1. Patient Protection and Affordable
Care Act (PPACA)
John J. Sarno, Esq.
Business and Public Policy
1

2. Patient Protection and Affordable
Care Act
March 23, 2010
A New Era for America
2

3. U.S. Supreme court heard oral argument on the
constitutionality of the Affordable Care Act on
March 26-28, 2012
3

4. Insurance Reform
 High-risk pool created (2010)
 Dependent coverage to age 26 (2010)
 Children with pre-existing conditions cannot be denied coverage (2010)
 No denial for pre-existing conditions eliminated (2014)
 No Charge for annual wellness visit (2014)
 Guaranteed issue policy (2014)
 Modified community ratio (2014)
 80 – 85% medical loss ratio (2014)
 Long-term insurance program (2014)
 No pre-existing condition exclusions (2014)
4

5. All Plans Must Provide
Essential Health Benefits
“Essential Health Benefits” requires minimum set of
benefits, with no lifetime of annual coverage limits
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Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance abuse coverage
Prescription drugs
Rehab services and medical devices
Preventative and wellness/chronic disease management
5

6. “Free” Preventive Care
No Co-Pays
No Out-Of-Pockets
No Deductibles
6

7. Automatic Enrollment
All new “full-time” employees will be automatically
enrolled, subject to regulations. Notice will include
opportunity to opt out. Current employees will be
auto enrolled
Applies to employers with 200 or more “full-time”
employees and who offer a health care plan. “Fulltime” employees means on average 30 or more
hours per week.
7

8. Non-Discrimination Rule
Employers cannot discriminate in favor of
highly-compensated employees.
Same basic plans on same terms to all
employees.
8

9. Health Delivery Reforms
 Research on best provider practices
 Research on comparative evidence outcomes
 Pilot program that pays for outcomes on flat fee
basis rather than fee for service for treatments
 Medical IT
 Standards for extended living arrangements
 Hospice, home-health reimbursement
9

10. Community Investment
 Health Care Clinics
 Primary Care Training
 Grants to States
 Diversity and Cultural Competency
 Education Curricula Development in Health Sciences
 Food Labeling
10

11. The Health Insurance Exchange
Uninsured individuals not eligible for Medicare or
Medicaid will be permitted to purchase insurance
through state Exchanges (purchasing pools).
Individuals will be eligible for subsidies.
Employers with fewer than 100 employees will be
permitted to enroll.
Employer eligibility may be expanded in 2017.
11

12. 12

13. Exchange Enrollment
October – December, 2013
2.2 Million Americans
23% - 18 – 34
15% - 35 – 44
22% - 45 – 54
33% - 55 – 64
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14. Wellness and Prevention Programs
 75 cents of every dollar is spent on chronic diseases
 100 billion dollars of health care is directly attributable to
behavior
The Act amends HIPAA, permitting premium discounts to
employees who participate in wellness programs.
Insurers that sell in the Exchange must provide discounts
for wellness and health promotion activities.
14

15. Smokers can be charged up to 50% more for
coverage purchased in the Exchange.
Employees who participate in HIPAA-approved
wellness programs can receive up to 30% off in
premium.
15

16. Minimum Essential Coverage
Requirement
(the Personal Mandate 2014)
A federal requirement that individuals purchase
health care insurance or pay penalty up to 2.5%
of income is unprecedented.
16

17. All five congressional committees
reported out a bill containing the
Individual Mandate
17

18. 6 lobbyists for every member of Congress
Insurance Industry - $100 million
Pharma - $110 million
Providers - $80 million
Hospitals - $90 million
Medical Device - $30 million
18

19. The pharmaceutical industry alone spent
over $600,000 per day in lobbying (2.3
lobbyists per member of Congress)
19

20. Hospitals, physicians, insurance companies and
others agree that without the Individual Mandate
the consumer protection and benefits reforms
would ruin the health care market
20

21. Florida v. U.S. Dept. of HHS
11th Cir. Court of Appeals (2011)
Congress has no authority to require citizens to
purchase health care insurance. Remainder of
law remains intact.
Thomas Moore Law Center v. Obama
6th Cir. Court of Appeals (2011)
Congress has authority to enact personal
mandate under commence clause.
21

22. NFIB v. Sebelius
U.S. Supreme Court (2012)
Personal Mandate exceeds Congress‟ power to
regulate commerce but is a valid tax
22

23. Congressional Authority
 Express authority to regulate interstate commerce
 Express authority to tax and spend for the general welfare
 Power to enact “necessary and proper” laws to execute
express authority
23

24. U.S. Health Care Spending
About 16% of the U.S. economy (in 1950, 5%)
Estimated $2.24 trillion in 2009
Most health care spending per capita in the world
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25. 25

26. Health Care Spending Per Capita
(2003)
United States
$5,711
Luxembourg
$4,611
Switzerland
$3,847
Norway
$3,769
Belgium
$3,044
26

27. Health Care Outcomes – U.S.
 33rd among developed nations in infant mortality
(6.3/1,000)
 50th in life-expectancy (78-years)
27

28. Who is Insured?
Most people are insured through an employersponsored plan (177 million Americans, 62% of
people are under age 65)

99% of employers with 200 or more employees
offer health insurance

78% - 10 to 24 employees

49% - 3 to 9 employees
28

29. Employer-Plan Crisis
 Premiums have grown 4-times faster than
wages since 1999.
 Average employee contribution has gone up
200% since 2000.
 Out-of-pocket and co-payments have gone
up 115% since 2000.
29

30. Who is Insured
(continued)
About 70 million Americans are insured
under a “public plan”
 Medicare
 Medicaid
Government spends about 42% of every
dollar spent on health care
30

31. Average Health Care Spending
by Age (2006)
under 5
$1,508
5 - 17
$1,267
18 - 24
$1,441
25 - 44
$2,305
45 - 64
$4,863
65 an older
$0
$8,776
$2,000
$4,000
$6,000
$8,000
$10,000
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32. Spending during the last year of life
accounts for 27.4% of total Medicare
spending.
32

33. Race and Medical Care (U.S.)
 Life expectancy for blacks is six years shorter than whites
 Black babies are almost three times as likely as white babies
to die before first birthday
 Blacks get bypass operations at a rate of one-quarter that of
whites
 Blacks get angioplasties at one third the rate of whites
 Blacks wait longer for kidney transplants
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34. The Uninsured
 Estimated 46 million Americans lack health
care insurance (15% of U.S. population)
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35. Who Are The Uninsured?
 27 million have personal income over $50,000
 66% of uninsured have family incomes of $45 - $85,000
 14 million are eligible for Medicaid on the Children‟s
Health Insurance Program
 10 million „illegal‟ aliens
 1/3 are between 18 to 29 years of age
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36. 36

37. Commerce Clause
“The Congress shall have power to regulate
commerce with foreign nations and among the
several states, and with the Indian tribes.”
Article I, Section 8
37

38. Congressional Authority to
Regulate Commerce
Sherman Antitrust Act (1890)
Federal Meat Inspection Act (1906)
Pure Food and Drug Act (1906)
Food and Drug Act (1906)
Federal Trade Commission Act (1914)
Pure Milk Act (1923)
Import Milk Act (1927)
38

39. United States v. Darby
U.S. Supreme Court (1941)
Fair Labor Standards Act upheld
Minimum wage
Overtime pay
Child labor restrictions
Court defers to Congress in determining
what constitutes interstate commerce.
39

40. Wickard v. Filburn
U.S. Supreme Court (1942)
Federal law regulates wheat production. Filburn, a
small farmer, produces wheat over his designated
allotment. The surplus was used for feeding his poultry
and livestock, and was not sold in the marketplace.
Holding: Congress has the authority to regulate any
article or product that could be sold in interstate
commerce.
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41. Can Congress require Americans to engage in
commerce, i.e.: purchase healthcare insurance?
NO
41

42. Congress can regulate commerce but
can not be able to require someone to
engage in commerce.
42

43. The Power to Tax and Spend
Congress has authority “to pay the debts and
provide for the common defense and general
welfare of the United States” and “to lay and
collect Taxes, Duties, Imports and Excises”.
43

44. Can Congress tax (penalize) a decision not to
purchase health care insurance?
YES
44

45.  About 500,000 New Jerseyans are eligible to
purchase a healthcare plan on the Health
Insurance Marketplace
 Most work full-or part-time for a small employer
 About 80% will be eligible for a subsidy
 525,000 undocumented workers in N.J. not eligible
45

46. Eligibility for Premium Subsidy
Individuals with incomes up to 400 FPL.
$46,000 / year (2013)
$94,200 / year (family of 4)
Expected amount of subsidize for N.J. - $700
million
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47. Notice to Employees – October 1, 2013
(thereafter at the time of hire)
Part A: General information about Health Insurance
Marketplace, coverage standards and help paying
premiums.
Part B: General information about coverage offered by
employer (if any)
Detailed information about plan is optional.
47

48. Employer Healthcare Plans
 Essential Benefits
 Consumer Protections
 Minimum Value
 Affordable
Employee will not get subsidy if employer offers
coverage that meets standards.
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49. Health Insurance Marketplace
A one-stop web portal where individuals and small
businesses can shop for plans, compare prices, and
receive other information.
Plans must 1) offer essential benefits, 2) have
consumer protection standards, 3) have a minimum
value, and 4) be affordable.
States define “small business.” Cannot exceed 50
employees.
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50. “Average” Employer Plan
“Essential Health Benefits” requires minimum set of
benefits, with no lifetime of annual coverage limits
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50
Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance abuse coverage
Prescription drugs
Rehab services and medical devices
Preventative and wellness/chronic disease management

51. Consumer Protections
All Plans
No lifetime maximums of essential benefits
 No annual maximums on essential benefits, except as
allowed by the secretary of HHS
 Provide coverage for children up to age 26
 No pre-existing condition exclusion on children under
age 19
 No rescissions of coverage

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52. Consumer Protections
(continued)
 Cover preventive services at 100%

Includes immunizations, child preventive care and women‟s
health screenings
 Insured health plans must comply with
nondiscrimination requirements

Generally prohibits discrimination in favor of highly
compensated individuals as to eligibility and benefits under
the plan
 New Appeals process for insurers
 Waiting periods cannot exceed 90-days for
employee or dependent otherwise eligible to enroll
52

53. Minimum Value
Platinum (pays 90 percent of the value of benefits)
Gold (80%)
Silver (70%)
Bronze (60%)
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54. Exchange Enrollment
October – December, 2013
7% - Platinum
13% - Gold
60% - Silver
20% - Bronze
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55. Affordability
Full-time employee cannot pay more than 9.5% of
household income for his/her share of premium for single
coverage. Lowest cost plan.
Safeharbor: Employer may use W-2 income for employee.
(Box 1)
Rate of Pay Safeharbor – Hourly rate multiplied by 130
hrs/month. Determine affordability using monthly premium
based on monthly wage. For salaried employee, monthly
wage can be used. Does not apply where wages were
reduced during the year.
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56. Maximum Out -of-Pocket Premium
Payments
400% of poverty level
Single - $4,115
Single/Spouse - $5,537
Family 3 - $6,958
Family 4 - $8,379
Source HHS (2009)
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57. The Marketplace, Prices and
Subsidies- N.J.
29 plans within 4 categories
Platinum
Gold
Silver – benchmark plan (70% of healthcare costs)
Bronze
October – December, 2013
4 of 5 enrollments eligible for subsidy
54% - women
46% - men
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58. Family Income and Gender
Women contribute 42.29% of family income
(2009)
5% (1970)
58

59. Wages
About half of all jobs in U.S. pay $20/hr or less.
Women earn about 80 cents of every dollar a
man earns.
Women managers make 73 cents
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60. Percentage of the unionized workforce
has decreased every year since its peak
in 1955 (35%)
7.4% in 2006
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61. 61

62. Reasons for Decline
 Technological advancements
 Outsourcing
 Worker mobility and immigration
 Organizational changes (teamwork, checks
and balances)
 Social legislation (wage and hour, OSHA,
FMLA, etc.)
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63. Unemployment and Gender
Since 2000, manufacturing has lost six million jobs
Men represented 80% of job losses during 2007-09
recession
1 in 5 working-age men are unemployed (2012)
In 2012, N.J. had 3.9 million jobs, down from 4.13 million
in 2008
Men and women competing for retail and service jobs.
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64. More Women in the Workplace
Half of the work force are women; 2/3
are of child-bearing age
Women comprise the majority of
professional, technical, administrative
support workers
Women comprise the majority of sales
and service workers
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65. Immigration and Age
Average age of Hispanics in U.S. is 27.
Non-Hispanic whites - 42
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66. The Workforce is Getting Older
 In 1970, the median age of workers was 28
 In 2002, the median age was 35
 By 2030, the median age will be over 40
Reality Check: Every 7.5 seconds someone
in America turns 50 years of age
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67. Workforce Education Level
52% of U.S. population ages 16 – 65
cannot pass the GED test
ETS Report (2003)
Functional Illiteracy:
12% White
25% Asian
33% African-Americans
49% Hispanic
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68.  27-year old earning $25,000/year
Silver plan - $260/month
with subsidy - $145/month
 Family of 4 earning $50,000
Silver Plan - $943/month
with subsidy - $282/month
Bronze Plan with subsidy - $131/month
68

69. Employee Protections
Employer can not interfere or discriminate against
an employee for seeking or receiving subsidy.
Does failure to provide notice constitute
“interference?”
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70. Delayed until January 1, 2015
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71. “Large” Employer Penalty
Employers with 50 or more “full-time” employees will be penalized for not
offering coverage or coverage that does not meet standards.
All employees counted in a calendar month (part-time, temporary, seasonal).
“Full-time” employee is someone who is employed to perform services on
average of 30-hrs per week or 120 hrs/month.
Part-time employees are grouped together to create “full-time” equivalents.
Aggregate number of hours worked by part-time workers in any month and
divide by 120 to determine number of full-time equivalents.
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72. Penalty for not offering insurance or to less than 95%
of full-time employees and at least one FTE receives a
subsidy to pay for insurance on the Exchange

$2,000 per full-time employee after first 30 employees
Penalty for offering unaffordable or less than minimum
value when employer offers to at least 95% of FTE
and at least one FTE receives subsidy

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$3,000 for each full-time employee receiving a subsidy or $2,000 per full-time
employee after first 30

73. Auditing and Enforcement
 U.S. Department of Treasury (IRS)
 U.S. Department of HHS
 U.S. Department of Labor
Combined databases – Form W-2, Form 5500,
Social Security Administration database.
73

74. W-2 Reporting
 Employers are required to disclose the value of health
coverage provided to an employee on a W-2
 This value includes medical coverage, HRA
contributions, and possibly EAPS and wellness
programs
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

Contributions to HSAs, Archer MSAs, and health FSAs are
not included
Need additional guidance
Does not include Dental or Vision care
 Effective for taxable years beginning January 1, 2011
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75. Coordinated Care
Creates incentives for “Accountable Care
Organizations”.
Team of healthcare providers are paid
incentives to lower costs and keep patients out
of expensive emergency room visits.
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76. Medical Care Shortages
Scholarships and loans for primary care
physicians, nurses and physician assistants.
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77. Expansion of Medicaid
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78. Medicaid Eligibility
Up to 133% of poverty level
Family of 4-$31,325 / year
October – December, 2013
71,000 enrolled (NJ)
300,000 eligible
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79. Industries with Most Minimum
Wage Workers
Leisure and Hospitality (includes restaurants and
food service)
Retail
Other Services
Fast – Food Industry
Median hours/week - 30
Median wage/hr $8.69
52% of families of front-line, fast-food
workers rely on public assistance - $7
billion/year
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80. Minimum Wage and Public
Assistance
Supplemental Nutrition Assistance – eligibility at 30/
hrs/week at minimum wage (A parent with 2 children
making minimum wage receives $276/month)
NJ FamilyCare – Parents with incomes up to $31,322 for
family of four; Adults without children $15,282
Housing Assistance – Low-income individuals whose
housing costs exceed 30% of household income
Collectively worth $18.62/hr if eligible for all maximum
assistance – Cato Institute
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81. Hospital Readmissions
Reduction
Reduces payments to hospitals for excess
readmissions
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82. Contraception Coverage
Mandate (No-Cost Coverage)
Hobby Lobby v. Sebelius (10th Cir)
Conestoga Wood Specialties v. Sebelius (3rd Cir)
Does a profit-making, secular employer have a
right to exercise religion?
82

83. Citizens United v. Federal Election Comm.
U.S. Supreme Court (2010)
Corporations have First Amendment right to
political speech. Congress cannot regulate
campaign contributions made by Political
Action Committees.
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84. Government as a “Stakeholder”
53% of CEOs say government and regulators will
be among the stakeholders with the biggest
economic impact on their companies over the
next 3-5 years.
McKinsey Global Study
2011
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86. 86

87. Questions?
Thank You
87