Wednesday, February 22, 2017

On the Michael Berry Show Discussing the Trump Admin's Blow to Obamacare's Indiv. Mandate

A detailed discussion with Michael Berry of the IRS announcement that it will accept tax returns which do not answer the question as to whether they have health insurance.

PPACA's individual mandate, which took effect in 2014, requires individuals who don't qualify for one of the many exceptions to obtain acceptable health insurance coverage for themselves and their family members or face a penalty ("tax").

Beginning in 2015, individuals filing a tax return (Form 1040) for the previous tax year were required to indicate which members of their family (including themselves) had health insurance coverage for the year.  Based on this information, the IRS assessed a tax for each nonexempt family member who did not have coverage. The IRS put systems in place for 2016 where individual tax returns that did not provide this health insurance coverage information would be labeled as "silent returns" and automatically rejected.

In a private meeting with tax preparation software companies on Feb. 3, 2017, however, the IRS indicated, effective Feb. 6, 2017, it would not automatically reject silent returns for 2016. Instead, silent returns would still be accepted and processed by the IRS.

Obviously, this change in processing returns does not eliminate the ACA's individual mandate penalty. The change in policy does mean, however, that returns will not automatically be rejected. Completely removing the individual mandate penalty (or reducing the penalty amount to $0) would require action by Congress. This change in processing individual returns, however, is clearly a move toward considerably less strict enforcement of the individual mandate.

When pressed as to whether the change meant that the IRS would not follow up and inquire about the filer's silence on health insurance status, the IRS clarified that it did, in fact, reserve the right to follow up on the subject.  This, however, was a legally necessary response.  Because if the IRS directly stated the that information was optional and that the IRS would not follow up on any silent forms, it would be a direct abdication of the IRS' responsibility (as part of the executive branch) under Article II of the U.S. Constitution to execute and enforce the laws created by Congress.

On Armstrong & Getty: Individual Mandate Made Optional; Aetna CEO says O'Care in Death Spiral; 70% of Californians on Taxpayer Healthcare


Monday, February 20, 2017

A Brutal Week for Obamacare: Enrollment Shrinking; Costs Soaring - Death Spiral

An excellent paragraph from Megan McArdle explaining the phenomenon of death spiral.  The end is near:
Why not just raise the premiums? Because a pool comprising too many sick people can’t be stabilized at any price. Once you start jacking up the premiums to pay for all the pricey health care your members are using, you start losing your remaining healthy customers, and the premiums have to be jacked up still further. The result -- the dread “death spiral” that Bertolini [Aetna's CEO] was talking about -- will ultimately end up with premiums that no one is willing to pay, or can afford to. What Humana is saying (and Bertolini made similar remarks) is that they’ve got a pool that they simply don’t think can be sold into profitably, because the problem isn’t that they mispriced the premiums. The problem is that too few healthy people are buying insurance. And now that exchange enrollment has begun to shrink, it’s obvious that problem isn’t going to get better. It’s likely it’s going to get worse. Bertolini predicts that more insurers are going to pull out for 2018, leaving many areas without any insurers at all offering plans.

Friday, February 17, 2017

U.S. Healthcare Costs to Escalate 6.4% Per Year Over Next Decade

Federal agencies typically low-ball this number. It is probably about right for a self-funded plan, but fully insured plans should budget 25% to 33% more to be safe.

This is from Reuters, reporting on a U.S. Centers for Medicare and Medicaid Services (CMS) study:
The cost of medical care in the United States is expected to grow at a faster clip over the next decade and overall health spending growth will outpace that of the gross domestic product, a U.S. government health agency said on Wednesday.
A report by the U.S. Centers for Medicare and Medicaid Services (CMS) cited the aging of the enormous baby boom generation and overall economic inflation as prime contributors to the projected increase in healthcare spending. 
Overall healthcare spending will comprise 19.9 percent of the economy in 2025, up from 17.8 percent in 2015, the report forecast. The pace of growth in U.S. spending on health is expected to pick up in 2017, increasing 5.4 percent over 2016. That compares with an estimated 4.8 percent spending uptick in 2016. Spending for 2016 was estimated at $3.4 trillion. 
When the final numbers are in, the growth in prescription drug spending for 2016 is expected to have slowed to 5 percent from 9 percent in 2015. However, CMS has forecast growth of 6.4 percent per year between 2017 and 2025, in part because of spending on expensive newer specialty drugs, such as for cancer and multiple sclerosis.

The projections for 2016 to 2025 were made assuming that the Affordable Care Act (ACA), former President Barack Obama's signature healthcare law widely known as Obamacare, would remain intact. It does not take into account likely changes to the law.... 

Wednesday, February 15, 2017

Obamacare Dealt a Violent Blow: IRS Won't Reject Tax Returns That Don't Answer Health Insurance Question

In a stealth maneuver, President Trump's IRS has all but neutered Obamacare's individual mandate.  The IRS will no longer require filers to indicate whether they maintained health insurance or paid the individual mandate penalty/tax as required under PPACA.  

How much difference does a single line on a tax form make? For Obamacare's individual mandate, the answer might be quite a lot.
Following President Donald Trump's executive order instructing agencies to provide relief from the health law, the Internal Revenue Service appears to be taking a more lax approach to the coverage requirement.
The health law's individual mandate requires everyone to either maintain qualifying health coverage or pay a tax penalty, known as a "shared responsibility payment." The IRS was set to require filers to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their form 1040s. Alternatively, they could claim exemption from the mandate by filing a form 8965. 
For most filers, filling out line 61 would be mandatory. The IRS would not accept 1040s unless the coverage box was checked, or the shared responsibility payment noted, or the exemption form included. Otherwise they would be labeled "silent returns" and rejected. 
Instead, however, filling out that line will be optional. 
Earlier this month, the IRS quietly altered its rules to allow the submission of 1040s with nothing on line 61. The IRS says it still maintains the option to follow up with those who elect not to indicate their coverage status, although it's not clear what circumstances might trigger a follow up. 
But what would have been a mandatory disclosure will instead be voluntary. 
Silent returns will no longer be automatically rejected. The change is a direct result of the executive order President Donald Trump issued in January directing the government to provide relief from Obamacare to individuals and insurers, within the boundaries of the law. 
"The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden," the IRS said in a statement to Reason. "Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn't indicate their coverage status." 
The tax agency says the change will reduce the health law's strain on taxpayers. "Processing silent returns means that taxpayer returns are not systemically rejected, allowing them to be processed and minimizing burden on taxpayers, including those expecting a refund," the IRS statement said. 
The change may seem minor. But it makes it clear that following Trump's executive order, the agency's trajectory is towards a less strict enforcement process. ... 
"It's hard to enforce something without information," says Ryan Ellis, a Senior Fellow at the Conservative Reform Network. ... 
Ellis says the new policy doesn't fully rise to the level of declining to enforce the law. "If the IRS turns a blind eye to people's status, that isn't quite not enforcing it," he says. "It's more like the IRS wanting to maintain plausible deniability." 
Tax software companies are already making note of the change. Drake Software, which provides services to tax professionals, recently sent out a notice explaining the change in policy. As of February 3, the notice said, the IRS "will now accept an e-filed return that does not indicate either full-year coverage or an individual shared responsibility payment or does not include an exemption on Form 8965, as required by IRS instructions, Form 1040, line 61." 
The mandate is a key component of Obamacare's coverage scheme, which is built on what experts sometimes describe as a "three-legged stool." The law requires health insurers to sell to all comers regardless of health history, and offers subsidies to lower income individuals in order to offset the cost of coverage. In order to prevent people from signing up for coverage only after getting sick, it also requires most individuals to maintain qualifying coverage or face a tax penalty. While defending the health law in court, the Obama administration maintained that the mandate was essential to the structure of the law, designed to make sure that people did not take advantage of its protections. 
In a 2012 case challenging the law's insurance requirement, the Supreme Court ruled that the individual mandate was constitutional as a tax penalty. The IRS is in charge of collecting payments. 
Some health policy experts have argued that the mandate was already too weak to be effective, as a result of the many exemptions that are included. A 2012 report by the consulting firm Milliman found that the mandate penalty offered only a modest financial incentives for families making 300-400 percent of the federal poverty line. More recently, health insurers have said that individuals signing up for coverage and then quickly dropping it after major health expenses is a key driver of losses, and rising health insurance premiums. 
It's too early to say whether the change will ultimately make any difference. But given the centrality of the mandate to the law's coverage scheme and the unsteadiness of the law's health insurance exchanges, with premiums rising and insurers scaling back participation, it is possible that even a marginal weakening of the mandate could cause further dysfunction. Health insurers have said the mandate is a priority, and asked for it to be strengthened. Weaker enforcement of the mandate could cause insurance carriers to further reduce participation in the exchanges. One major insurer, Humana, said today that it would completely exit Obamacare's exchanges after this year. ...
Full story here.

Thursday, February 9, 2017

PPACA Watch – Repeal, Replace, What’s Advancing

  • January 24 – Dr. Tom Price “I think the employer system has been a remarkable success in allowing individuals to gain coverage," response to Sen. Tim Scott (R-SC). 
  • January 26 - 27 – Republican Retreat in Philadelphia: House Speaker Ryan and Senate Majority Leader McConnell indicate an expectation PPACA repeal bill will be on floor by end of March.
  • This week – HHS, Treasury and Labor Cabinet heads still be to confirmed. These three departments will work on regulatory process to create any flexibility per President Trumps Executive Order.
Linked below is an excellent outline by Alston & Bird, HealthCare Reform: Déjà VU All Over Again – a must read for anyone interested in Repeal and Replace Activities.

Trump order on regulations could create hurdles for FDA, Cures Act

January 30, 2017 – STAT
Excerpt: “President Trump on Monday signed an executive order directing federal agencies to cut two regulations for every new one that they adopt…Some regulations are actually deregulations, which reduce existing burdens, he said. Others implement spending programs, or are technical amendments, sometimes correcting errors. Michael Gaba, a life science partner in Holland & Knight, said Trump’s executive order was broadly written and gives the director of the White House Office of Management and Budget latitude in how to implement it. (Trump’s nominee for the post, Mick Mulvaney, is currently being considered by the Senate.) “There is discretion on how you evaluate the cost of old and new regulations,” Gaba said. “Before we can really analyze this we need to see what the OMB director says.”

Cadillac plan tax math may shape ACA attack
January 26, 2017 – LifeHealthPRO
Excerpt: “But the CBO might have exaggerated how much revenue the tax would actually raise, by failing to include the full effects of how much employers would change their behavior to avoid the tax, Fensholt said. "So, we think the GOP will want to have the Cadillac [plan] tax repeal re-scored by the CBO, perhaps even with direction to change the assumption about how employers will respond," Fensholt said. "Where the GOP takes the [group health] tax exclusion from there is anyone's guess."

GOP talks shifts from replacing ObamaCare to repairing it

February 2, 2017 – The Hill
Excerpt: “It’s a striking change in rhetoric that speaks to the complexities Republicans face in getting rid of the Affordable Care Act. Many of the law’s provisions are popular, and some parts of the law that the GOP does want to repeal could have negative repercussions on the parts seen as working. Senate Health Committee Chairman Lamar Alexander (R-Tenn.) is sounding a similar note. He notes that Republicans plan to use special budget rules known as reconciliation to prevent Democrats from filibustering a vote to repeal ObamaCare. The use of those rules won’t allow all of ObamaCare to be repealed."

Healthcare Reform: Déjà vu all Over Again
February 2, 2017 – Alston & Bird LLP
Excerpt: “24 presentation slides. Topics: [1] Repeal/replace activities: Executive Order(s); reconciliation activity to date; [2] Health Care Reform Proposals: Trump campaign proposals; Empowering Patients First (Rep. Tom Price, R-Ga.), Patients' Choice Act (Rep. Paul Ryan, R-Wisc., and others), other proposals; [3] Similarities/broad brush conclusions; [4] The 'Dirty Dozen of ACA' and how they may fare."
February 6, 2017 - Insurance Journal
Excerpt: "President Donald Trump said the process for coming up with a replacement for the Affordable Care Act could stretch into 2018, a longer time frame than he previously indicated.  Trump’s comments came in an interview with Fox News’ Bill O’Reilly that aired on Sunday during the Super Bowl pre-game show. ... 'Maybe it’ll take till some time into next year, but we are certainly going to be in the process,” Trump said in the interview. “I would like to say by the end of the year, at least the rudiments, but we should have something within the year and the following year.'"

How an Obamacare Repeal is Likely to Impact Employer Plans

Repealing all or parts of Obamacare generates headlines every day at this point.  Yet, no details have materialized.

Below are considerations on a number of provisions that could have an impact on employer-sponsored health plans.

It is important to note, however, that Congress and the Trump administration are working through their process, which will result in more of a "replace and repair" form of repeal.  At this time, it is unclear which, if any, of the current PPACA provisions will be affected.

We'll continue to update you on pertinent developments. When important news develops that requires action from you, we will update right away.

At this time, our recommendation is to continue with all current compliance efforts, including employer reporting obligations due Mar. 2.

How an Obamacare Repeal is Likely to Impact Employer Plans