VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Repeal >> Components of ACA Delayed (last updated July 22, 2014)
- On October 4, 2010, Senator Coburn’s office released a report from the Congressional Research Service showing the number of deadlines mandated by the Patient Protection and Affordable Care Act (PPACA) that the U.S. Department of Health and Human Services (HHS) had missed. The analysis by the nonpartisan CRS found that HHS failed to fulfill its requirements in seven of 22 deadlines before September 23, 2010, which was the six-month mark of the law being enacted.
- On November 1, 2011, in a second report to Dr. Coburn, the non-partisan Congressional Research Service compiled a list of deadlines mandated in the new health care law, that the Department of Health & Human Services has failed to meet. Out of the 30 deadlines included in the report that passed since the prior report, HHS has gets a “late” or “incomplete” on 18 (i.e., more than half) of these deadlines under the law.
- The Galen Institute calculates that as of July 18, 2014, 42 significant changes had been made to the ACA, including 24 made by the president unilaterally, 16 enacted by Congress and signed into law and 2 by the Supreme Court. That list included 4 items repealed (see Components of ACA Repealed To Date) and 5 items defunded (see Components of ACA Defunded).
Legal Authority for Administrative Delays
- Constitution. Walter Olson reports: “Georgetown law professor and Cato fellow Nicholas Quinn Rosenkranz noted that the Constitution’s Take Care Clause directs the President to take care that the laws are faithfully executed, and descends directly from centuries of struggle against the “dispensing power” claimed by pre-modern English kings — that is, the power to dispense with enacted legislation entirely where the royal will is better served that way, a claim of power that goes beyond simple prosecutorial discretion or the pardon power.”
- Case Law. In 1998, the U.S. Supreme Court in Clinton v. City of New York asserted, “There is no provision in the Constitution that authorizes the president to enact, to amend, or to repeal statutes.”
- Standing to Sue. Many of the unilateral changes may not be subject to formal legal challenge since in many cases, no one may have standing to sue. Senator Mike Lee (R-Utah) notes that to establish standing to sue “You’ve got to show three things: you’ve got to show that the plaintiff has suffered an injury in fact–a concrete, particularized harm that’s fairly traceable to the conduct of the defendant, and it is capable of being redressed or remedied by the court.” Conversely, while taxpayers might be harmed, Senator Lee asserts “there is a longstanding jurisprudential rule that one cannot establish standing merely by virtue of one’s status as a taxpayer, absent certain rare circumstances.”
Specific Provisions by Date
These are listed in chronological order of the date a delay was officially announced. These have been tagged by whether the changes predominantly affected Employers, Small employers, Health care industry, Medicaid/Medicare, Pre-existing conditions patients, Military/VA, Special Interest groups, Families.
- Changes by Administrative Action
- Delay reporting health costs on W-2 forms (October 12, 2010) E
- Medicare Advantage patch (November 2010) M
- Subsidies may flow through federal exchanges (May 23, 2012) F
- Closing the high-risk pool (February 15, 2013) P
- Doubling allowed deductibles (February 20, 2013) F
- Delay plan choice in most small business exchanges (March 11, 2013) S
- Delay low-income plan (March 22, 2013) F
- Delay employer mandate (July 2, 2013) E
- Self-attestation (July 15, 2013) F
- Delay on-line enrollment in Small-Employer Health Option Program (November 27, 2013) S
- Congressional opt-out (September 30, 2013) SI
- Delaying the individual mandate (October 23, 2013) F
- Insurance companies may offer canceled plans (November 14, 2013) F
- Exempting unions from reinsurance fee (December 2, 2013) SI
- Extending Preexisting Condition Insurance Plan (December 12, 2013; January 14, 2014) P
- Expanding catastrophic hardship waiver to those with canceled plans (December 19, 2013) F
- Equal employer coverage delayed (January 18, 2013) E
- Delay employer mandate for medium-sized employers (February 10, 2014) E
- Additional transition relief for large employers (February 10, 2014) E
- Extension of canceled plans to 2016 (March 5, 2014) F
- Subsidies for lawfully present immigrants through Basic Care Plan (March 12, 2014) SI
- Delaying the sign-up deadline (March 26, 2014) F
- Canceling Medicare Advantage cuts (April 7, 2014) M
- More funds for insurer bailout (May 16, 2014) SI
- Changes by Congress, Signed by President Obama
- Military benefits (April 26, 2010) Mi
- VA benefits (May 27, 2010) Mi
- Drug-price clarification (August 10, 2010) H
- Doc-fix tax (December 15, 2010) H
- Extending the adoption credit (December 17, 2010) F
- TRICARE for adult children (January 7, 2011) Mi
- 1099 repealed (April 14, 2011) S
- No free-choice vouchers (April 15, 2011) F
- No additional funds for new IRS agents (April 15, 2011) F
- No Medicaid for well-to-do seniors (November 21, 2011) M
- CO-OPs, IPAB, IRS defunded (December 23, 2011) F M
- Slush-fund savings (February 22, 2012) F
- Less cash for Louisiana (July 6, 2012) F
- CLASS Act eliminated (January 2, 2013) F M
- Cutting CO-OPs (January 2, 2013) F
- Trimming the Medicare trust-fund transfer (March 26, 2013) M
- Eliminating caps on deductibles for small group plans (April 1, 2014) E
- Changes made by the Supreme Court
- Medicaid expansion made voluntary (June 28, 2012) M
- Individual mandate made a tax (June 28, 2012) F
- Potential delays
- Extension for grandfathered health plans F
- Individual mandate F
The following provides further details on each provision, along with legal justifications/challenges related to administrative actions. The list is organized by the groups affected with items listed chronologically within each header.
Specific Provisions Affecting Employers
Delay Reporting Health Costs on W-2 Forms (October 12, 2010: 1 Year Delay)
Administrative Action. On October 12, 2010, the administration announced a one-year delay of the requirement that employers must report to their employees on their W-2 forms the full cost of their employer-provided health insurance. The reporting requirement was made optional for tax year 2011, and required for the 2012 tax year (i.e., applicable to W-2s that are provided to employee in 2013).
Legal Authority Challenged. The guidance states: ‘The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement” (p. 576). However, Section 6051(a)(14) provides generally that the aggregate cost of applicable employer sponsored coverage must be included in the information reported on Form W-2 effective for taxable years beginning on or after January 1, 2011. Thus, the delay appears contrary to this statutory deadline although the situation is somewhat ambiguous since the IRS issued guidance in time for employers to report this information voluntarily for tax year 2011.
Delay Employer Mandate (July 2, 2013: 1 Year Delay)
Administrative Action. On July 2, 2013 the administration announced that reporting requirements for employers with 50 or more workers would be delayed for one year until January 1, 2015. The shared-responsibility payments required by such employers likewise were postponed for one year. Some have questioned whether the administration has the legal authority to unilaterally suspend this provision, but it remains to be seen whether anyone can or will take legal action. The president dismissed such claims, asserting: “Where Congress is unwilling to act, I will take whatever administrative steps that I can in order to do right by the American people.” Yet the president also threatened to veto legislation passed overwhelmingly by the House of Representatives (264 to 161,including 35 Democrats who voted yes) on July 17 to enshrine the employer-mandate delay into law, claiming it was “unnecessary.”
Legal Authority. The employer mandate is provided for under Section 1513 of the ACA which specifically states: “The amendments made by this section shall apply to months beginning after December 31, 2013.”
In a July 9, 2013 letter sent to Representative Fred Upton (R., Mich.) by Treasury Department official Mark Mazur, Mazur cited “the Treasury Department’s longstanding authority to grant transition relief when implementing new legislation like the ACA. Administrative authority is granted by section 7805(a) of the Internal Revenue Code.” Critics have argued that the specific historical instances used by Mazur in the main text of his letter to buttress this argument provide weak support for using that authority in the case of the ACA; ACA supporters have countered that this critique did not address 8 additional historical examples cited in footnote 2. But constitutional law professor Jonathan Turley has stated: “You have a president who is claiming the right to basically rewrite or ignore or negate federal laws. That is a dangerous thing. It has nothing to do with the policies; it has to do with politics…a system in which a single individual is allowed to rewrite legislation or ignore legislation is a system that borders on authoritarianism.”
As a practical matter, even if the administration has no legal authority to unilaterally alter a statutory deadline, it’s unclear anyone except left-wing activists would have the motivation to mount a legal challenge to this delay. Employers being given relief from a burdensome requirement would not be in a position to argue they were being injured by a delay. Congress has the power of the purse to withhold funding, but with President Obama slated to leave office after 2016, Republicans may prefer to retain the flexibility for a future Republican president to effectively repeal some or all of Obamacare by using the same tactics not to enforce its provisions.
Delay Employer Mandate for Medium-Size Employers (February 10, 2014: 1 Year Delay)
Administrative Action. On February 10, 2014, the administration announced that the employer mandate would be delayed until 2016 for employers with between 50 to 99 employees (the Small Business Administration estimates there are 7.8 million workers in such firms). Employers who want to take advantage of this particular exemption will need to certify with the federal government that they are not cutting back on positions just to fall below the threshold.
Legal Authority Challenged. New York Times reports “J. Mark Iwry, deputy assistant Treasury secretary for health policy, said the administration had broad “authority to grant transition relief” under a section of the Internal Revenue Code that directs the Treasury secretary to “prescribe all needful rules and regulations for the enforcement” of tax obligations. This authority has often been used to postpone the application of new laws that would cause “unreasonable administrative burdens or costs” to taxpayers, Mr. Iwry said.” However, Michael Tanner, Yuval Levin, and Avik Roy, all have argued why the statutory text of the ACA doesn’t appear to allow for rolling, ad hoc delays.
Additional Transition Relief for Large Employers (February 10, 2014: 1 Year)
Administrative Action. On February 10, 2014, the administration announced that employers with 100 or more workers will only have to offer coverage to 70% rather than 95% of their employees to be counted as fulfilling the employer mandate in 2015. Such firms must cover 95% of employees by 2016, which is the threshold established in the earlier rule (the Small Business Administration estimates there are 113 million workers in such firms).
Legal Authority. Since this action merely changes a prior administrative rule clarifying conditions that employers would have to meet to avoid the employer mandate penalty, it does not appear to raise the same sort of legal questions posed by the employer mandate delay.
Specific Provisions Affecting Small Employers
Delay Plan Choice in Most Small Business Exchanges (March 11, 2013: 1 Year Delay)
Administrative Actions. The Small Business Health Options Program (SHOP) is designed to give small employers several different plans from which to choose. On March 11, 2013, a rule was issued to delay SHOP for one year until 2015. Specifically, SHOP will still be open in 2014, but for the 36 states in which the Federal Government runs the exchange, SHOP will offer only one insurance choice. States running their own exchanges have the option to delay having their SHOP open in 2014. A few states running their own exchanges, including California and Connecticut, said they planned to offer an employee choice option next year, though it was not required by the federal government. Thus, SHOPs will be not be fully operational in all states as intended until January 1, 2015.
Legal Authority. The New York Times reported (4.1.13): “The administration cited “operational challenges” as a reason for the delay.” The rule itself cited comments made in response to the proposed rule (issued 12.7.12) had offered the following reasons to offer only 1 plan initially: “Whether issuers could meet the deadlines for submission of small group market QHPs given the new small group market rating rules; whether issuers could complete enrollment and accounting system changes required to interact with the SHOP enrollment and premium aggregation systems required by employee choice; and whether there would be adequate time to educate employers, employees, and brokers about the employer and employee choices available in the SHOP.”
Some observers speculated the “delay is part of a bigger plan to remove employers from the health insurance market.” However, progressive blogger Joe Klein characterized the failure to set up such plans despite having three years to do so as “Obamacare incompetence.”
Delay On-line Enrollment in Small Business Exchanges (November 27, 2013: 1 Year Delay)
Administrative Actions. Online enrollment on SHOP exchanges has been delayed twice:
- On September 26, 2013, the administration announced that the SHOPs run by the federal government (36 states) would not open for online enrollment until November. But applicants could still enroll by phone, mail or fax beginning Oct. 1.
- On November 27, 2013, in the aftermath of widespread glitches in enrollments on the non-group Exchanges, the administration announced that SHOP exchanges run by the federal government will not offer online enrollment until November 2014, a one-year delay from a launch that was initially planned for October 2013. Small firms will still have the option to purchase SHOP plans through a broker or agent, who will assist the employer with filing a paper application.
The delay will inconvenience all employers with fewer than 25 employees wanting to the small employer tax credits (available only through the SHOP exchanges) since they will need to purchase one of the plans certified by the SHOP marketplace through an agent, broker or an insurance company.
Legal Authority. According to the Washington Post (11.27.13), “Administration officials characterized the decision as one made necessary as they prioritized fixes to the individual health exchange, which the White House has promised will “work smoothly for the vast majority of users” by Dec. 1.” The ACA imposes no statutory deadline for the availability of online enrollment and the delay does not preclude SHOP enrollment for calendar year 2014 given that the paper enrollment process remains in place. That said, enrollment on the small-business exchange is available year-round, so it is unclear why a full one-year delay was necessary given that glitches in the non-group Exchanges were expected to be resolved within a matter of weeks or months. Some have cynically noted that the delay will place the start date beyond the 2014 election, although it is unclear how that would benefit the administration since SHOP gives small employers greater flexibility/more choice.
Specific Provisions Affecting Health Care Industry
Drug-Price Clarification (August 10, 2010)
Statutory Change. Under the ACA, the definition of average manufacturer price (AMP) changed. It became the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to retail community pharmacies and by retail community pharmacies that purchase drugs directly from the manufacturer. – See more at: On August 10, 2010, Congress modified the definition of average manufacturer price (AMP) to include inhalation, infusion, implanted, or injectable drugs that are not generally dispensed through a retail pharmacy.
Doc-fix Tax (December 15, 2010)
Statutory Change. Congress modified the amount of premium tax credits that individuals would have to repay if they are over-allotted, an action designed to help offset the costs of the postponement of cuts in Medicare physician payments called for in the ACA.
Specific Provisions Affecting Medicare or Medicaid Beneficiaries
Cuts to Medicare Advantage (3 Year Delay)
Administrative Action. In November 2010, shortly after the election (which saw heavy losses for Democrats in the House and Senate), the administration announced that it would conduct a nationwide demonstration from 2012 through 2014 to test an alternative method for calculating and awarding bonuses to Medicare Advantage plans. The ACA originally included $136 billion in cuts to Medicare Advantage plans, which were initially scheduled to be phased in starting in 2012. Spending $8.3 billion on a “demonstration project” meant postponing the impact of the cuts for at least a year, turning cuts scheduled to begin in 2012 into a slight increase. In 2015, the cuts called for in the health care law will kick in again.
Legal Authority. To make this policy change, the administration relied on a 1967 statute giving the HHS secretary authority to spend money without specific approval by Congress on “experiments” directly aimed at “increasing the efficiency and economy of health services.” However, in a July 2011 letter to Health and Human Services (HHS) Secretary Kathleen Sebelius, the Government Accountability Office (GAO) said HHS failed to show that it had the legal authority for this quality bonus demonstration program.
Motivation. In July 2012, Senator Orrin Hatch argued that the proposed demonstrations illustrate how the administration had “tried to use a technicality to side step Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections.” Under federal “open-enrollment” rules, seniors must pick their Medicare coverage program for the following calendar year by the end of the preceding year; the open enrollment period opened on October 15, leading to concerns that the cuts would have caused many seniors to lose their preferred health-care plans right before an important election (the Medicare actuary had predicted that by 2017, Medicare Advantage enrollment in 2017 would be half as much as it would have been in PPACA’s absence).
- On March 21, 2012, the nonpartisan GAO raised concerns about the highly political nature of the study–which the GAO’s health director pointed out would be more expensive than “all other Medicare demonstrations conducted since 1995 combined.” Moreover, the agency questioned whether the bonus program could achieve its goal of finding better incentives to promote quality since most of the money would go to plans rated merely average. The GAO recommended that the cuts proceed without delay. This recommendation was ignored.
- The Medicare Payment Advisory Commission also criticized the change saying it amounts to “a mechanism to increase payments” and its design “sends the wrong message about what is important to the program and how improved quality can best be achieved.”
Specific Provisions Affecting Special Interests
Subsidies for Lawfully Present Immigrants through Basic Care Plan (March 12, 2014)
Background. ACA §1331 creates the “Basic Health Program,” an optional program that states may adopt to make subsidized care available, separate from the ACA exchanges. More generous than Medicaid, the program provides federal subsidies to the state equal to 95 percent of the subsidy the enrolled individuals would have gotten on an exchange.
The ACA permits BHP subsidies for U.S. citizens with incomes from 133-200% of Federal poverty line, and legal aliens with incomes from 0 to 133% of FPL. Specifically, the PPACA itself specifies BHP enrollment for aliens “lawfully present” shall be limited to “…in the case of an alien lawfully present in the United States, whose income is not greater than 133 percent of the poverty line…” —PPACA, §1331(e) (42 U.S.C. 18051(e)(1)(B)).
S.744, the comprehensive amnesty bill passed by the Senate, does not prevent currently illegal aliens who obtain lawful status from receiving BHP benefits since S.744′s language blocks insurance premium tax credits paid via the IRS. But that isn’t how BHP’s subsidies are paid. Under the Basic Health Program, the ACA pays subsidies from HHS directly to the states (42 USC §18051(d)), which then pay premium assistance (IRC §36B) and cost-sharing subsidies (PPACA §1402) directly to insurers, thus avoiding the IRS payment mechanism altogether.
Administrative Actions. Even though the language of the statute does not permit this, the HHS’ final rule issued March 12, 2014 extends BHP payments to “aliens lawfully present” with incomes that are greater than 133 percent of FPL (“whose household income is between zero and 200 percent of the FPL” —42 CFR 600.305).
Also, the ACA provides that “only people who meet these requirements” will be eligible for the BHP. However, the HHS rule uses the language “people who meet these requirements are eligible.” The Obamacare Truth Squad argues that “This slippery substitution opens the possibility that HHS may deem additional people eligible at some future date, even if they don’t meet the law’s requirements.”
Motivation. The administration has not advertised this change in policy or defended its legality, so it is unclear whether it is deliberate or inadvertent. The BHP subsidies for non-citizens amount to 95% of what citizens would receive on an exchange. However, BHP plans must charge premiums that are less than the 2nd lowest silver plan, and also must offer the platinum-level “cost-sharing” subsidies required by the ACA (or gold-level, depending on the alien’s income). Consequently, non-citizens granted any sort of “legal status” by an immigration deal or Executive Order would immediately become eligible for taxpayer subsidized, ACA-compliant private insurance plans (even though such individuals would not be eligible for coverage on the ACA Exchanges).
Specific Provisions Affecting Families
Conscience Mandate Safe Harbor (multiple delays)
Administrative Actions. In February 2011, a final rule was issued requiring non-exempt private health insurance plans to provide coverage for all FDA-approved contraception methods, sterilization, and counseling and education, effect August 2012. Only churches were given a conscience exemption to this mandate–the narrowest definition of religious employer ever used in federal law–leaving the mandate in place for religious charities, hospitals, colleges, nursing homes, and universities.
- In response to a firestorm of protest, the administration issued temporary guidance on February 10, 2012 stating it would not enforce the new rule on specified employers until after August 1, 2013.
- In an update to this guidance issued June 28, 2013, this date was extended to January 1, 2014.
Legal Authority. As of late June 2013, there were more than 200 plaintiffs in over 60 cases challenging this rule; of the 28 cases that have had rulings touching on the merits, 21 have received temporary halts to the mandate’s enforcement while their cases proceed.
Out-of-Pocket Spending Caps (1 Year Delay)
Administrative Action. “According to the law, the limits on out-of-pocket costs for 2014 were $6,350 for individual policies and $12,700 for family ones. But in February , the Department of Labor published a little-noticed rule delaying the cap until 2015. The delay was described by Robert Pear in the New York Times, who reported: “The grace period has been outlined on the Labor Department’s Web site since February, but was obscured in a maze of legal and bureaucratic language that went largely unnoticed. When asked in recent days about the language — which appeared as an answer to one of 137 ‘frequently asked questions about Affordable Care Act implementation” — department officials confirmed the policy.’”
Motivation. According to New York Times, “Federal officials said that many insurers and employers needed more time to comply because they used separate companies to help administer major medical coverage and drug benefits, with separate limits on out-of-pocket costs. In many cases, the companies have separate computer systems that cannot communicate with one another.”
Managed Care Option (1 Year Delay)
Administrative Action. The Federal Basic Health Plan Option (FBHPO) was a managed care option designed to make coverage more affordable. It originally was to have begun in 2014, but in April 2013, the administration announced that the provision would be delayed one year until 2015.
Grandfathered Health Plans (uncertain delay)
- On November 14, 2013 President Barack Obama asked health insurance companies to allow individuals whose current plans have been canceled due to the ACA to renew them for a year.
- Under the policy, health insurance companies will be permitted to extend current policies, even though they don’t comply with ACA standards for benefits and financial protections, for their customers into next year. However, insurers won’t be allowed to enroll new customers into these extended policies.
- According to Huffington Post, insurers will be required to disclose to customers that these new plans won’t include the new consumer protections in the law and explain that alternatives are available on Obamacare’s health insurance exchanges, and that tax credits to cut the cost of private insurance are only available on the exchanges. Insurance companies will also have to tell consumers that they may qualify for Medicaid, the federal-state health program for low-income people. State health insurance regulators are being asked to permit the administration’s new policy.
- According to the Washington Post, “The insurers aren’t happy. ‘This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,’ says Karen Ignani, head of the trade group America’s Health Insurance Plans. They worry the White House is underestimating the number of people whose plans have been canceled and who will opt to either remain uninsured or buy catastrophic insurance rather than more comprehensive coverage.”
- On March 5, 2014, CMS announced it “will extend our transitional policy for two years – to policy years beginning on or before October 1, 2016. We will consider the impact of the two-year extension of the transitional policy in assessing whether an additional one-year extension is appropriate.”
- AHIP has a map of states’ decisions regarding extending the coverage of current policies. As of May 6, 2014:
- 19 states have granted 3-year extensions.
- 3 states granted 2-year extensions.
- 12 states granted 1-year extensions.
- 14 states + DC refused to grant extensions
- 2 states still undecided.
- Commonwealth Fund. As of January 8, 2014:
- 21 States Reject Proposed Extension. “States such as Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Indiana, Maryland, Massachusetts, Minnesota, Nebraska, Nevada, New York, Oklahoma, Oregon, Rhode Island, Vermont, Virginia, Washington, and West Virginia, as well as Washington, D.C., have publicly announced that they will not implement the transitional policy fix. Although some of these states are allowing insurers to reinstate canceled policies until December 31, 2013, insurers in these states will not be permitted to renew policies that do not comply with the Affordable Care Act after January 1, 2014″ (state map included). Many states also passed their own laws applying some or all of the Affordable Care Act’s market reforms to coverage issued or renewed in their state on or after January 1, 2014. These market reforms include the coverage of a minimum set of essential health benefits and the ban on preexisting condition exclusions. Officials in California, Maryland, and Nevada cited such laws as explanations for why they had to reject the proposed extensions.
- 29 States Allowed Plans to Extend Deadline. According to Commonwealth Fund’s map, as of January 8, 2014, all remaining states except Mississippi will allow carriers to renew non-compliant ACA coverage for a policy year starting between January 1, 2014 and October 1, 2014.
- House Action. On November 15, 2013, the U.S. House approved (261-157), a proposal introduced by Rep. Upton (R-MI) to allow insurers to continue offering health care plans to new and existing customers through next year, even if the plans do not meet new federal requirements. The bill also would allow new customers to purchase those older plans. 39 Democrats voted in favor of the measure.
Senate Action. Senator Landrieu (D-LA) is sponsoring a bill to allow people who like their plans, to keep their plans by grandfathering in any plan in which people were enrolled in on or before Dec. 31, 2013, regardless of whether that plan complies with the ACA. Co-sponsors include Senators Feinstein, Manchin, Merkley (R-OR), Kay Hagan (D-NC), and Mark Pryor (D-AR). Unlike the Upton bill, which made participation voluntary, the Landrieu bill would compel insurers to keep offering the old plans and would also require insurers to inform customers in writing of other plans available to them. According to USA Today, “Senate Democratic leaders so far say that the administration’s fix is enough and that a vote in the Senate is unnecessary.”
Insurance Company Actions. Jonathan Cohn has detailed five reasons that many insurers might elect not to renew their plans.
Legal Authority. Case Western law professor Jonathan Adler states that the offering of a hardship exemption to enforcement of the individual mandate is “perfectly legal.”
Impact Analysis. The RAND Corporation concluded that the White House plan would reduce enrollment in ACA compliant plans by 500,000 (4%), decrease the number of uninsured by 260,000 and increase premiums in that market by 1%; it would not cause a death spiral. Some of the congressional plans would have had a considerably larger impact.
Employer Coverage Verification in State-Run Exchanges (1 Year Delay)
Because reporting requirements for large employers were delayed 1 year, the state-run exchanges in 16 states and the District of Columbia are being given until 2015 to verify whether exchange applicants are eligible to receive subsidized coverage (i.e., have not received an affordable offer of health insurance from their employer). According to a final rule issued July 5, 2013–on grounds that “the proposed rule is not feasible for implementation for the first year of operations”– ”the exchange may accept the applicant’s attestation regarding enrollment in an eligible employer-sponsored plan…without further verification.” Consequently, at least some who received subsidized coverage will not be eligible for it. However, there are “serious consequences for applicants who misrepresent their employer-coverage. The exchange must still notify employers every time one of their employees receives premium tax credits. The IRS will do so as well. Applicants who receive tax credits for which they are ineligible will have to pay them back when they file their taxes, and the exchange will inform applicants of this fact if it provides the applicant with tax credits pending verification of information provided by the applicant. Negligent misrepresentation of eligibility information can result in a $25,000 fine, while knowing and willful violations are punishable by a $250,000 penalty.” The issue is whether employers not subject to fines will even bother trying to ascertain whether their employees are receiving subsidized coverage inappropriately in 2014.
Income Verification in State Exchanges (1 Year Delay)
The Centers for Medicare and Medicaid Services originally issued a proposed rule requiring exchanges to request further income verification data from anyone who reported an income that was 10 percent lower than what federal data indicated they earned in the previous year. However, the July 5, 2013 final rule modified this to require an audit of only of a statistically significant sample of such cases. For everyone else, “for income verification, for the first year of operations, we are providing Exchanges with temporarily expanded discretion to accept an attestation of projected annual household income without further verification.” Critics have noted that in principle, “since IRS knows your income, it could claw back these excess subsidies afterwards, if it chooses to. But the IRS’ record of impartiality is, shall we say, contested. And people who don’t file tax returns—such as those with incomes below the poverty line—would probably not be subject to that enforcement mechanism.”Moreover, Congress has set limits on the amount that the IRS can “claw back” (ranging from $600 to $3,500 for families and half those amounts for individuals). Note that families below poverty who commit fraud to get subsidized coverage through their state health exchange will be eligible for more than $18,000 in subsidies. In such circumstances, the IRS would be able to claw back less than one-fifth of any fraudulently obtained subsidy.
Electronic Notices for Medicaid and Exchange Subsidies (1 Year Delay)
Due to concerns that technology will not yet be in place, the CMS also has delayed for one year the requirement that states provide applicants with electronic notification of eligibility for Medicaid and exchange subsidies. These would include notices of what tax subsidy, for example, an individual applicant is eligible to receive.
Extension of Canceled Plans to 2016 (Additional 1 Year Delay)
Administrative Action. On March 5, 2014, federal officials announced that health insurance companies would be allowed to extend disqualified health plans through calendar year 2015. According to the Wall Street Journal (3.5.14), “administration officials have told insurers in recent weeks they are strongly considering allowing these grandfathered plans to be extended for up to three years beyond the one year already granted, said a health-insurance executive.”
State Responses. According to the Wall Street Journal (3.5.14), “any effort to create a longer reprieve could face obstacles. State insurance commissioners would likely have to agree again to allow insurance companies to continue selling policies that don’t meet the law’s standards, and the companies themselves would need to be willing to continue to offer them.” Some state insurance commissioners “remained worried that allowing consumers to keep skimpy policies—often held by people who are in good health—would leave a riskier population to be covered in the main insurance market, which in turn would drive up rates.”
Note there is a separate section on Components of ACA Proposed for Repeal.
Individual Mandate (pending?)
Some have argued that the delay of both employer and insurer reporting requirements means that de facto, the individual mandate has been delayed a year, since there is no practical way to enforce it. Delaying the mandate by just one year would reduce the federal deficit by over $35 billion, according to the Congressional Budget Office. Note that delaying only the individual mandate without delaying other insurance reforms such as guaranteed issue (the requirement to take all comers, even those with pre-existing conditions) and modified community rating (prohibiting those with pre-existing conditions from being charged higher rates) might considerably increase the adverse selection problem facing insurers since it likely will increase the number of healthy young people who simply opt to go without coverage. There have been several efforts by Congress to delay the individual mandate:
- On July 17, 2013 the House voted to delay the individual mandate by one year (251 to 174, including 22 Democrats voting yes).
- On September 30, 2013 the House voted 228-212 to pass a continuing resolution that included a one-year delay of the individual mandate. 9 Democrats voted in favor and 12 Republicans voted against the resolution.
- On November 13, 2013 Democratic New Hampshire Sen. Jeanne Shaheen introduced a bill co-sponsored by Sens. Mary Landrieu, Mark Udall (D-CO), Jeff Merkley (R-OR), and Dianne Feinstein (D-CA) are co-sponsoring the bill that would delay the individual mandate for at least two months, giving people extra time to sign up for health coverage.
- West Virginia Democratic Sen. Joe Manchin proposed a one-year delay for the individual mandate.
- Florida Republican Sen. Marco Rubio has sponsored a bill that would delay it until six months after the website was fully functional.
- Sen. Al Franken (D-Minn.) on November 22 said he would be open to a brief delay in the individual mandate if the problems with HealthCare.gov aren’t fixed by the end of the month, according to Minnesota Public Radio.
- Even DNC chair Debbie Wasserman Schultz is on record as being open to a delay in the individual mandate, or at least an extension of the open-enrollment period.
There also have been proposals/efforts to repeal the individual mandate entirely (see Components of ACA Proposed for Repeal).