The Supreme Court is set to begin hearing arguments next week on whether the Patient Protection and Affordable Care Act (PPACA) is constitutional or not. For our part, we feel the case could go either way, but many conservative constitutional scholars have opined that the Obama administration may have a good shot of convincing enough justices (especially swing Anthony Kennedy) that the individual mandate is essentially a tax and is within the domain of the federal government. So the case may or may not be decided on a 5-4 vote.
The main issues to look out for are as follows:
- Can the Supreme Court even act now? PPACA defenders will argue that the Supreme Court cannot act to strike down the law because the tax law (aka individual mandate) has yet to go into effect. Opponents will argue that the court should rule now because the question is not on the tax itself but on the constitutionality of the overall mandate.
- Is the individual mandate legal? Defenders will argue that it is essentially a federal tax within Congress’ ability to regulate commerce, while opponents will argue it is a fundamental infringement on state and individual rights and an unjust exercise of federal power.
- Is the Medicaid expansion legal? Opponents will argue here that the mandate for minimum coverage levels means that states are coerced to participate in the Medicaid program, while defenders will say that Medicaid remains a voluntary state-federal partnership.
- What is the status of the law if any part is struck down? Defenders admit that certain components (guaranteed issue and community rating) would need to go if the individual mandate is struck down, but otherwise other elements should stand. Opponents argue that all elements should go if any are declared unconstitutional.
The Congressional Budget Office (CBO) has just revised its estimates of people to be enrolled in the various insurance programs under dispute in the Supreme Court cases. The CBO says 20 million to 23 million people will receive coverage in the state commercial Exchanges and 16 million to 17 million people will be enrolled in Medicaid and the State Children’s Health Insurance Programs (SCHIP).
In the meantime, after months of delay, the Department of Health and Human Services (HHS) is issuing regulation after regulation on health reform. In the past week or more, it has issued final rules or guidance on state Exchanges, the Medicaid expansion, and the risk adjustment and related financial elements of the Exchanges.
We told you about the state Exchange guidance issued last week. HHS has now laid out rules regarding Medicaid eligibility under PPACA. The overwhelming emphasis is on streamlining eligibility and linking it to Exchange eligibility. Medicaid will cover up to 133% of the federal poverty limit, SCHIP will cover even higher family incomes in some states, and subsidized Exchange coverage (up to 400% of poverty) generally kicks in after that. Despite Medicaid expansion funding of 100% initially and 90% thereafter, states complain that they will face real costs from the mandate as they did in the past. Eligibility verification will be via electronic sources. States get some flexibility in how to run the eligibility process.
HHS also issued final rules on risk adjustment and related financial issues. The Exchanges rely on a series of financial mechanisms to ensure that the new community rating works and health plans are not squeezed by adverse selection. Individuals will be risk adjusted. Plans will either give back or gain revenue based on their aggregate risk scores. To further stabilize the system in the short term, reinsurance and risk corridors will be utilized.
For states not running their own exchanges, the federal government will own these responsibilities; it also thinks that many states that do operate exchanges should cede authority to the feds on these issues. Some states may have limited or no experience with such programs, while others run risk adjustment and similar processes in their Medicaid programs. HHS and CMS currently do much of this in Medicare Advantage and Part D. The risk corridor program will look similar to the Part D risk corridors.
One major clarification that will mean great expense for insurers, the federal government and state and local governments: HHS says federal employee (FEHBP) plans, state and local employee plans, grandfathered plans, self-insured plans and third-party administrators will all have to contribute to the reinsurance program. Medicaid and Medicare plans will be exempt.