The Supreme Court last week upheld the Patient Protection and Affordable Care Act, President Obama’s signature domestic achievement aimed at expanding health care coverage to 30 million uninsured Americans. The court upheld both the requirement that all individuals buy insurance, and the expansion of Medicaid, a joint federal-state insurance program for the poor — as long as the federal government does not threaten to withhold states’ Medicaid funding if states choose not to expand.
Here is a look how the decision affects the local business world:
So what happens now?
The ruling lets stand a new individual mandate that requires every American to buy health insurance by 2014 or pay a penalty.
Less clear is what happens to provisions that would have expanded Medicaid to include everyone below 133 percent of the federal poverty line. Although the law provides states with financial incentives to expand Medicaid, states can opt out, and the court ruled that the government cannot withhold federal Medicaid funding as punishment, as originally envisioned in the law.
What else is now the law of the land?
Many insurance plans must allow young adults to stay on their parents’ plan until age 26.
Insurers must cover preventive services, including birth control, without imposing out-of-pocket costs.
Insurers must eliminate lifetime dollar limits on coverage.
Insurers must phase out annual caps.
States must establish “health insurance exchanges,” or online marketplaces to help the uninsured choose and buy subsidized insurance plans.
Solicitor General Donald Verrilli Jr., who defended the law on behalf of the Obama administration during oral arguments in March.
Lawyers, especially health care lawyers who advise employers, employer group health plans and third-party administrators on benefits. Employers and group plans typically make decisions about 2013 benefits around this time of year, and the uncertainty with health care reform has delayed their normal procedures, said Mark Stember, chairman of the health and welfare practice at Kilpatrick Townsend & Stockton. Now, “we’re going to have to work overtime to get everything out in time for annual enrollment, which usually occurs in September or October for the next year,” Stember said. Tom Mills, a health care lawyer and managing partner of Winston & Strawn’s D.C. office said, “There’s nothing better for us than change. Ironically, change is almost always bad for our clients. One of the reasons it’s bad is because they have to hire us to navigate and understand the change.”
Lobbyists will be jostling to help write the rules on how the regulations will be implemented. “The administration will be pushing out as much guidance and regulation as they can before the election,” Stember said. “From that respect, with the Department of Labor and Health and Human Services, there’s going to be lobbying going on there.” The advocates will also be looking past the election and offering guidance — one approach for if Obama is re-elected, and one if Romney triumphs, said Democratic lobbyist Robert Raben of the Raben Group. “Then we’ll have to prepare for trench warfare in the Congress ... A lot of it will just be the churn of trying to change the policy in the way different sectors of the parties want. It’s such a massive piece of policy that tinkering with the tax code and dollars to the appropriations process can affect the outcome.”
States, and contractors hired by states to set up insurance exchanges.
Maryland is among the 14 states that have taken the lead in building state-run exchanges. Exchanges are like an Expedia for health insurance and are meant to help the uninsured compare and pick the best plan from private providers. Even Virginia, which sued the federal government over the constitutionality of the individual mandate, has made plans to create an exchange.
Also benefitting will be firms that contract with states to build the exchanges. About 75 contracts have been awarded in connection with various parts of the Affordable Care Act, and between 40 and 45 of those are related to setting up the state-based exchanges, according to Deltek, a company that analyzes the contracting market. In February, Noridian, Curam, Connecture and CNSI jointly entered into a two-year, $67 million contract with Maryland for the design, development, implementation of the exchange starting in 2014, according to Deltek.
People who do not g et health insurance through their employers will be able to buy cheaper insurance on state-run exchanges starting in 2014. That includes “pre-retirees” — people who don’t get insurance through their employers and have yet to turn 65, and thus don’t qualify for Medicare. They’ll be able to enroll through the exchange until they turn 65. After that, they’ll qualify for Medicare.
Young adults on their parents’ insurance will continue to be covered until age 26. After age 26, they can enroll in state-run exchanges. If they can’t afford those, the law provides for tax credits for low-income people.
The National Federation of Independent Business, the small-business association that was the lead plaintiff in the lawsuit challenging the law.
Insurers. Many may see profits margins shrink because they will no longer be able to deny individuals with pre-existing conditions. At the same time, the law limits how much insurers can raise their rates — if they go over a certain percentage, they’ll have to rebate consumers. “Even though they have to enroll all comers, they can only increase rates by a certain percentage,” Stember said. “The profit margins for insurers and HMOs will be squeezed.”
Small nursing homes. Mom-and-pop nursing homes and other small long-term care facilities may struggle to stay independent because they won’t be able to afford the costs of complying with new regulations. “We’ll see an increasing consolidation of the long-term care industry, especially as baby boomers get older and start to require care,” said Michael Loucks, a health care attorney at Skadden Arps.
Lower income uninsured Americans who don’t qualify for Medicaid may find it cheaper to pay the tax penalty rather than buy insurance, undermining the law’s intent. Those penalties are $95 for 2014, $325 for 2015 and $695 for 2016. The law would not penalize people who have to spend more than 8 percent of their income.
Small businesses. Starting in 2014, companies with more than 50 employees will have to pay penalties of at least $2,000 per employee if they do not offer a certain level of health benefits. Companies with fewer than 50 employees — for whom buying group plans can be expensive — are exempt, and could benefit from the law because their employees will be able to buy insurance on the exchange.
But Craig Fritsche, president of Tart Lumber in Sterling, which already offers health plans for its 60 employees, is concerned the law will make already-rising health care costs even worse. If insurance companies enroll everyone regardless of pre-existing conditions, it will drive up rates across the board — and employers will have to absorb those costs. Tart Lumber has had to limit options and raise its deductibles to keep premiums reasonable in recent years. “The problem I have with the Affordable Care Act was that they didn’t do enough to control costs,” he said. Small businesses would’ve benefited more from a provision allowing small-business trade groups to band together to buy plans across state lines, and spread risk, Fritsche said.
Hospitals will no longer have to bear the cost of treating the uninsured, but they will be subject to new “quality of care” regulations that could affect the level of federal Medicare reimbursement.
Medical device makers. A larger patient population could mean a bump in sales. However, the law imposes a 2.3 percent excise tax on medical device starting in January, to help finance the expansion of insurance coverage. Cindy Crump, chief executive of AFrame Digital — a 12-employee Reston company that makes wrist watches that monitor the activity of the elderly — said she’s concerned the levy could cut into funds for research and development. “We do view [the law] positively,” Crump said. “At the same time, I am concerned that a tax on medical devices, especially for a new company like us in start-up mode, can certainly impact us as we’re trying to deliver new solutions.”