Wednesday, September 23, 2020

U.S. Supreme Court Will Hear Challenge to PPACA on November 10th With or Without a New Justice - On Armstrong and Getty

   "But without an individual mandate, the law cannot fiscally balance."  
    - Okay Boomer.

In March 2020, the United States Supreme Court agreed to hear a legal challenge to the Patient Protection and Affordable Care Act (PPACA). The case involved is Texas v. Azar, a lawsuit challenging the constitutionality of PPACA after earlier elimination of the law's individual mandate - the portion of the law requiring all Americans to have health insurance or pay a tax penalty for failing to maintain such coverage.

PPACA Litigation

18 states filed Texas v. Azar after the elimination of PPACA's individual mandate.  In December 2017, Congress passed the Tax Cuts and Jobs Act, which effectively eliminated the individual mandate penalty, effective January 1, 2019, by making the tax penalty for a violation of that mandate $0. 

In December 2019, a federal appeals court ruled in the case that the individual mandate is unconstitutional and directed the lower court to determine whether the rest of PPACA can remain in place.  Specifically the federal appeals court held that, "the individual mandate is unconstitutional because it can no longer be read as a tax" since the Tax Cuts and Jobs Act reduced the individual mandate penalty to $0.  Once the tax was federally prescribed to be $0, the appeals court held that there is no longer any such "tax."  In 2012 PPACA was saved at the Supreme Court when the Obama Administration successfully argued that the individual mandate was valid as a tax and that the mandate was essential to the very essence of the law.  All people (healthy or ill) must be compelled to purchase health insurance, the argument went, if the law were to have any hope of remaining under its original $1 trillion price tag.

This latest argument by PPACA's opponents picks up on that thread by pointing out that if the individual mandate was absolutely essential to the law (as held by the Supreme Court in 2012) then the law now must be dead since there is no more individual mandate after congress reduced the individual mandate tax penalty to zero. 

The Supreme Court previously denied a request from the U.S. House of Representatives and several Democratic-controlled states to review the case on an expedited basis. The Supreme Court has now agreed to hear the case on its regular schedule, based on the argument that the lower court rulings create uncertainty about PPACA’s future. Oral arguments are scheduled for November 10, 2020 and a decision will be issued in the late spring or early summer of 2021.

This is the third time the Supreme Court has reviewed PPACA’s constitutionality. In addition to the 2012 case, in 2015, the Supreme Court upheld the constitutionality of PPACA’s health insurance Exchange subsidies.

Impact on PPACA

While this legal challenge is pending, all existing PPACA provisions will continue to be applicable and enforced. This challenge does not impact Exchange enrollment, PPACA’s employer shared responsibility (pay or play) penalties and related reporting requirements, or any other applicable PPACA requirement.

Supreme Court Vacancy

On Sept. 18, 2020, U.S. Supreme Court Justice Ruth Bader Ginsburg passed away at the age of 87. Whether the Court vacancy created by Justice Ginsburg’s death should be filled prior to the November election is the media's controversy de jour.  

Under federal law, the President is responsible for nominating a new Supreme Court Justice and the nominee must be confirmed by the U.S. Senate.

President Donald Trump indicates that he plans to nominate a woman to fill the vacancy on Saturday September 26th, and the Senate plans to hold a vote on the nomination. However, a number of Democrats in Congress believe that the nomination process should not take place until after the November election.  

Long Term Impact in the States 

If confirmed before the election, a new Supreme Court Justice could greatly impact the outcome of Texas v. Azar. It is widely expected that President Trump’s nominee will have a more conservative viewpoint and would be more likely to invalidate PPACA. In contrast, a Supreme Court Justice nominated by Joe Biden would be more likely to uphold the law.  

Until a nominee is confirmed, the practical impact of this decision remains to be seen. As a result, employers will want to closely monitor developments related to the Supreme Court nomination, keeping in mind that many states have already passed legislation mirroring PPACA.  

California, for example, has passed all of the statutes necessary to mandate employer sponsored coverage, individuals maintaining coverage, prohibitions against pre-existing condition limits, and an insurance exchange.  Much of the funding for PPACA, however, comes from the federal government.  So a repeal of PPACA would create a whole new plethora of nightmares for states that wish to continue insurance exchanges with subsidies.  Massachusetts, New Jersey, the District of Columbia and Vermont have all enacted individual mandates at the state level.   

Who Wins? 

There are compelling arguments on either side.  In a purely legal sense, the law's opponents have the better argument.  As stated earlier, this argument underscores that PPACA is only alive today because the Obama Administration argued and the Supreme Court agreed in 2012 that the individual mandate was absolutely essential to the law to PPACA's core operation.  To wit, without the mandate, only sick folks will buy coverage, premiums will spiral out of control and the insurance systems undergirding PPACA will crumble.  Now that the mandate is dead, the argument goes, the law must also die as contemplated by PPACA supporters and the Supreme Court's prior ruling.

PPACA as passed was projected by the CBO to come in at just under $1 trillion.  However, immediately after passage, federal administrative agencies began creating exceptions to PPACA's individual mandate.  This was done at the behest of PPACA's supporters in congress and the White House because those politicians realized it was going to be unbelievably unpopular to been seen as the party fining people who could not afford health insurance.  At peak political cynicism, there were 32 different "exemptions" to the individual mandate meaning that anyone with a reasonable degree of intelligence could exempt themselves from the mandate.  In fact, as it turned out, the mandate only ended up applying to two percent of Americans.  I've written about this here and here.

The better practical argument lies with PPACA's proponents.  And oddly enough it is exactly their political cynicism and America's complete fiscal dysfunction that supports this notion.  In the early stages of 2012, many honestly believed that the individual mandate was essential to PPACA's functional existence.  The whole concept of insurance is that we all buy it because some of us will really need it.  If we only allowed those who truly need it to purchase it and then compel insurers to sell it to them we end up with the disastrous phenomenon of adverse selection, whereby, the persons who insurers most want to sell to are the last ones to show up to purchase and vice versa. 

From 2012 to 2015 something else happened.  Federal bureaucrats sitting in administrative agencies like HHS, the IRS and CMS crafted these 30+ exemptions to the individual mandate.  At peak lunacy, we had exemptions that eliminated your need to buy health insurance if you received a shutoff notice from a utility company in the last six months (not that your power was actually shut off, just that you received a warning).  There was also an exemption in the early years that allowed you to opt out of PPACA's mandate if you tried to log into and the site was not functional.  And my favorite exemption of all was that you didn't have to buy insurance if you "felt" that it was too expensive for you and you had better options elsewhere.   Ah, the "feelings" exemption - a rigorous legal test if there ever was one. 

All throughout this time, there have been reinsurance mechanisms built into PPACA.  Without getting too wonky with insurance terminology this basically means that if the risk moving into PPACA's Exchanges ends up being worse than insurers anticipated, the federal government steps in and shares in those losses.  A cynic might call these "baked in bailouts."  And these very payments have come under scrutiny as well - but we'll save that for another day.

Beyond these reinsurance payments from taxpayers to insurers, insurance companies are also given fairly liberal leeway to set premiums as high as necessary in order to cover future bad risk.  And since 80% of PPACA Exchange buyers are making that "purchase" with taxpayer subsidies, the "buyers" don't care all that much about premium anyway.

So, in a practical sense, why do you need a mandate to make this program fiscally feasible if the federal government is ultimately going to make insurers whole and pay any form of required bloated premiums to keep the system afloat?  Therefore we now end up with a PPACA whose 10-year price tag looks more like $2 trillion as opposed to its original $1 trillion.  Eleven years ago, when PPACA was born, taxpayers and politicians at least pretended to care about a trillion dollar price tag.  That was seen as an incomprehensible sum of money.  Now, in the midst of a global pandemic and the worst economic depression in 100 years the $2 trillion of healthcare reform looks like a pittance.  Today, half of our country argues for Medicare-for-All at a thirty trillion dollar price tag.  And our Treasury Department in conjunction with the federal reserve digitally create and spread out $6 to $9 trillion in pandemic bailouts in the blink of an eye with a few strokes on their keyboards. 

So when we circle back to these arguments for and against the validity of the law, those arguing that PPACA must fall because without the individual mandate the law could balloon to twice as much as originally contemplated appear antiquated and well outside of the nation's spendthrift zeitgeist.  In a practical sense, we never had an individual mandate.  It was an IQ test that 98% of Americans passed with flying colors.  And while some thought it may have been necessary for PPACA's function in 2012, 2013-2020 have proven that it is clearly not necessary - all we have to do is throw another trillion at the problem.  And then maybe another trillion.  Chump change in the fiscal imprudence of today's politician.

Perhaps on November 10th when Justice Thomas points out that PPACA will have no chance of sustaining itself at its original projected price tag without an individual mandate, Justice Kagan will, under her breath, utter, "okay boomer."

Thursday, September 17, 2020

California Exempts Additional Occupations from Independent Contractor Classification Test (AB 5)

On Sept. 4, 2020, California amended the list of occupations exempted from using the state’s employee classification test, also known as “the ABC test” (AB 5). When the ABC test is not required, including when an exemption applies, employers may need to revert to previous methods to determine whether a worker is an employee or an independent contractor.

Modified List of Exempt Occupations

The amendments modified the business-to-business, referral agency and freelance writer exemptions. The amendments also added the following new exemptions (see full text for details):
  • Recording artists, songwriters, lyricists, composers and related occupations;
  • Musicians (for single-engagement live performance event);
  • Individual performance artists;
  • Licensed landscape architects;
  • Freelance translators;
  • Registered professional foresters;
  • Home inspectors and persons who provide underwriting inspections, premium audits, risk management or loss-control work for the insurance industry;
  • Manufactured housing salespersons;
  • Persons engaged in conducting international and cultural exchange visitor programs;
  • Competition judges with specialized skill sets;
  • Digital content aggregators who serve as licensing intermediaries for digital content;
  • Specialized performers hired to teach a master class for no more than one week; and
  • Feedback aggregators.
For companies like Uber, Lyft and DoorDash, Californians will vote on the issue this fall in Proposition 22.  
Establishes different criteria for determining whether app-based transportation (rideshare) and delivery drivers are “employees” or “independent contractors.” Independent contractors are not entitled to certain state-law protections afforded employees—including minimum wage, overtime, unemployment insurance, and workers’ compensation. Instead, companies with independent-contractor drivers will be required to provide specified alternative benefits, including: minimum compensation and healthcare subsidies based on engaged driving time, vehicle insurance, safety training, and sexual harassment policies. Restricts local regulation of app-based drivers; criminalizes impersonation of such drivers; requires background checks. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Increase in state personal income tax revenue of an unknown amount. 

Should Self-Interest Have A Role In Health Care? - Short History of How We Got Where We Are In U.S. Healthcare

From Dr. John Goodman, writing at Forbes:   
By the mid-1980s it was clear to almost everyone that something was amiss. Costs were not only rising at an unaffordable rate, they were getting increasingly out of line with what other countries were paying. So, the concerns of the doctors were pushed aside and, much to the doctors’ future regret, public policy began to encourage the emergence of for-profit hospitals, for-profit clinics and for-profit insurance plans. 
Unlike the stodgy non-profits, which tended to be wasteful and inefficient, the new entities competed aggressively. They literally changed the entire nature of their industries in a short amount of time. 
And that produced a new set of problems. 
Remember, year after year, decade after decade, we suppressed normal market forces in health care. So much so that no one ever sees a real price for anything. No doctor. No patient. No employer. No employee. 
When people face artificial prices that are significantly different from real prices, they invariably face perverse incentives. And aggressive competition in the face of perverse incentives can produce outcomes that are even more perverse.

Wednesday, September 16, 2020

COVID-19 Supplemental Paid Sick Leave Expanded in California

On September 9, 2020, California Governor Gavin Newsom signed legislation (AB 1867) codifying Executive Order N-51-20 which:
  • Mandates that a food employee working in any food facility must be permitted to wash their hands every 30 minutes as needed; and
  • Makes the COVID-19 food sector supplemental paid sick leave effective until December 31, 2020, or when any federal extension of the Emergency Paid Sick Leave Act (EPSLA) established by the Families First Coronavirus Response Act (FFCRA) expires, whichever occurs later.
The law also creates a new entitlement to COVID-19 supplemental paid sick leave for persons employed as health care providers or emergency responders. This new entitlement is also effective until December 31, 2020, or when any extension of the EPSLA expires, whichever occurs later. 

According to the Governor’s message, the law closes the gaps between paid sick days provided in federal law and the Governor's Executive Order. The law now includes employers with over 500 employees as well as all employers of first responders and health care employees who opted not to offer coverage under federal law. 

The Labor Commissioner can cite workplaces for a lack of paid sick days under the expanded law.

Monday, September 7, 2020

Why the Federal Government Has Given Us Harmful Dietary Guidelines - Lessons from Thomas Jefferson to Today

Whether your name was Keys in nutrition or Keynes in economics, your contribution to 20th century education and science has left us with more than five decades of horrendous consequences.  This is from Terence Kealey writing at Cato:  
Although by 1955, within two years of originally proposing it, Keys had abandoned the dietary cholesterol hypothesis, for another 60 years the federal government continued to warn against consuming cholesterol-rich foods. It was only in 2015 that its Dietary Guidelines Advisory Committee classified high-cholesterol foods such as eggs, shrimp, and lobster as safe to eat: “cholesterol is not a nutrient of concern for overconsumption.” 
This 60-year delay shows how asymmetrical the official science of nutrition can be: a federal agency can label a foodstuff dangerous based on a suggestion, yet demand the most rigorous proof before reversing its advice. The Harvard professor of epidemiology and nutrition Walter Willett, commenting on the asymmetry in a related area of government nutrition advice, described it as “Scandalous. They say ‘You really need a high level of proof to change the recommendations,’ which is ironic, because they never had a high level of proof to set them.” ... 
Governments may be institutionally incapable of providing disinterested advice for at least four reasons. First, the scientists themselves may be divided, and by choosing one argument over another, the government may be making a mistake. Second, by abusing the precautionary principle, the government may be biasing its advice away from objectivity to risk‐​avoidance long before all the actual risks have been calculated. Third, because of public pressure, it may offer premature advice. And fourth, its advice will be distorted by lobbying.
Full article