Politics Doesn't Fix Health Care

It doesn't matter which party is making the decision. Politics doesn't fix health care.

It seemed clear to me that President Obama's November 14 decision to allow insurers to renew certain cancelled policies for 2014 was done entirely for political expediency. I have not yet found anyone who disagrees with me. So, now everything is fixed and everyone who had a policy that they liked in 2013 can keep that for 2014, right?

Wrong!

First, state regulators have to grant approval for this to happen. In a number of states, regulators have already said that they will not allow these sub-standard, non-compliant policies to be renewed.

Second, there have been increases in health care costs over the last year. The natural extension of this is that premiums must increase. This requires actuarial calculations to determine the correct increase. Actuarial work takes time. And, the actuaries who would do this may have other priorities right now. That some politicians(s) thought something was a good idea does not create more hours in the day, more days in the week, or more weeks in the year for any actuaries that I know, and I know a lot of actuaries.

Third, health insurance plans require administration. In the 21st century, plan administration requires software. Software requires time to be created or updated. And, it needs to be checked for glitches (see, for example, healthcare.gov). That some politicians(s) thought something was a good idea does not create more hours in the day, more days in the week, or more weeks in the year for any programmers that I know.

And, then there is the business decision that insurers must make. Despite a general public hatred of insurance companies, people tend to be somewhat loyal to their policies if not their insurers. Suppose you have a policy with, for example, Aetna and they decide to not reinstate it, but your friend who has a policy with, say, Kaiser, gets theirs reinstated, how will that make you feel about Aetna? On the other hand, if you find out that the Kaiser policy got reinstated with a large increase in premiums, you might feel even worse about Kaiser. It creates a frankly unhealthy guessing game.

But, wait, there's more.

According to the guidance we have received, these reinstated policies are simply a one-year fix. They will not be grandfathered, or so it seems. So, even if your policy is reinstated, come this time or thereabout, in 2014, you will be facing the same dilemma of trying to work out your health insurance arrangement for 2015. Well, at least healthcare.gov may be working properly by then.

ObamaCare Economics -- You Shouldn't Be Surprised

This may look like it's going to be a highly political post, but it's not. Instead, it's more of a primer for the ordinary consumer of health care and health insurance.

We're hearing these days about those people who have made it far enough through the Affordable Care Act enrollment website to learn their options. Remember, if you are going to enroll in an ACA exchange health insurance program, you have the choice of a Bronze, Silver, Gold or Platinum plan. They are designed to provide the consumer some choice in the matter. That's a good thing.

The big difference among the plans is the percentage of costs that they are expected to cover. While designs will vary from state to state, Bronze plans are expected to cover 60% of health care costs, Silver plans 70%, Gold plans 80% and Platinum plans 90%. Among the ways that Platinum plans will get to that threshold are by having lower deductibles, lower out-of-pocket maximums and lower co-pays. In other words, the Platinum is a more generous (and more expensive) plan.

Each plan, regardless of its associated metal must cover essential health benefits. If you get really excited by reading this kind of stuff, you can go to Section 1302 of the Affordable Care Act. But, most of my readers have better things to do with their time. So, you can find a summary here:

• Ambulatory patient services (generally outpatient services such as routine doctor visits)
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health services
• Substance use disorder services 
• Prescription drug coverage
• Rehabilitative and habilitative services and devices (in plainer English, these are things like relearning a physical skill, e.g. walking, or learning a physical skill, e.g., speaking if you were born with a speech impediment)
• Lab tests and services
• Preventive and wellness services including chronic disease management
• Pediatric services including oral and vision care

Thus far, I have heard lots of complaints that the Affordable Care Act is not affordable. This should have been obvious to anyone who bothered to think about it. 

Why?

Suppose you as a consumer went out to buy private health insurance coverage pre-2014. Let's further suppose that you are a healthy late 20s single male who does not engage in any particularly dangerous activities (think skydiving, mixed martial arts, motorcycle racing, etc.). You don't require any prescription drugs. You are not a substance abuser and you are fortunate to have not been born with or gotten any severe disabilities.

Now, suppose you went out and bought a health insurance plan for yourself. You wouldn't pay for lots of these required coverages. Certainly, you wouldn't get maternity coverage. You would likely leave out prescription drug coverage and rehabilitative and habilitative coverage. You wouldn't get substance abuse coverage. 

And, you wouldn't pay for them. 

But, under the ACA, you have to have them. You don't get a choice. 

Further, under the various metal-type plans, the design is such that the "average" (not really an average, but perhaps typical) person will pay 60%, 70%, 80%, or 90% of their health care costs. 

Here are two more facts. 1) All of these coverages cost money. 2) Insurance companies are in business to make money (contrary to popular belief, they do not exist for the sole purpose of losing money so that you, dear reader, can have great and inexpensive health care coverage).

What this means is that healthier people who are less likely to require health services need to subsidize coverage for those more likely to require health services. Further, since people should make intelligent choices, heavy users of these benefits should opt into plans that provide more (and better) coverages and light users should elect the plans that are least expensive. This phenomenon is an example of antiselection and antiselection increases costs.

Don't get me wrong. I think it's great that children under the age of 26 should be able to covered by their parents' plans. I have kids who have made use of it. I think it's great pre-existing conditions cannot be excluded from coverage by insurers. But, you know what? One of the ways that insurers have kept premiums down is by excluding pre-existing conditions.

Think about it. If an insurer is required to provide you with chemotherapy, it is unlikely that they can be charging you enough to make up for the cost of your treatments. Therefore, they have to spread the costs among others who are not receiving chemotherapy.

It's just math.

I also think it's great that there are no lifetime maximums under the Affordable Care Act. If you don't know, many health plans have historically had lifetime maximums of $1 million or $2 million. This means that once the plan has paid out that much on your behalf, they stop paying. Why do they have these provisions? They have them to that the insurer can limit its downside risk. It's good business practice. But they can't do it anymore. Since they are in business to make money (there's that nasty word again), they will spread the costs of not being able to impose lifetime maximums across all their customers. 

Again, it's just math.

Anyone who thought that the government could provide more and better insurance coverage for less money was either 1) delusional, 2) dreaming, or 3) not very smart. 

It's just math, and you, dear reader, should not be surprised.

John's Adventures at Healthcare.Gov

Chapter 1 -- Down the Sign-Up Hole

It all started on an October afternoon. I wanted to see for myself what all the ruckus was about. Surely, finding out what it would cost to sign my family up for the Affordable Care Act (ACA, PPACA, ObamaCare) could not be too hard. After all, I am reasonably computer savvy. I understand health care and health insurance better than the average person. My IQ tests to which I was subjected in childhood and early adulthood suggest that I am at least as intelligent as the average American.

My first task was to select a username and password. That I recall, each was required to be between 6 and 70 characters -- quite a range, I would say. I chose a pretty unique username of 20 characters containing an assortment of letters, numbers, and the dreaded special characters. The system told me that this username was already taken. I tried another one of 21 characters. The system told me that one was already taken. I tried one of 34 characters created randomly by banging on the keyboard of my laptop with my eyes closed until I was satisfied. This one, too, was already taken.

At this point, I screamed that word that one screams when one does not believe what has happened. You know the word. It starts with a B and ends with a T and has a total of 8 letters. Assuming that my characters were chosen fairly well at random, the odds of this username being a duplicate were approximately 1 in 36 raised to the 34th power. Excel tells me that this is a 53 digit number.

A few minutes passed and my e-mail inbox greeted me. The Health Insurance Marketplace informed me that my username and password had been accepted. The key question was which one.

Chapter 2 -- My Own Pool of Tears

I wanted to cry. I'm not sure if they were tears of joy or frustration. Finally, I decided they were tears of laughter. I clicked on the verification link and there it was: healthcare.gov was instructing me to log in. And, believe it or not, one of my log-ins was working.

I began to enter data. I chose Georgia, this having been my state of residence for more than 25 years now. I told the system some stuff about me.

I'm curious. Why does it ask if I am of Hispanic, Latino, or Spanish heritage? The question after that asks me for my race. Why not save a question and just ask my race? Obviously, I am missing something. And, in order to insure me, why does healthcare.gov need to know my race anyway?

Chapter 3 -- Chasing My Tale

The system asked me for my Social Security Number and for the name on my Social Security card. I typed it in.

Wrong, you idiot.

The system said there is no such person.

Well, I was looking at my Social Security Card while doing this. I held one next to the other and I was not wrong. So I tried again. Failure. Alas, the third time was a charm. I guess whoever said it was correct. Try, try, and try again.

Then I had to do the same things for my other family members. Just out of curiosity, what happens if you don't have some of this information handy?

Finally, all of the required information was entered for all of my family members. As you must after each tidbit of information that you enter, I clicked on "Save and Continue."

Success?

No, of course not. I clicked again ... and again ... and again. No luck.

So, I logged out and logged back in. And, I had the same problem. And, I tried it another day. And, again I had the same problem. So, I cannot tell you yet what will happen in Chapter 4 -- Obamacare Sends a Bill.

Populating Your Web Site

So, you're in a business related to benefits and or compensation. You have this really nice website. It's pretty glossy and glitzy, but you don't have enough substance on it. You need some technical or opinion articles, but either you don't have the time or you just don't like to write.

Have you ever considered specifying what you want on there and have someone else write it for you? You're here reading my blog. You know that I write on a wide variety of topics.

So, have me do it for you.  Contact me and we'll work out the details.

New Pay Limit for Covered Health Insurance Providers and Maybe a Way Around It

Perhaps you like the Patient Protection and Affordable Care Act (PPACA, ACA, or ObamaCare). Perhaps you don't. You are entitled to your opinion. I think we can all agree that it has its good provisions and it has those that perhaps could have been better thought through. One that falls into the latter category is the [relatively] new Code Section 162(m)(6) dealing with the limit on compensation for Covered Health Insurance Providers (I'll refer to them as CHIPs because it's much easier for me to type). In a nutshell, the section and its new proposed regulations limit the deduction for compensation that can be taken by a CHIP to $500,000 annually with respect to any person.

If you want to read the regulation like I did, you can find it here. If you want a good technical overview with the requisite cynicism, I direct you to Mike Melbinger's blog.

If you would like a solution, read on.

In a nutshell, you are a CHIP if 2% of the gross revenues received by your controlled group are from health insurance premiums. Yes, that means that if you happen to be part of a controlled group that contains a health insurer, you are likely a CHIP. Congratulations!

Most of Code Section 162(m) deals with deduction of compensation (as a reasonable business expense). The parts that limit it generally limit it to $1 million, except for CHIPs. And, for CHIPs, and only for CHIPs, the determination of whether an individual's compensation exceeds $500,000 includes deferred compensation earned, nonqualified plan benefits earned, equity compensation awarded, and severance benefits paid. The calculation is not easy, but this post is not about that. If you'd like to know more about the calculation, contact me and I'll be happy to charm you with its details.

I said I have a solution, and for many companies, I think I do. What was left out? Did you notice that qualified plan contributions and accruals were left out? And, for qualified plans, we have an objective set of nondiscrimination rules.

The solution involves a technique often referred to as a QSERP. What this technique does is to take nonqualified deferred compensation amounts and moves them from a nonqualified plan to a qualified plan. In this case, it has lots of advantages:

• Frequently immediate tax deductibility
• Tax-favored buildup
• More security
• Pooling with significant other obligations in a large trust

Most often, QSERPs are utilized in a defined benefit context. But, realizing that many companies no longer have defined benefit plans providing for current accruals, QSERPs can be utilized in a defined contribution context as well. 

Again, the explanation is long and has been covered elsewhere, so I'm not going to bore my readers here, but if you'd like a detailed explanation, contact me directly.

I know the cynics among you will say that this deduction limitation is the right thing to do. For you, I will say that you should have asked Congress to craft the law in a way that doesn't leave creative minds the opportunity to find loopholes.

If you're reading this today (it's a Friday) or even if you're not, have a great weekend whenever that may come for you.

Higher FICA Taxes on the Horizon

Health care reform in the guise of the Patient Protection and Affordable Care Act (PPACA) came to us with many new benefits. In order to pay for those benefits, the government had two options -- cut costs or raise revenue (spelled T-A-X). Here we talk about one of those new taxes.

Beginning January 1, 2013, high earners will be required to pay additional HI (Medicare) taxes under the FICA program. The additional tax is 0.9% of compensation in excess of $200,000 for individual filers or $250,000 for couples filing jointly. The employer portion of FICA will not increase.

First, this is going to need to be administered differently from traditional FICA taxes which generally are paid through payroll deduction. Here, your employer has no obligation to know how you file (in fact, you don't need to decide until you actually file), and your employer has neither the obligation nor the right to know your spouse's income. So, presumably, higher earners will simply have an additional tax tacked on to their Form 1040.

Think about this. What are FICA wages. Generally, they are compensation first vested and reasonably ascertainable in a year. For most deferred compensation plans, the amount of compensation that has been deferred is reasonably ascertainable. However, for plans such as defined benefit SERPs or for certain stock plans, this may not be the case. Regulations under Code Section 3121(v) allow taxpayers to early include such deferred compensation. In the case of individuals with significant SERP benefits in particular, they may want to discuss the possibility of early inclusion with their employers. While the tax hit for 2012 could be meaningful, it may lessen the long-term blow.

On the other hand, we don't yet know the outcome of the 2012 presidential election. Mitt Romney has pledged to repeal PPACA if elected. Its repeal would eliminate this tax.

Planning isn't as easy as it used to be.

Much Ado About a Tax

The arguments among the cognoscenti have been going on for months. Does the Patient Protection and Affordable Care Act (PPACA or ObamaCare) violate the United States Constitution?

The arguments that I heard most frequently centered around whether or not the Act violates the Commerce Clause or the Necessary and Proper Clause.

Attorneys, especially those who practice constitutional law are far more versed in these subjects than I, but they are also far more versed than most of my readers. So, when they refer to Ayotte v Planned Parenthood or to Hooper v California, many eyes will glaze over. This is intended for those glazing eyes.

For those lay people who want to know what happened, here you go. Note: I have no formal legal training and I do not practice law.

Article 1, Section 8 of the Constitution discusses the powers given to Congress. Among them are the right to regulate commerce among the several states. Many argued that this would be the point on which the constitutionality of PPACA would turn. And, most of the experts seemed to believe that forcing an individual to make a purchase was beyond the scope of the Commerce Clause. The Supreme Court agreed.

Article 1, Section 8 also contains the so-called Necessary and Proper Clause whereby Congress has the power to make all laws which shall be necessary and proper for carrying into execution the other powers granted by Article 1, Section 8. Since there was nothing in that section which needed to be executed, the Necessary and Proper Clause did not apply.

Some may recall that the Obama Administration had pledged that those families earning less than $250,000 per year would not see a tax increase. Therefore, the amount that individuals who choose to remain uninsured would pay was written as a penalty, not as a tax.

But, and now for the legalese. the Court through the decision handed down by Chief Justice Roberts, looked to Hooper v California, which says in pertinent part that "every reasonable construction must be resorted to in order to save a statute from unconstitutionality." In English, that means that if there is any way to find a law to be constitutional, then that way should be found.

So, the Supreme Court labeled the penalty to be a tax. And, the first clause of Article 1, Section 8 begins that '[T]he Congress shall have the power to lay and collect taxes ..." So, to the extent that the penalty is, in fact, a tax, Congress was within its constitutional powers to impose said tax.

Much of the law becomes effective in 2014. Of course, we have a major election coming in November and its anyone's guess as to what this will do to the inhabitants of the White House and the Capitol building. If there are big changes, we could see changes to the law. If not, then this law will stand at the very least through 2016.

Health Care Reform Year-by-Year

I've got no original material for you here, but I happened upon this government website that tells its readers what happens under the Patient Protection and Affordable Care Act year-by-year.

Here is the link.

The Cynic In Me Says Watch Out For the Health Insurance Industry

Yesterday, I attended the Traveling Seminar in Atlanta put on by the Conference of Consulting Actuaries. Well, actually, I instructed for part of the day and attended for part of the day. It's a really good day of continuing education and I would highly recommend it even if I am one of the instructors. You can read more about here so that you can see why perhaps you should attend a Traveling Seminar next year.

But, that's not my point in this post. I'll get to that in a second. One of the four sessions yesterday was on health care in the US, essentially health care reform, PPACA, or whatever glorious name you might choose to attach to it. As I listened, I noticed some analogues between the Dodd-Frank Act that was intended to keep the financial services industry in check and PPACA which among other things appears intended to keep the health insurance industry in check.

So, I digress. Dodd-Frank created lots of new rules. In fact, 2800 pages or so of legislation has a tendency to do this. Among other things, it restricted some of the practices of the banking industry that lawmakers had judged were pretty nefarious. The banking industry saw that its profits, especially on the retail side were declining. So, what did the banks do? They started to put more and different fees in place. Some of them, such as the $5 per month (that was usually the number, I think) fee for using your debit card even once, faced public uproar and outrage and were repealed. But, they are finding other ways that will not be so in your face. If you ever find out about them, you won't like them, but chances are that you can't find out whether they are in your bank's disclosures or not.

So, what does that have to do with PPACA? Well, the more I listened to yesterday's presentation, the more I heard about health insurers losing some of their margins. And, many of them have shareholders to report to. And, those shareholders expect profits. And, the profits may be ready to decline. So, my message to you is that since the health insurers can't easily deal with declines in their profits, they'll have to get them back somewhere ... somehow.

So, ladies and gentlemen, I don't know how they will do it. But, hold onto your wallets. The insurers need their profits. They are in business, after all, to make money.

Public Enemy #1

Suppose I told you that I had a business idea for you that had profits (written as +) and costs (written as -) that went like this:

• 2010: + 100 billion
• 2011: + 200 billion
• 2012 : + 250 billion
• 2013: + 250 billion
• 2014: + 250 billion
• 2015: + 250 billion
• 2016: + 150 billion
• 2017: + 50 billion
• 2018: - 50 billion
• 2019: - 200 billion
• 2020 --> : - 200 billion or more every year

How would you "score" this business? Personally, I would say that if we went in to that business, it would be time to get out by 2017. The Congressional Budget Office (CBO), not because they are stupid (they are, in fact, a bunch of very smart people), but because they have a set of rules given to them by Congress that they must follow, would tell you that this business (or law) actually saves the country lots of money.

How can that be? Look at their rules. Time value of money is not part of the rules. So, one dollar in 2010 is the same as one dollar in 2012 is the same as one dollar in 2019. And, the scoring for a bill ends after 10 years. So (and my intent here is not to be political, but instead to make a point) construction of bills and therefore laws becomes a jury-rigged process. Every major bill that goes to the House Ways and Means Committee seems to save money early on and not start to cost money until close to Year 10. Hmmm? Does that make such a bill a budget-neutral, or even budget-positive bill? I don't think so. But the author of the bill will tell you how it will save the country money while neglecting to tell you that the same bill will saddle future generations with mountains of debt.

Where did the numbers above come from? I made them up. Where could they have come from? They could have come from the Affordable Care Act (PPACA), or Health Care Reform, if you prefer. There is a law where the savings are front-loaded, but once the program starts to cost the country money, it never is projected to stop costing money. Yet, the authors of the law say it saves the country money. And, they use the non-partisan CBO as ammunition to prove it. 

The CBO says PPACA will save us money. And, by their estimates, which I believe to be as valid as any others, it is expected to save us money ... over a 10-year time horizon. But, what happens after 10 years? Hmmm! It costs money every year after Year 10. So, if instead of scoring over 10 years, CBO rules asked them to score over 20 years, then proponents of the law could not say that PPACA saves the country money.

Does the public know this? Generally not. Does Congress know this? I think that some in Congress do, and some probably do not. Now you do.

To my mind, these rules are lunacy. We are in the computer age. If the CBO can do a 10-year projection, it can also do a projection for 25 years, 50 years, 100 years. It's not the CBO's fault, though. They have rules. But, to my mind, those CBO rules, foist upon them by Congress are Public Enemy #1.

What do you think?

A Good Idea Spoiled -- COBRA and the HDHP

Many would disagree with him, but Mark Twain, many years ago, said that "Golf is a good walk spoiled." I don't think as many will disagree with me when I say that COBRA is a good idea spoiled by high-deductible health plans or HDHPs. Why?

Suppose we consider a not atypical situation. Fred Stonematch was an employee with Rocky Roads Paving Company (RRPC). Fred was married to Wilma, and they had two children, Pebbles and Bam Bam (BB). As Fred had a good job with good benefits and the two children were young, Wilma chose to take a part-time job that gave her flexibility to be home when the kids got home from school, but her job provided no benefits. Recently, RRPC had changed the health care benefits that it offered to its employees to an HDHP. In April, RRPC lost one of its largest contracts in a bidding war and they felt compelled to lay off many of their employees. As the foreman on that contract, Fred was one of the first to be laid off.

When Fred was given his pink slip, the HR manager explained to him the benefits of COBRA coverage. Fred could still get health care coverage for his family and at group rates (plus a small administrative charge), Fred dutifully enrolled for COBRA coverage and began writing checks for $1400 per month. Fred didn't have a lot of savings, so this was a real hardship, but he did understand that he and his family needed to be covered against a health catastrophe.

In May, Pebbles was out riding her bicycle when she hit a small hole in the road that she hadn't noticed. As Pebbles' arm was scraped severely from the fall, Fred and Wilma took her to the doctor. The $700 charge was covered under the health plan, but they had not yet met their [high] deductible for the year. So, for May, the Stonematch family had health care costs of $2100. Despite paying their COBRA premiums, they received no real benefit for the month of May.

In mid-June, during his first year of Little League, BB got hit in the head by a pitch. Thankfully, he was wearing a helmet. Also, thankfully, the Stonematch family had health insurance that they paid $1400 per month for because withing minutes, BB was feeling woozy and seeing double. Since he had a head injury, the emergency room physician decided that BB needed a CT scan. Ouch! The charge for the scan in the hospital was $1200, but because the Stonematch family was in an HDHP, the insurance paid nothing.

Do you see the problem? Fred did. He knew that there was no way that he could afford not to get COBRA coverage for his family. On the other hand, he couldn't afford to get it. In the first two months of his coverage, he had paid $2800 in premiums, $1900 for medical expenses and received no benefits. Thinking back, he realized that this could be the case, but he still didn't see a way around having health insurance.

When an employee elects an HDHP (or has no other health care choice through their employer), he doesn't anticipate getting laid off during the year. But, if he does, he will often be left no reasonable alternative to paying for COBRA coverage that will likely provide no benefit. It's a triple whammy: 1) no source of income; 2) needing to pay for insurance that he cannot afford; and 3) receiving no actual benefit for the coverage that he pays for.

The system is broken. Some think that the Affordable Care Act was the right answer. Some don't. But I know that COBRA combined with an HDHP is not the right answer. Shame on whoever thought it might be.

Surprise ... Hide the Children -- There's a Flaw in Health Care Reform

It took a while to find it, but ... sit tight ... hide the children ... put down your drink ... there is a costly glitch in health care reform (PPACA, if you prefer). It's hard to believe that it could happen in a law that was so carefully read by each member of Congress before they gave it a thumbs up or a thumbs down, but buried in the 2700+ pages, there is a provision that would allow retirees to ignore their income from Social Security in determining their eligibility for Medicaid.

In English, this means that as currently written (and remember it is the law), PPACA is a whole lot more expensive than the projections and forecasts have said it is.

How could that happen? The Republican Party has been informing me ad nauseam that they are flawless. Not to be outdone, the Democrat Party has assured me that the Republicans are mistaken, and the Democrats are flawless.

Oops, you mean neither one is flawless? Could it be that, in fact, they have no idea what they vote on? No! Hide the children even better. This is truly alarming.

At first, the White House responded by saying that this provision was always intended. Then, when they heard the cost, they admitted their might be a mistake. President Obama has assured us that this will be fixed.

Wait! We have a flustercluck here.

This can't be fixed by Executive Order. It will take a vote. Could this be one where one party will choose to hold the other party hostage? I can see it now. In the House (Republican controlled, by the way), a bill will be introduced to fix this provision ... by repealing PPACA. And, in the Senate (Democrat controlled), a bill will be introduced to fix this provision.

I believe that both need some education. There is a wonderful book out there that all of our elected representatives who engage in such foolhardiness should read. My kids were familiar with it when they were quite young. It was written by a wonderful author with the birth name of Theodore LeSieg. Some of you may know him by a different name, but in either case, check out the "Butter Battle Book." It makes far more sense than much of what goes on at Capitol Hill.

The Health Care Reform Debate Gets Stranger

Music mavens may remember the classic album put out by the Mamas and the Papas, "If You Can Believe Your Eyes and Ears." If you read through this and you still can, then perhaps you are "California Dreaming" (which was on that album).

Leave it to the debate over health care reform, or PPACA (The Patient Protection and Affordable Care Act), if you prefer, to bring forth some of the more interesting legal arguments that the world may ever see. Truth is stranger than fiction and listening to the audio of this testimony has proven it once again.

What am I talking about? The 6th Circuit Court of Appeals is now getting its chance to weigh in on PPACA. Specifically, the issue seems to be whether Congress has the right to enforce the so-called individual mandate. Proponents rely on the broad powers of Congress under the Commerce Clause (and yes those powers have historically been construed extremely broadly).

For those who would rather listen for themselves than read my verbosity, here is where you can click.

Back to the readers of the world. Understand that the 3-judge panel in this case consists of two republican-appointed judge (Judge Sutton and another) and one democrat-appointed judge. What we focus on is the testimony of Neal Kumar Katyal, Acting Solicitor General of the United States. Mr. Katyal ascended to this role when Elena Kagan was confirmed by the Senate to her appointment to the US Supreme Court.

In any event, the aforementioned Judge Sutton asked Mr. Katyal if he could name one case heard by the Supreme Court which considered the same question as that posed with respect to the individual mandate. Mr. Katyal conceded that it had never been considered exactly, but did bring up Heart of Atlanta Motel (you can read Justice Black's opinion here if you like).

For those who choose not to read this decision, I summarize. Heart of Atlanta Motel had a commercial restaurant that purposefully discriminated in choosing its customers on the basis of race (this was prior to the passage of the Civil Rights Act). The Supreme Court ruled that Congress could use its Commerce Clause power to bar discrimination in such commercial establishments.

You may wonder what the connection to health care reform is. I certainly did. But, as they say on late-night TV, "Wait, there's more!"

Judge Sutton said that the motel was in the business. Congress (and the Supreme Court) told them that if they didn't want to follow the law, they could exit the business. He pointed out that individuals are not given the option of 'exiting the business.' They can't just opt out of the individual mandate provision without financial penalty.

Wait, there's more! Mr. Katyal was prepared with an answer.

Individuals can avoid the individual mandate. As some readers undoubtedly know, individuals are exempt from the mandate if they cannot purchase health insurance for less than 8% of their income. So, Mr. Katyal explained to the 6th Circuit that an individual who wanted to 'exit' the individual mandate could simply earn less money and therefore exempt himself.

You have read correctly. Finis!

The Non-Event That is Making News ... The Supreme Court Doesn't Rule on Health Care Reform

It's the biggest benefits news of the day, and all because nothing happened. Attentive readers, as well as all other people who have not been hiding under a very large rock will recall that there are a whole bunch (I think 16 is the number) of lawsuits out there trying to have all or a part of health care reform (PPACA) declared unconstitutional. Some have gone the way of the Obama Administration. Some have not. This is to be expected. Anyone who has read the court decisions to date on this issue can see what is happening. District Court judges who tend to be viewed as liberal have found PPACA to be constitutional. District Court judges who tend to be viewed as conservative have found at least parts of PPACA to be unconstitutional.

Predictable, huh?

So, what happened now? Opponents of the law would like to have the Supreme Court rule on this once and for all. If the Supremes rule against the law, then states can stop the expensive process of implementation. Proponents of the law would be thrilled if the Supreme Court were to rule quickly in their favor, but obviously not so happy if the ruling went against them.

I'm showing my ignorance here as I don't know all the rules of procedure for the courts. I do know that in the ordinary course of things, a case that is ruled upon at the District Court level, if appealed, then goes on to the level of the Circuit Court of Appeals. The next level of appeal after that is the Supreme Court.

Apparently, there is a procedure referred to as fast-tracking whereby the Appeals Court gets circumvented and the case goes directly from the District Court to the Supreme Court. In this particular case, the Supreme Court had been petitioned to hear it immediately so that states would know whether to continue the PPACA implementation process, or not, as the case may be. And, for something with consequences this far-reaching, of course the Supreme Court would decide to fast-track this case, make a quick ruling, and let us move on. There was no doubt about it, was there?

Hold on. The Supreme Court essentially answers to nobody. We don't elect them. They don't have term limits. And, in their collective humble (or not) opinion, this case just doesn't merit fast-tracking.

The Supreme Court is not founded on convenience. It is not founded on the expenditure or saving of a few billion dollars. It exists to rule on matters of law, and historically, only those issues that are of extreme importance, AND where undue harm or duress could come as a result of their not fast-tracking a case have been fast-tracked.

So, your top headline for today is that nothing happened. But, now we know that nothing has happened with regard to the PPACA litigation. Presumably, this case will make it to the Supreme Court docket for the session beginning this fall. This means that we are likely to see a ruling next spring, or more likely, summer. That is right around the time of the presidential nomination conventions.

Oh, the speeches we will hear.

In the meantime, we can all go back and hide under our rocks. This case sits still for the moment.

Sanity on the Hill for a Change

UPDATE: It's the law now. The President signed it.


Former House Speaker Nancy Pelosi (D-CA) asked us to wait until the bill was passed to see what was in it. We all know that this refers to the Patient Protection and Affordable Care Act (Health Care Reform or PPACA). Most observers would say that the bill (now law) had a number of good things in it. Most observers would also say that it had a number of bad things in it. With regard to some of those elements, however, there was near unanimity. One, in particular, is the requirement that businesses and landlords file a Form 1099 with the IRS for all goods and services purchased with value above $600. Surely, this has something to do with either patient protection or affordable care, but the connection escapes me.

In the House of Representatives, the bill passed by a vote of 314-112. In fact, in addition to Representative Dan Lungren (R-CA) who introduced the bill, there were 273 co-sponsors. That was enough to get it through the House without any of the non-sponsors voting for it. The co-sponsors were from both parties. No Republicans voted against the bill. The Democrats were fairly evenly split with roughly 40% of them supporting passage of the bill.

Yesterday, the Senate acted on the bill, introduced by Senator Mike Johanns (R-NE) and co-sponsored by 10 others representing both major parties. The Senate passed the bill by a vote of 87-12. The Library of Congress website has not yet reported the vote, so I can't report to you who the 12 with particularly lame brains are, but if you find the need to know yourself, check here and click on 'major congressional actions' when that link becomes active.

The bill now goes to the President who I expect will sign it. Now that this is over with, perhaps we can have a budget for Fiscal 2011 before Fiscal 2011 ends.

House Votes to Repeal 1099 Requirement

Yesterday, the House of Representatives voted to repeal the silly 1099 requirement in health care reform (PPACA). For those who have been in hibernation, this provision requires businesses to provide Forms 1099 to report payments for goods and services in excess of $600.

When this language, that is oh so related to health care, was put in PPACA, it was clear that the drafters were looking for a way to make the act revenue positive. Little did they seem to realize or care about the tremendous burden that this would put on businesses, especially small businesses.

Given the public uproar over this provision, one would think that its repeal would fly through the Senate as well for signature by President Obama. However, Democrats in the Senate are reported to be concerned about how this affects the price tag on PPACA.

To me, this is what happens when we load up a bill with things that are entirely unrelated to the bill's intent,or at best, peripherally related to it. Some may recall that the Pension Protection Act (PPA) of 2006 had pages and pages of provisions that were encouraged by lobbyists. Even going back to my earlier days in this business, the Tax Reform Act of 1986 had provisions that applied, for example, to every company whose primary business is in the field of widget-making and which was incorporated in the State of Delaware on some random date in 1923. Every company, huh?

The 1099 provision needs to be repealed. While I usually try to keep this blog apolitical to the extent that I can, this provision neither improves health care, changes the cost of health care, nor stimulates the economy. Companies can react in one of several ways, but I expect that most small businesses will simply see an increase in their cost of outsourcing their reporting, and that can't be good.

In any event, if the Senate does pass this, I am sure that it will make the news, but I will do my best to cover it here.

You Can Keep Your Health Care Benefits, or Can You?

We all remember the trumpeting of health care reform (PPACA). We all heard that if we wanted to, we would be able to keep our existing benefits. A recent poll suggests that is wrong.

According to data from the Society for Human Resource Managers (SHRM), 51% of HR managers say they will keep their health care offerings. That leaves 49% who either won't or are not sure. The biggest hurdle may not be cost, but the implementation process. 54% said that the provision requiring coverage of adult children is creating implementation problems. 34% complained about the exclusion on reimbursements for out-of-pocket expenses for over-the-counter medication as being an implementation challenge.

To me, this suggests that many of us will not be able to keep our health care benefits. Stay tuned.

Health Care Reform Declared Unconstitutional Again -- Should Anyone Care?

Are you bored? Here is a link to Judge Roger Vinson's 78 page opinion in State of Florida v US Department of Health and Human Services, also known as 26 states get together to challenge Health Care Reform (PPACA). http://www.scribd.com/doc/47905937/Health-Care-Ruling-by-Judge-Vinson

What does it all mean? I think that we are in about the same place as we were before. Federal courts are split, so it's heigh ho, heigh ho, off to the Supreme Court we go.

In any event, here are the significant highlights of Judge Vinson's ruling, at least as I see it:

• Summary judgment in favor of HHS was found on the claim that the massive expansion in Medicaid because of the increased costs to the states was unconstitutional. In other words, the claim of the states got thrown out here.
• With respect to the individual mandate, Vinson elected to look at the Commerce Clause and the Necessary and Proper Clause separately. Bottom line, he finds the individual mandate to be unconstitutional on both grounds.
• Finally, he has found that the individual mandate is not severable from the rest of PPACA. Therefore, he throws out the entire law.
• Plaintiffs had asked for injunctive relief, and Judge Vinson said that such relief was not needed in light of his ruling.

Stay tuned for more ...

A New Twist on Health Care Reform Litigation

Some lawsuits I just don't understand. I guess that's because I don't have the proper training. Surely three years of law school would have showed me why this one should move forward ... well perhaps surely is too strong a word.

Somewhere in the heart of Pennsylvania reside and work a presumably lovely self-employed couple -- Barbara Goudy-Bachman and Gregory Bachman. They have sued the US government in federal court to challenge the individual mandate under health care reform (PPACA). They believe that the government has exceeded its powers.

As it has in (I believe all of) these individual cases, the United States has argued that the Bachmans do not have standing to sue because personally, they could show no immediate individual harm. Well, hold on a second, United States. The Bachmans are alleging immediate economic challenges as a result of PPACA. You see, the Bachmans are planners and they have calculated that they cannot afford car payments and health care premiums come 2014 (currently, they have no health insurance).

Judge Christopher C. Conner, writing in the Central District of Pennsylvania wrote:

The economic impact is immediate: the Bachmans must forego the purchase of a new vehicle and rearrange their finances in anticipation of the statutory requirement that they purchase insurance. Although it is certainly true that the Bachman’s circumstances may change, they must undertake financial planning and budgeting decisions now in preparation for the implementation of the individual mandate. The mandate will likely require a significant financial investment by the Bachmans. Changes in their family budget are required now and are reasonably traceable to the mandate. The Bachmans have no crystal ball. They must engage in financial preparation and reduced spending based upon their present circumstances in light of the impending effective date of the individual mandate.

This is incredible logic. I fear that my personal taxes may be higher in 2014. And, my car is vintage 1999, so I should need a new one by 2014. I think I have a case, perhaps even better than the Bachmans. But, I don't think I am going to sue the US government over this one.

In any event, I googled Judge Conner. He is a Bush appointee, educated at Cornell University and the Dickinson School of Law. He was an Adjunct Professor at the Widener University School of Law about 10 years ago. You can go to this website and see that there are a bunch of people not real happy with him: http://www.impeachjudgeconner.com/

And, if you want to read about the case in gory detail, you can go here: http://docs.justia.com/cases/federal/district-courts/pennsylvania/pamdce/1:2010cv00763/80371/37/0.pdf

Health Care Reform Debate -- 17 Years Ago

I'm not going to take a position on health care reform here. I'm sure you have one though, as I'm sure you know I have one. It's interesting, however, to note that during the Clinton administration and an earlier health care reform debate, the math used by the President and the math used by a CEO (who happens to have a math degree) were wildly disparate.

As with any other major change in the law, health care reform will have a huge effect on business. There will be some winners and there will be some losers. Ultimately, the losers are most likely to be the workers (or soon to be former workers) of the companies that are losers. The other choice is the consumer, who always seems to lose when government intervenes in business. The winners will be the previously uninsured or uninsurable.

I think what it comes down to is whether a company can afford the level of compassion being imposed on them. Each company does its calculations. Some think they will not be severely affected. Others know they will be.

In either case, you decide, but I think this 8-minute clip gives a very interesting perspective (if YouTube is blocked where you are, you'll have to wait until later).

http://tinyurl.com/47hoy29