Obamacare (ACA) Ruled Unconstitutional in Texas, but This Fight is Far from Over

Uncharacteristically late on Friday evening December the 16th, a Texas U.S. District Court Judge (Reed O’Connor) held that the Affordable Care Act was unconstitutional and should be entirely struck down. The basis of this argument is that the recent decision by Republican Congress to remove the tax penalty for people who do not have health insurance, now places the law in opposition to the constitution.

The decision is certain to be appealed. In fact, house leader Nancy Pelosi almost instantly challenged the decision and said that when Democrats take the house in January, they will certainly appeal. This is widely anticipated to lead to a very long legal battle between Democrats and Republicans.

In the meantime, the current ACA law stands. The white house released a formal statement reiterating just that. White house press secretary Sarah Sanders stated that, “Obamacare will remain in effect while the case is appealed”.

Most legal scholars believe that this case will ultimately be heard by the supreme court. Until then nothing will change with how our current healthcare system operates.

This means that Employers must still comply with the Employer Mandate. ACA Reporting is still required by law and employees must receive their forms 1095C no later than the extended deadline of March 4th 2019, for the 2018 reporting year.

IRS Deadline Extended 2019: Employers get extra time to distribute form 1095-C

The IRS has yet again extended the annual deadline for distributing form 1095-C for the 2018 tax year. The new deadline for form distribution to full time employees (required under the Affordable Care Act ACA) is March 4, 2019. This deadline was extended from the original due date of Jan 31, 2019 effectively giving large employers 32 additional days to comply.

On November 29th the IRS released notice 2018-94, which serves to extend the due date for certain 2018 information-reporting requirements for insurers, self-insuring employers, and certain other providers of minimum essential coverage under section 6055 of the Internal Revenue Code (Code) and for applicable large employers under section 6056 of the Code.

The notice specifically mentions that failure to comply with new due dates will result in penalties for Applicable Large Employers (ALEs). The notice states “Employers or other coverage providers that do not comply with the due dates for furnishing Forms 1095-B and 1095-C (as extended under the rules described above) or for filing Forms 1094-B, 1095-B, 1094-C, or 1095-C are subject to penalties under sections 6722 or 6721 for failure to timely furnish and file, respectively. However, employers and other coverage providers that do not meet the relevant due dates should still furnish and file.”

ACA Reporting Service is a leading full service vendor for ACA reporting since the inception of the law in 2014. We work directly with employers as well as partnering with HR firms, Staffing companies and many others needing an expert partner for backend fulfillment for their clientele. Reach out to our customer service team for more details at 888-978-8310 or email us: support@acareportingservice.com.

New Partnerships: SelfInsuredReporting.com

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• How is our plan performing versus our budget for the year? How about our stop loss contract?
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• How are the medical and pharmacy claims trending for each plan? What about network performance?
• How are claims trending for conditions such as cancer or diabetes?
• Which providers are the most expensive in an area?
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Individual Health Insurance Mandates Being Signed into Law at the State Level

On Wednesday June 27^th the New Jersey Health Insurance Market Preservation Act was signed into law. This was just the latest development in an effort for several states who are attempting to enact Mandated health insurance at the State level.

The New Jersey law in effect enforces residents, by way of penalty, to enroll in qualified health insurance. This law will be enacted on October 1, 2018 and will apply to taxable years beginning Jan 1, 2019.

It is being said that in many ways this Mandate was designed to mirror the Mandates brought forth by the Affordable Care Act (ACA). Here are a few of the similarities:

• • Annual penalty of 2.5 percent of a household’s income or a per-person charge
  • Maximum penalty based on household income will be the average yearly premium of a bronze plan in the state (rather than nation like the federal law)
  • maximum penalty based on per-person charge will be a maximum household penalty of $2,085

Reporting guidelines

Along with this come reporting requirements. Employers will have to report qualified offers of coverage to individuals to track subsidy eligibility. The bill states that “In summary, any reporting that was acceptable under the ACA’s federal guidelines will be accepted under the New Jersey’s state reporting guidelines”.

Other States to Potentially Enact Health Insurance Mandates

Massachusetts was the first state to enact a health insurance mandate (took effect in 2006 and was a model for the health insurance mandate in the ACA).  It is still implementing this mandate.

Vermont governor, Phil Scott, signed a bill on May 28 that would establish an individual mandate. The details for the bill such as financial penalties and enforcement mechanisms will not be determined until the 2019 legislative session, which means the mandate won’t go into effect until January 1, 2020.

Maryland Democrats running for Governor have all agreed to a health insurance program that has many ACA related items. The insurance program will create a state individual mandate where the penalties imposed on individuals for not obtaining health coverage would be used as a “down payment” to obtain health insurance policies.

Other states that have discussed the possibility of a state individual mandate are; California, Connecticut, Hawaii, Minnesota, Rhode Island, Washington, and District of Columbia. Many of these states’ ability to implement an individual mandate will hinge on the results of the midterm elections this November and how many Democrats are voted into office.

It has been rumored that if these states are able to enact Healthcare Mandates they will do so with the intention of having their state laws closely mirror the infrastructure of the Affordable Care Act. Several of the states are attempting to use re-insurance coverage to take care of the expense associated with higher risk individuals. It has been reported that penalties associated with the Mandates and subsequent reporting will be used to fund these re-insurance premiums.

Overall Outlook

A few weeks ago, we published an article outlining the potential impact of the upcoming Mid-Terms as it pertains to Health Care reporting. That Article can be found here.

It seems that the Mid-Terms will take a determining role in how this all plays out. However, these laws being taken to the State level are a sign that no matter the outcome on the Federal level, there are many states who are ready to enact “ACA like” laws of their own.

The IRS is currently enforcing the Individual Mandate at the Federal level for 2018. Additionally, enforcement of the Employer Mandate continues to occur. Letter 226J is being sent out for the tax year 2015, and our sources are saying that 226J letters for 2016 are soon to follow.

Right now, may be a very good time to retroactively review your previous years filings.

How will the upcoming mid-terms affect the need for Employer based healthcare reporting?

A LITTLE BIT OF CONTEXT

Here we are, 2018 and staring down the barrel of another upcoming election. This time will it be the Democrats who takeover control of congress? Will the Republicans maintain their stronghold and gain seats? How will the outcome of this election shape the landscape for ACA reporting going forward? The answer might not be what you think.

We’ve watched for years now as Republicans have fought to fulfill their promise of dismantling the Affordable Care act and along with it, the unpopular Employer Mandate. This mandate has required employers with 50 or more full time employees to offer certain healthcare coverage then report their offers of coverage via informational returns (1094/1095Cs) that are then supplied to employees. These reports are ultimately filed with the IRS. Failure to comply with this law can result in millions of dollars’ worth of penalties for the employer. So how can the 2018 midterm affect this?

The broad consensus that we are hearing at Sky Insurance Tech is that if Republicans gain seats and Democrats lose seats, the Employer Mandate will go away and so will the need to report coverage.

To that notion we say, “HOLD YOUR HORSES”.

This common misconception comes from the assumption that ACA Reporting is tied directly to the Employer Mandate. If the Employer Mandate goes away, so does the need to report. That would be a risky assumption. So, I will do my best to explain in the paragraphs that follow, why that thought process is totally incorrect.

THE REPORTING IS ALL ABOUT THE SUBSIDY ELIGIBILITY

First things first, what are we talking about with ACA Reporting? Why do employers have to report their offers of coverage? To be compliant with the ACA laws of course! Right, however lets really think about why this is part of the law. This is part of the law because of Subsidized health coverage.

That’s right, the reason reporting exists is because healthcare subsidies exist, and we must determine who is eligible for a subsidy and who is not. An Employers offer of affordable coverage greatly affects an individual’s subsidy eligibility. Universally granting subsidies would be catastrophic for the US budget, so we must determine who needs this assistance.

So, there’s your short answer. No matter what happens to the ACA law, if there are subsidies there will be reporting.

Here is where the rebuttal comes in, “well what if we get rid of the subsidies altogether”? Really? Do you think that is a possibility at this point? I think now is a good time to take a closer look at the numbers, then we can formulate a more educated opinion.

ALL ABOUT THE SUBSIDIES

Based on a recent report released by the Congressional Budget Office (CBO), in an average month in 2018, about 244 million people under the age of 65 will have health insurance, and around 29 million people will not. By the year 2028 it is projected that the 29 million number will grow to around 35 million. Currently net federal subsidies for “Insured” people in 2018 total around $685 Billion. These subsidies are expected to grow to 1.2 Trillion in the year 2028. These subsidies are being used to help pay for: Medicaid, The Children’s Health Insurance Program, Medicare, and coverage obtained through the ACA Marketplace. So, at this point we must ask these questions: Can we really get rid of these subsidies? If we attempt such a thing what would be the outcome? How would this affect the American people?

WHAT DO SUBSIDIES LOOK LIKE GOING FORWARD?

According to the CBO, an average month in the year 2018 will look about like this.

• 158 million people will be enrolled in Employment based coverage.
• 12 million people will be eligible for Medicaid due to the expansion brought about by the ACA.
• 49 million will be eligible for Medicaid.
• 6 Million people in the Children’s Health Insurance Program.
• 8 million people on subsidized healthcare coverage from the ACA marketplace.
• 2 million people on unsubsidized coverage from the marketplace.
• 8 million on Medicare.
• 10 million on other coverage.
• 29 million uninsured.

Additionally, health insurance premiums are expected to increase by about 15 percent on average between 2018 and 2019. Then they are expected to increase at a rate of around 7 percent a year between 2019 and 2028.

So where will the money come from to cover all this healthcare? Subsidies of course! I think now is a good time to mention something else. Even If the law changes, and we replace the word “subsidy” for let’s say……. the word “tax credit”, we will still be in the exact same situation.

We will have a growing demand for healthcare coverage, and a growing number of people of who cannot afford it. The strain on the US budget is enormous and growing and we must consistently track subsidy eligibly or else risk massive overspending.

There is simply no way to keep up with subsidy eligibility outside of Employer Based Reporting.

HOW DO WE MITIGATE THE COST OF SUBSIDIZED HEALTHCARE?

There is a short answer to this question as well, taxes and penalties.

These taxes and penalties are expected to reduce the total amount of federal subsidies for coverage by about $21 billion in 2018. Most of these will come from penalties associated with the employer mandate. The IRS is currently enacting those penalties and notifying employers through the issuance of letter 226-J.

HOW WOULD REPORTING BE ENFORCED?

In this article we’ve been talking about a scenario in which the Employer Mandate goes away. (A broad assumption that assumes a Republican Majority and the ability to garner the needed votes). So, in this scenario how would any of the reporting be enforced.

The reporting itself has been and will continue to be enforced by the US Code § 6721 and § 6722. Those are as follows:

26 U.S. Code § 6721 – Failure to file correct information returns

26 U.S. Code § 6722 – Failure to furnish correct payee statements

What these laws state, is that there are penalties associated with not filing correct and timely informational returns to the IRS. Additionally, there are further penalties associated with not furnishing those same returns to employees on time.

The existence of these laws does not hinge on the Employer Mandate remaining the law of the land. However, they will exist if subsidies and/or tax credits exist. These will remain enforceable as long as subsidy eligibility is something that needs to be tracked, and due to costs, they must be tracked.

IN CONCLUSION

At this point hopefully, you now understand why it would be incredibly difficult to remove the need for Large Employers to report their offers of health coverage. Additionally, I hope I’ve done a decent job of explaining the struggle surrounding the notion of removing billions of dollars of healthcare coverage for millions of Americans.

Can we totally remove healthcare subsidies? I don’t think we can, but you are free to decide.

Can the US afford to not regulate subsidy eligibility? I don’t think we can do this either.

Would we need to know details of the offers of coverage from employers for Subsidy eligibility? Yes.

Would that require a form of Employer Reporting similar to what we have now? Absolutely

Unfortunately, there is no crystal ball telling us about the future. Only time will tell us the outcome for certain. Based on the evidence thus far I revisit the question. How will the upcoming mid-terms affect the need for Employer based healthcare reporting? My answer, it won’t.

How Obamacare Repeal Failed, Then Failed Again

In the Beginning….

Last November the world watched as Republicans won the white house along with majority control of Congress. With the notion of “repeal and replace” being at the forefront of almost every Republican campaign, it seemed as if quick action toward that end was inevitable. House Speaker Paul Ryan along with Senate Majority leader Mitch McConnell (R-Ky) almost immediately began moving forward with what they were calling a “Straight Obamacare Repeal Bill”.

The aim of the bill would be simple. Repeal the Affordable Care Act (Obamacare) now, then allow for a two-year transitional period to craft a replacement. The plan seemed to be gaining momentum until Trump did an interview with CBS’s “60 Minutes”. In that interview, Trump notoriously stated that he planned on repealing and replacing the healthcare law simultaneously.
Shortly after, Paul Ryan began working with Trump to help craft a bill that would simultaneously repeal Obamacare and then provide a replacement program. What ensued were nine months of uncertainty, several failed votes and ultimately the death of Obamacare repeal attempts.

What Came Next Was Time Consuming

To avoid a Senate filibuster which would require 60 Senate votes to overcome, congress elected to use what is known as “Budget Reconciliation” in their attempts to dismantle the healthcare law. This procedure only requires a simple 51 vote majority and cannot be filibustered. Since Senate republicans held 52 seats, they could afford to lose up to two member votes on any proposed bill and still have it pass with vice president Pence available to break a tie. It all seemed inevitable given the majority numbers.

However, disagreements began to arise in Congress with regard to the repeal efforts very shortly after Trumps inauguration. House moderates debated many aspects of repeal with house conservatives and vice versa. What ensued were delays, then even more delays.

Republican momentum began to fade as February came and went. It became evident that Republicans did not have a repeal bill crafted prior to the election. It was March before a bill was finally marked up by the Committee on Ways and Means.

A House vote was scheduled for March 24th. Trump told Republican law makers “it was now or never”. On the day of the scheduled vote it became evident that Ryan did not have the votes. Ryan drove to the white house to personally inform Donald Trump that they had failed. Afterwards Ryan stated that Obamacare would be the law of the land for the foreseeable future. Trump was furious in defeat and congress left for a two-week Easter break.

The First Resurrection

Just weeks after the failed House attempt, the chairman of the conservative House Freedom Caucus declared that he was working with the moderate Tuesday Group to work out a deal.

In late April House Republicans seemed to agree on changes to the proposed bill and planned a vote for May 4th. The house passed their version of the Obamacare Repeal and Replace bill on May 4th. What ensued was a victory celebration for Trump and fellow Republicans in the White House Rose Garden. Nonetheless, the bill had only just passed the first chamber of Congress and still had some ways to go.

The Fight in the Senate

The victory in the House was followed by some bad news shortly thereafter. It seemed that many of the changes that helped win over House Conservatives, really didn’t sit well with Senate Moderates.
The first to speak up was Senator Susan Collins (R-Maine) who declared that the Senate would be “starting from scratch”. This meant they were practically throwing out the House version of the bill, and whatever the Senate would draft would then need to be reconciled again with the House. A tall order indeed.

McConnell decided to set up a working group to have hearings and conduct an open process for the American people. Notably, not a single female was assigned to the working group. This oversight became important because proposals to defund Planned Parenthood and allow states to obtain waivers with regard to maternity care, proved to be very unpopular with women. This resulted in controversy and delay.

A Senate Bill Emerges

The Senates legislation titled “the Better Care Reconciliation Act” was released on June 22nd. Many of the bills details had been kept secret and several Senators felt “out of the loop”. Days before the release of the bill, many members of Congress were still clueless as to what the bill contained.

A vote on the bill was postponed after four Senate conservatives – Sen Ted Cruz (R-Texas), Sen Rand Paul (R-Ky), Sen Mike Lee (R-Utah), and Sen Ron Johnson (R-Wis) – all criticized the bill for not dismantling the ACA enough. What followed was a mad dash by Mitch McConnell to win over skeptical conservative and moderates alike. Several amendments were made and finally the bill seemed to be at a place in which it was ready for a vote.

Can’t do it Without McCain

In July Sen John McCain (R-AZ) underwent emergency surgery to treat a brain tumor. His absence took away a key Republican senate vote. The Senate would need to wait on him to recover and return to Capitol Hill before moving forward.

In waiting for McCain’s return, Republican Senators Collins (R-Maine) and Murkowski (R-Alaska) had already publicized their opposition to the Senate bill. This left the Republicans with zero margin for error. At this point they could not afford one more Republican defection if they planned on passing a bill under reconciliation. The defections of Collins and Murkowski angered President Trump who lashed out against them over social media. In hindsight, many would say this move backfired as it only angered Murkowski giving her fuel to remain an opponent of the bill.

The proposed Better Care Reconciliation Act lost traction and it was clear that the Senate did not have the votes it needed to pass the Repeal and Replace bill. Insert plan B, make a push to vote on what was deemed the “Skinny Bill”.

The Skinny Bill was nothing more than an attempt the repeal the mandates and defund Planned Parenthood. Many in the Senate did not like the idea, but McConnell thought it was a good way to start negotiations with the House. Concerns mounted as many worried the House would just simply pass the bill “as is” to show they “accomplished” something with regard to repeal.

After days of debate, McConnell surmised he had the Senate votes and brought the bill to the floor. It was well after Mid-Night on July 27th when the voting took place. Everything seemed to be going well for the Republicans until Senator John McCain notoriously gave a thumb down to the bill on the Senate floor, thus destroying the last attempt at repeal. Shortly after, McConnell conceded defeat on the Senate floor.
It seemed as if Republicans were finally coming to terms with defeat and were ready to give up on their Repeal efforts, or so we thought.

Another Resurrection?

In September Sen Lindsey Graham (R-SC) and Sen Bill Cassidy (R-La) began gathering support for their version of a repeal bill aimed at dismantling Obamacare’s subsidy programs and Medicaid expansion.
The idea was to simply provide block grants to the states, repeal the mandates, get rid of the exchange, stop Medicaid Expansion and then let the states decide what to do.

Republicans were looking at a firm Sept 30th deadline to do all of this, as this would be the end point for their Budget Reconciliation. Week after week the bill seemed to gain steam as more and more supporters gathered around the effort.

Senator Rand Paul was among the first to come out against the bill stating that it did not do enough to repeal the ACA. Shortly after, McCain and Collins both publicly announced their opposition to the bill. On Tuesday September 26th Graham and Cassidy admitted defeat as yet another attempt at repeal fell into failure.

Moving Forward

On Friday Sep 29th, a draft of the Congress budget resolution was released. This draft did not include any specific instructions with regard to health care reform. It can be assumed this means that efforts to repeal the Affordable Care Act must now wait until 2019. However, that supposes that Congress maintains GOP majority through the 2018 mid-term elections. The Senate may be ok, but the house may be at risk.
Currently Democrats are leveraging the Obamacare repeal failures against the Republicans building up to the 2018 mid-terms. It is widely thought that future attempts to repeal the law will be wildly unpopular and difficult for the Republicans in Congress.

What this means is that The Affordable Care Act (Obamacare) remains the law of the land. It means that the Employer Mandate is staying in place, and it also means that we should expect the IRS to implement any and all penalties that pertain to ACA compliance and Reporting. For the foreseeable future, none of that is going to change.