November elections the pressure will mount for Reform supporters to delay or change the mandate again. While our economy has been adding jobs it has been via a reduction in full time work and a larger increase in part time employment.  Employers have a new financial incentive to move employees below 30 hours a week and to keep from growing past 50 employees to avoid these implicit taxes.

Viebeck and Goad continue:

... Interest groups say they're in a holding pattern until the Treasury Department releases two more forms and a set of specific enforcement guidelines.

Those materials, expected prior to July 4, are considered necessary to constructing databases that will help fulfill the mandate's complex requirements.

The Treasury Department says the documents will be ready soon and noted it released final regulations on the mandate in February.

"These forms will be made available in draft form in the near future," said a spokesman for the IRS.

Since that month, however, a growing number of Democrats have muddied the waters by questioning how much the mandate really matters to the healthcare law.

Skeptics include the party’s likely 2016 standard-bearer, Hillary Clinton, and former Obama spokesman Robert Gibbs.

Rep. Henry Waxman (D-Calif.), who helped craft the healthcare law, said he was "concerned" about the potential for lost revenue if the mandate is scrapped.

But he said another delay would not doom the healthcare law. "I don’t think it would be disastrous," he said. "It wasn't disastrous last year." ...

Away from the public debate, the lobbying battle over the administration's final decision is heating up.

Business groups are airing concerns about the missing forms on Capitol Hill and in "quiet conversations" with administration officials.

Some of the groups are proposing that the administration scale back the 2015 penalties for failing to comply. Others say that a form of self-verification should suffice for reporting which employees have healthcare coverage.

Lobbyist Yvette Fontenot, who helped draft the employer mandate as an aide to former Senate Finance Committee Chairman Max Baucus (D-Mont.), said the administration should explore its options.

"We didn’t have a very good handle on how difficult operationalizing the provision would be at that time,” said Fontenot, who is now a partner at government affairs firm Avenue Solutions.

"I don't have any doubt that there are other approaches … that make some sense in ensuring employers pay their fair share."

Thursday, July 17, 2014

California Almanac Employer Health Benefits Survey, Summarized

California workers are less likely to be offered employer-based coverage, and those who are covered pay more in premiums and cost sharing. Workers may continue to see costs rise next year: Over 40% of surveyed firms said they are likely to increase what workers pay for their premiums in the coming year, and 34% plan to increase employees' deductibles. Nevertheless, because this survey was conducted during the immediate lead-up to ACA implementation, the 2013 numbers may not signal important trends.

Key findings include:
  • The proportion of California employers offering coverage has declined significantly over the last decade, from 69% in 2000 to 61% in 2013.
  • Coverage is offered to employees at a higher rate at larger firms, firms with higher wages, and firms with some union workers.
  • Since 2002, premiums in California rose by 185%, more than five times the state's overall inflation rate.
  • Average monthly premiums for single coverage in California were $572 in 2013, compared to $490 nationally. For family coverage, monthly premiums were $1,442 in California and $1,363 nationally.  
  • California workers paid an average of 22% of the total premium for single coverage and 33% for family coverage in 2013, significantly higher shares than in the previous year. 
  • California's HMO premiums have been higher than the national average since 2010 — a change from the previous decade.  
  • Nearly one-third of covered workers in small firms had a deductible of $1,000 or more for single coverage in 2013, up from just 7% in 2006. In large firms, only 9% had a deductible of $1,000 or more.
  • One in four California firms reported that they reduced benefits or increased cost sharing in the last year.

Source: The California Health Care Almanac Employer Health Benefits Survey, January 2014. 

MethodologyThe California Employer Health Benefits Survey is a joint product of the California HealthCare foundation (CHCF) and the national opinion research Center (NORC). The survey was designed and analyzed by researchers at norC and administered by national research llC (NR). The findings are based on a random sample of 651 interviews with employee benefit managers in private firms in California. NR conducted interviews from May to September 2013.