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Legislative and Compliance Update: Future of the Affordable Care Act? (And Other Welfare Plan Developments)Ben ConleySeyfarth Shaw LLP

©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential - 41318027_1.pptx

ACA – Positive Developments

• Enrollment Gains

https://aspe.hhs.gov/pdf-report/chartpack-affordable-care-act-has-led-historic-widespread-increase-health-insurance-coverage

From 2010-2015 the uninsured rate dropped:• 19.9% to 10.0% in expansion states (50%)• 25.9% to 17.7% in non-expansion states (32%)

2©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential - 41318027_1.pptx

ACA – Positive Developments

• The Impact of Medicaid Expansion• Studies show:

– Lower Medicaid spending per enrollee for new adults– Declining costs for new enrollees since expansion– Marketplace premiums 7% lower in expansion states compared to

non-expansion states (greater risk pool)• Reduction in uninsured hospital visits and uncompensated care

whereas non-expansion had no reduction• Documented significant job growth• Adults with disabilities significantly more likely to be employed

– Over half expansion enrollees reported Medicaid enrollment made working easier

Source: http:/ /kff.org/medicaid/issue-brief/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review/

©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential - 41318027_1.pptx 3

http://kff.org/medicaid/issue-brief/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review/

ACA - Challenges


ACA – Landscape Facing Congress

Source: Kaiser Family Foundation


ACA - Process

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• Current Senate Make-Up:

• Votes Needed for “Regular Order”:


What is Reconciliation and What are the Limitations?

• Pros:– Only requires 51 votes in the Senate (50 if VP serves as tie-

breaker)• Cons:

– Can only address budget/revenue items– Must be at least budget-neutral in ten year window– Must be tied to fiscal-year budget reconciliation instructions


Timeline for Repeal Efforts

• Republicans win both Houses of Congress & Presidency• Promise “repeal and replace” of ACA will be waiting for President

on inauguration dayNovember 2016

• Republicans make first attempt to repeal ACA through American Healthcare Act (AHCA)

• Bill pulled from floor minutes before vote• Paul Ryan declares ACA “is the law of the land for the foreseeable

future”

March 2017

• MacArthur Amendment introduced and repeal effort gains steam• Republicans in House vote 217-213 to pass bill• White House hosts Rose Garden Ceremony to celebrateMay 2017


Timeline for Repeal Efforts

• Senate releases long-awaited bill, the Better Care Reconciliation Act (BCRA). Bill largely mirrors AHCA

• President Trump reportedly calls AHCA “mean”• McConnell fails to obtain votes to move to debate before July 4th

recess

June 2017

• Senate votes to bring bill(s) to the floor• BCRA 2.0 voted down• Rand Paul proposal voted down• “Skinny repeal” voted down

July 2017

• Graham-Cassidy effort shelved due to lack of votes• Window closed on repealing and replacing ACA through current

fiscal year reconciliation processSeptember 2016


ACA vs. Republican Proposals

ACA Republican ProposalsEmployer Mandate Penalty reduced to $0 (but reporting obligation

continues – potentially simplified)

Individual Mandate Penalty reduced to $0 (but see Continuous Coverage penalty)

Cost of Coverage:• Cost-sharing subsidies for lower-income

individuals on Marketplace• Income-based premium tax credits for lower-

income individuals on Marketplace

Cost of Coverage:• AHCA & BCRA included tax credits• Graham-Cassidy included block-grants to states

Age Rating:May only charge older adults more than 3x younger adults

Older enrollees may not be required to pay more than 5x the rate of younger enrollees;

States may apply for a waiver to allow for an even greater age weighting



ACA Republican ProposalsHealth Status:

May not charge more for Pre-Existing Conditions

Continuous Coverage Penalty

Essential Health Benefits:• 10 categories of EHBs must be covered for

Marketplace plans;• Employer plans must select a state’s EHBs as a

model plan

Allows states to waive the requirement of EHBs for plans on their exchange



ACA Republican Proposals

Reinsurance:• Temporary high risk pools between 2010 and

2014• Marketplaces with shared risk pooling effective

2014, with high cost claims offset by new taxes (such as TRP fee)

• Four year reinsurance program;

• Short-term: $50B to CMS to help insurers:

• Long-Term: $62B from 2019-26 into funding state efforts, being front-loaded. States required to match an increasing % beginning in 2022.

• State Performance Bonuses: $8B distributed by HHS to state Medicaid and CHIP programs (2023-2026)

Opioid Funding:Not directly addressed – primarily treated through Medicaid expansion and adding substance abuse as EHB

• Medicaid significantly scaled back• EHBs potentially waived• Billions allocated to address opioid epidemic



ACA Republican ProposalsTaxes on High Earners:• Additional 0.9% Medicare HI tax for high wage

earners • 3.8% tax on certain passive income• Wages paid in excess of $500,000 to officer,

director or employee of insurer not deductible

Taxes on High Earners:• Early proposals eliminated taxes• Later proposals retained taxes

Medicaid :

States may expand coverage for Medicaid to those above 133% of FPL, and receive Federal reimbursement

• Gradual phase-out of ACA expansion• Shift traditional Medicaid funding to per capita or

block grants (i.e., federal contribution is set subject to CPI-M inflation until 2025 when CPI inflation), meaning states carry the primary risk of increasing costs


What Options Remain?

17

Congressional Action Executive ActionBi-partisan stabilization efforts (Lamar-Murray) Defund Marketplace cost-sharing subsidies

New Reconciliation instructions (2018? 2019?) Executive action on selling insurance across state lines and Association Health Plans


Senate Composition – Challenges for Future Efforts

Source: NY Times


Senate Composition – Challenges for Future Efforts

Source: Roll Call


Evolution of EEOC Wellness Guidelines

• AARP v. EEOC– AARP argued there should be no incentives for wellness – programs. – Court found incentives are permissible but found no basis for – EEOC settling on 30% limit. – Remanded for further rulemaking – Existing rules remain in effect, pending new regulations.


MHPAEA

• MHPAEA does not mandate that plans cover mental health/substance abuse benefits

• MHPAEA does mandate that plans covering any MH/SA benefit cover all MH/SA benefits at same level as medical/surgical


Comparing Medical to MH/SA Benefits


Comparing Medical to MH/SA Benefits


Inpatient In-Network

Inpatient Non-Network

Outpatient In-Network

Outpatient Non-Network

Emergency

Prescription Drug

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Warning Signs

• Blanket pre-authorization for all MH/SA• Fail-first protocols• Probability of improvement standard• Written treatment plan requirement• Limits on:

– Residential treatment– Geographical region– Licensure



• Issue:– Out-of-network providers appeal,

purportedly on behalf of participant in plan, under designation of authorized representative and assignee of benefits

– Content: Request for documents Allegations of breach of fiduciary duty Various other allegations

Out-of-Network Provider Claims


• Considerations:– Failure to produce documents

within 30 days can lead to civil penalties

– Understand what is required under ERISA 104(b)(4)

– Push back on assignment of benefits

– Cigna v. Humble $13MM assessment against Cigna (in

lawsuit brought by Cigna!) Cigna challenged “fee-forgiving”

practice Court: Cigna abused discretion and

did not follow plain-language interpretation of plan

Out-of-Network Provider Claims

Questions?

Ben ConleySeyfarth Shaw [email protected]


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