The ACA is Here to Stay: What Comes Next for Law and Policy

F. Curt Kirschner, Jr.Catherine E. Livingston

Jones DaySeptember 21, 2015

Agenda

• Status of the ACA Post-King v. Burwell• Increased Focus on Consumers• Variations Among the States• Information Reporting• Remaining Ambiguities in the ACA• HRAs and Employer Reimbursements• Cadillac Tax• Enforcement• Increased Risk for Retaliation Claims• Takeaways

Status of the ACA Post-King v. Burwell

King v. Burwell – What does it mean for the law?

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we

must interpret the Act in a way that is consistent with the former and avoids the latter.”

— Chief Justice Roberts— June 25, 2015

Core Provisions of the ACA

Individual Mandate

Insurance Reforms

Subsidies(Premium tax credit and

Medicaid Expansion)

Exchanges are Here to Stay

Legislation to Come –The Hill, July 13

• Let patients have the power, not bureaucrats. This may mark the point at which the left begins to see why conservatives and a majority of Americans disapprove of Obamacare.

— Sen Bill Cassidy (R-La.)

• Obamacare emerges from the shadows. Obama may view it as his legacy, but to American families, it’s a weight around their necks.

— Rep. Charles Boustany (R.-La.)

Legislation to Come –The Hill, July 13

• Obamacare works. And the number and stories back it up.— Rep. Lois Capps (D-CA)

• What’s next for the Affordable Care? The ACA’s most visible success has been to increase the number of Americans with health insurance coverage.

— Rep. Gene Green (D-TX)

Increased Focus on Consumers

Pittsburgh Airport

Cleveland Clinic Super Bowl Advertisement

Fenway Park

Public Bus in Washington, DC

Why Focus on Consumers?

• Public and private exchanges give consumers the power to compare plans and make selections.

• Increased cost-sharing burden on consumers motivates them to make choices.

• Provider are competing for patients at the network level.• Higher-priced academic medical centers have an asset in their

brands.

Variations Among the States

State Variation

• States make separate decisions on Medicaid expansion.• States select essential health benefit benchmark.• States may apply to HHS for waivers that would take effect

as early as January 1, 2017. • Stop loss remains a subject of state rather than federal

regulation.

Medicaid – State by State

Exchanges – State by State

Exchanges – State by State

http://www.bloombergview.com/quicktake/health-insurance-exchanges

Information Reporting

Form 1095-C

• One Form 1095-C for each employee who was full-time for one month or more or who was only part-time but was enrolled in self-funded plan.

• Submit transmittal on Form 1094-C as well.

• Deadlines:

• January 31 – Furnish copies to employees

• March 31 – Submit reports electronically

• Separate filings for each entity in the controlled group.

Filing Requirements

“[T]he IRS will not impose penalties . . . on [employers] that can show they made good faith efforts to comply

with the information reporting requirements. Specifically, relief from penalties is provided . . . For

incorrect or incomplete information reported on the return . . . including social security numbers. No relief

is provided in the case of [employers] that fail to timely file an information return or statement.”

Penalty Relief

Legislation passed in July of 2015 increased the penalty for missing or incorrect information returns from $100 to $250 per return, with the maximum penalty for a year increased from $1.5M to $3M.

Penalties Have Increased

Remaining Ambiguities in the ACA

- Where to Start?

Essential Health Benefits• Single most controversial issue under ACA.• Ten categories defined by ACA:

• ambulatory patient services; • emergency services; • hospitalization; • maternity and newborn care; • mental health and substance use; • prescription drugs; • rehabilitative and habilitative services; • laboratory services; • preventive services and wellness and chronic disease management;

and • pediatric services including dental and vision

• Current approach relies on state benchmarks. Likely to stay that way.

Expect Controversy

Data Driven Analysis

Treatments: at what price?

• Who is your employee?

• Misclassification issues

• Use of Staffing Agency employees

• How to count on on call hours?

• Accommodating EEOC’s position on wellness plans

• See, e.g., EEOC v. Honeywell (D. MN. 10/27/14)

• The ACA and multiemployer health plans

Lingering Ambiguities With No New Guidance

HRA’s and Employer Premium Reimbursement Plans

What’s (Presently) Not So Ambiguous

HRAs and Employer Premium Reimbursement

• Employers trigger large penalties if they offer standalone Health Reimbursement Arrangements or Premium Reimbursements to anyone other than retirees.

• Administration will not allow an HRA or premium reimbursement to be integrated with individual market coverage.

• Small employers are seeking a legislative fix so they may maintain longstanding practice of helping employees pay part or all of their premiums.

• New Administration could possibly change this position.

Cadillac Tax

It’s So Popular!

Tax Policy• Cadillac Tax

— 40% excise tax on excess of cost of coverage over specified thresholds tied to most popular federal employee plan

— Dental and vision coverage not included in cost of coverage

— Complex to determine cost of coverage and complex to administer

— Projected to affect between 1/3 and ½ of employers in 2018

Cadillac Tax (cont.)

• Cadillac Tax creates incentive on payor side to reduce value of coverage. Must still navigate MOOP, essential health benefits, and other insurance reforms.

• Net effect is shifting of cost sharing to consumers• Cost of repeal is substantial. Replacements?

— Cap tax exclusion for employer-provided health care— Permit employers to integrate standalone HRA with

individual market coverage• Negotiating labor contracts to address potential impact of Cadillac Tax is proving difficult

“A provision of the Affordable Care Act, which is one reason Allegheny

Technologies locked out more than 2,000 union workers last week at 12 plants in six states, also could be a stumbling block in negotiations involving two other major steel producers whose contracts covering about 30,000 union workers expire in less than two weeks.

The federal legislation subjects employers to a 40 percent tax if premiums for health care coverage exceed prescribed limits starting in 2018.”

‘Cadillac tax’ key in Allegheny Technologies‘ LockoutPittsburgh Post-GazetteAugust 19, 2015

EMPLOYER shall have the right to make changes in the Plans that it deems necessary or appropriate in

connection with the ACA or any other federal or state laws, including the need to avoid ACA penalties or

taxes, provided that such changes are generally applicable to other EMPLOYER employees covered

under the Plans. The changes authorized under this provision shall not be subject to arbitration or

bargaining with the Union.

Sample CBA Language re Changes to Health Benefit Plans re ACA

Legislative Effort to Repeal Cadillac Tax

• “The Alliance to Fight the 40 is a broad based coalition comprised of public and private sector employer organizations, unions, health care companies, businesses and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 150 million Americans across the United States. The Alliance seeks to repeal the 40% tax on employee health benefits to ensure that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.”

• Members range from Blue Cross Blue Shield and Cigna to Pfizer and Express Scripts to the Laborers Union and UNITE HERE.

Mission of the Alliance

Increased Risk of Retaliation and Other Claims

No employer shall discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions, or other privileges of employmentbecause the employee (or an individual acting at the request of the employee) has –

• received a premium tax credit or cost sharing subsidy;

• provided, caused to be provided, or is about to provide or cause to be provided to the employer, the Federal Government, or the attorney general of a State information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of, any Federal labor law;

• testified, assisted, or participated, or is about to testify, assist, or participate, in a proceeding about such violation; or

• Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any Federal labor law. FLSA § 18C

Premium Tax Credit Retaliation

• OSHA investigates and issues findings and award, if applicable

• Employee or employer can appeal OSHA’s findings to a DOL Administrative Law Judge (ALJ)

• At the ALJ stage, the parties can engage in full discovery and have a hearing before the ALJ

• Employee or employer can appeal the ALJ’s decision to the Administrative Review Board (ARB), which decides based on the ALJ’s record

• ARB decision can be appealed to a federal circuit court

• Until decision is final (not until ARB decision or earlier appeal deadlines run), employee can file an action in federal district court (even after ALJ issues decision)

Retaliation Complaint – Procedure

–Burdens of Proof (not McDonnell Douglas framework)

• Employee must establish that his/her protected activity was a ---contributing factor in an adverse employment action

• Employer must prove by clear and convincing evidence it would -----have taken the action in the absence of the protected activity

• These burdens are more difficult on the employer

– Employee’s remedies

• Reinstatement and/or compensation (back pay)

• Compensatory damages

• Attorney’s fees and costs

• Employer’s remedy for frivolous/bad faith claim? Max. $1,000.00

Retaliation Complaint –Legal Framework

• Reporting and anti-retaliation policy

• Train HR staff, managers and employees on the policy (e.g. an employee asking a manager about whether employer’s practices to avoid ACA coverage are permissible may be protected activity)

• Control access to information from IRS about employees who receive premium tax credit

Protecting Against Retaliation Claims

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which

such participant may become entitled under the plan (29 U.S.C. § 1140)

Plaintiff must show

1. Adverse workplace action; and

2. Action was taken for purpose of interfering with attainment of

plaintiff’s benefits (specific intent)

“Discriminate” might include reclassification to part-time status

ERISA Section 510 Claims

Enforcement

• IRS will be able to start enforcement in mid-2016. Constant oversight of ACA implementation will push them to start.• Data from W-2s, 1095-Cs, and 1040s will be used to analyze potential compliance targets.• IRS will contact employers about potential penalty. Employer will have to defend their positions.• IRS enforcement agents may not have background in payroll and benefits.• Worker classification issues may get attention through ACA enforcement, though probably not in initial years.

Enforcement is by the IRS

• Is the tax and finance function in your organization alert to the possibility that the IRS may contact you with a potential penalty? Do they know whom to contact if a notice comes in?• Is the legal function similarly aware?• If you are contacted, it will be critical to have a team that can explain the approach to health benefits and the composition of your work force effectively to IRS agents.

• The IRS agents are likely to be a dangerous combination: Totally new to the industry but know allthe technical rules.

Be Prepared

Takeaways

• Exchanges, subsidies, and standardized comparisons of plans are here to stay.

• Focus is on consumers.• For those too young for Medicare, there will continue to be

lots of variation, state by state.• Increased focus on record keeping and enforcement.• Controversy and change will continue around

— required benefits, — shifting of cost-sharing onto consumers, and — use of tax penalties or incentives to keep health care

costs from continuing to grow.— Maybe, just maybe, an opportunity to clean up certain ACA

provisions.