Initial Analysis of the Supreme Court’s Healthcare Decision

In a sweeping ruling, The United States Supreme Court has upheld the Patient Protection and Affordable Care Act, which was enacted in 2010. Now, the focus will shift from the court decision to its impact. This PIA National executive analysis is designed to put this decision into perspective, as well as to assess what is likely to happen next. As this analysis is primarily intended to inform independent insurance agents who are members of PIA, much of its focus is concentrated on addressing one question: “What Does It Mean for Agents?” However, we also take a broader look at the immediate effects of the decision. Since the court’s decision sustains the existing PPACA, state insurance regulators and the federal Department of Health and Human Services (HHS) will continue to play a primary role in implementing the law. A number of states that had decided to delay setting up health insurance exchanges as mandated in PPACA. They must now decide whether they will move quickly to set up state-based exchanges, or allow the federal government to do it for them. We can expect to see federal legislation calling for a repeal of PPACA, but with the court’s decision to sustain it and opponents controlling just the House and not the Senate or White House, such legislation is likely to fail until and unless the political dynamic changes. This document is PIA National’s first “take” on the ongoing public policy debate on healthcare reform following the Supreme Court’s decision.

The Supreme Court Decision on Health Care: What Does it Mean for Agents? The Supreme Court decided the fate of the Patient Protection and Affordable Care Act (PPACA) when they upheld the law. This decision means states will have to move forward with the reforms outlined in the law. Many constitutional scholars believed the court would reject parts of the law, such as the individual mandate to purchase health insurance, but the court showed great deference to the powers of Congress and upheld this mandate under the authority of Congress to levy taxes. Because the court viewed the individual mandate as a tax rather than a penalty, it survived scrutiny. In other words, Congress doesn’t have the authority to force people to purchase health insurance under the commerce clause, but it does have the authority to impose taxes. While “the individual mandate cannot be upheld as an exercise of Congress' power under the Commerce Clause…in this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance,” Chief Justice John Roberts wrote. “Such legislation is within Congress' power to tax.” In fact, while the federal government does not have the power to force individuals to buy health insurance, “it does have the power to impose a tax on those without health insurance,” he wrote. Referring to the individual mandate, the requirement is constitutional “because it can reasonably read as a tax,” he concluded. The Supreme Court decision means that the states that have begun to implement reforms are well on their way to complying with PPACA, but states that have taken a “wait and see” approach must now act quickly. An estimated 17 states were awaiting today’s decision before moving ahead to set up the exchanges. To date, only 14, including California, Colorado and West Virginia, as well as the District of Columbia, have authorized creation of the exchanges. States must submit a blueprint for the exchanges by November 16. States are required to either set up health insurance exchanges or opt to let the federal government do it for them. States may choose to partner with other states to help facilitate exchange management. The decision to sustain PPACA means those states that have been delaying taking action on the exchanges in anticipation of a different ruling must now make up for the time they lost. PIA encourages all states to deal now with the issue of insurance exchanges in a manner that guarantees the right of insurance consumers to rely on the expertise of licensed insurance professionals – not unlicensed so-called “navigators” – as they make important decisions about their health insurance coverage. This decision will undoubtedly prompt a torrent of legislative activity on the federal and state levels. State insurance regulators are being heavily relied upon to help implement the law and their guidance and expertise will be even more critical now. A significant number of states have already established an exchange and many more have plans to do so soon (see attached map). In addition to the individual mandate, several other reforms

become effective in 2014 such as guaranteed issue, no pre-existing condition exclusions, and no annual limits for essential benefits. Beginning in 2014, issuers offering coverage in the individual and small group markets must provide coverage that includes an essential health benefits package. Issuers in the large group market and self-insured plans must offer minimum essential coverage. New Benefits Starting in 2014, all health insurers will have to sell coverage to everyone who applies, regardless of their medical history or health status. At that time, insurers will not be allowed to charge more to individuals with pre-existing conditions, nor will they be able exclude coverage of those conditions from the insurance plans they sell.

The Secretary of Department of Health and Human Services (HHS) will define the benefits health plans have to cover, which includes a number of service categories specified in the health reform law: ambulatory services, emergency care, hospitalization, maternity and newborn care, prescription drugs, mental health and substance abuse services, rehabilitative services and devices, labs, chronic disease management, and oral and vision care for children. The scope of benefits will be the same as that provided under a typical employer health plan.

The health reform law contains a provision that requires private insurers to continue dependent coverage of children until age 26. HHS regulations specify that a young adult can qualify for this coverage even if he or she is no longer living with a parent, is not a dependent on a parent's tax return, or is no longer a student. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to a young adult’s spouse or children.

Individual mandate

Starting in 2014, most people will be required to purchase health insurance or pay what the Supreme Court has deemed is a tax if they do not. The individual mandate to purchase health insurance means independent agents will be busy providing advice to millions of new health insurance consumers on the best plan that fits their needs. Exchanges In January 2013 HHS will certify state exchanges and in October 2013 the initial enrollment period will begin. In January 2014, exchange coverage becomes effective. The decision means that insurance agents will still be involved in the health insurance delivery system and should look at this as an opportunity to reach out to new markets in an effort to get more people covered. Agents will be well versed on the various new options available to consumers and will be able to let people know whether they qualify for assistance. HHS regulations provide guidance on the role of agents and brokers and their relationship with exchanges. On March 27, HHS issued regulations further

The Supreme Court Decision on Health Care: What Does it Mean for Agents? The court decided today to uphold the Patient Protection and Affordable Care Act (PPACA). This means agents have opportunities to educate a whole new group of consumers on the health reform changes that are being implemented over time. Licensed, trained professional agents are in the best position to help guide consumers through the myriad of new options available to them.

When do the major reforms take effect?

In 2014 insurance marketplaces, or exchanges, have to be set up to offer competitive pricing on health policies for individuals and small businesses that don’t have coverage. People with pre-existing conditions will no longer be denied coverage, and all lifetime and annual limits on coverage will be eliminated. Medicaid will be expanded to cover more low-income Americans.

How will this decision affect small businesses?

Businesses with 50 or more employees will face fines for not providing insurance coverage. Businesses with smaller workforces, though, would be exempt. Companies would get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000.

How does the bill affect Medicare recipients?

Seniors are getting immediate help on the "doughnut hole" - a gap in their coverage for prescription drugs. This year, those reaching that hole would get $250 to help pay their drug costs. Next year, they would receive a 50 percent discount on the cost of brand-name drugs in the doughnut hole. Meanwhile, preventive screenings would be free to beneficiaries beginning this year.

But federal payments to Medicare Advantage plans would be cut substantially, starting in 2011. Seniors in those plans may lose some extra benefits, such as free eyeglasses.

How does the decision affect Medicaid?

The justices voted to set limits on the law’s expansion of Medicaid, the federal state program for the poor, leaving up to states to decide whether to participate.

highlighting the role of agents saying, “health insurance issuers and agents and brokers are likely to play a significant role in the Exchange.”

The Supreme Court left many decisions open to the states to decide. PIA National advocates that states moving forward with exchanges should have broad representation on the governance board, including representatives from the agent community. Independent agents should be allowed to continue to offer their services to consumers and should be permitted to sell and service all health insurance plans whether they are part of the exchange or not.

The National Association of Insurance Commissioners passed a resolution on November 22, 2011 that expressed support for consumer access to professional insurance agents and brokers so most state insurance commissioners understand the valuable role agents play in the marketplace.

Navigators PPACA calls for the establishment of exchanges in each state to facilitate the purchase of health insurance by individuals and employers. It is the exchange’s responsibility to create a grant program for entities or individuals called “navigators.” Navigators are intended to personally assist consumers in understanding their choices in the post healthcare reform environment. The federal law and regulations provide details about the responsibilities and roles of navigators. An exchange may NOT require that all navigators hold an agent or broker license, or maintain errors and omissions coverage. The regulations indicate that HHS will issue additional guidance on model standards for Navigator training and best practices for certification or licensure standards. The Role of Agents and Brokers in the Exchange: Under the federal law, exchanges have a great deal of flexibility to determine the role of agents and brokers and web-based entities in the marketplace. The federal regulations make clear that agents and brokers can enroll individuals, employers and employees in qualified health plans (QHPs) through the exchange, as well as outside the exchange as soon as the QHP is offered through the exchange.

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States that passed health insurance exchange legislation

States that rejected health insurance exchange legislation

States that have pending health insurance exchange legislation

States that have not taken legislative steps to establish a health insurance exchange

* Governors in the follow

ing states established health insurance exchanges through executive order: Indiana, N

ew York and Rhode Island

States Act on Health Exchanges