Friday, November 14, 2014

The Remedy to the State Exchange Subsidy Cases

Sometimes lawyers forget things.  Big things.  Like what should a court do when it decides who wins and who loses?  We think we have a solution to the cases arguing that the Obamacare premium subsidies are invalid in most states.

It all comes down to the remedy.

We've been tracking the various challenges to Obamacare's subsidy scheme for some time.  In fact, we're glad we included a small section in The Small Business Guide to Obamacare covering the issue.  Whether you call it Obamacare, PPACA or the Affordable Care Act, the subsidies are a critical component to fulfilling the dream of universal health insurance coverage.

The Supreme Court's decision to hear King v Burwell jeopardizes not only the subsidies, but the enforceability of the employer and individual mandates.  Most of the commentators out there see this as a black and white issue--either the subsidies survive or they don't.  And if they don't, millions will have to pay more for their health insurance.  If they do, shame on those evil Republicans for even trying to take away the subsidies.

But if we know anything about this Supreme Court, especially Chief Justice Roberts, they like to intervene only when necessary and even then as little as possible.  Knowing that makes me believe neither side will land a knockout blow.  Here's how to get to a sweeping, legally sound, but more limited ruling.

First, understand the basic argument of the businesses interests involved, the plaintiffs with the strongest cases.  The employer mandate requires every employer with 50 or more employees to offer affordable insurance to all of their full-time employees.  However, the penalties for failing to make an affordable offer do not kick in until an employee does not get the required offer AND then obtains insurance on an exchange AND gets a subsidy.  No subsidy means no penalty for violating the employer mandate.

Here's the problem.  As written, Obamacare provides subsidies only to people who live in states that have their own exchanges.  The IRS decided to go ahead and offer subsidies to everyone anyway.  If your state relies on the federal exchange, the statute says you don't get the subsidies.  If that interpretation is right, it means the employer mandate is unenforceable in those states because no employee can get a subsidy that causes their employer to be subject to the penalty.

The individual plaintiffs make a somewhat different argument.  They say that they make so little income they fall below the amount for people who have to pay the individual mandate penalties.  The subsidies, however, make the insurance cheap enough so that they are now subject to the penalty for failing to buy insurance.  It's a bit squirrelly, but basically the argument is "your invalid subsidies make my insurance unfairly affordable."

The government argues that the distinction between the state and federal exchanges is merely a typo, which the IRS has the authority to fix by executive action.  Obamacare architect Prof. Jonathan Gruber, is now infamous for calling the American people "stupid" and boldly stating exactly the opposite, that the distinction was there to force states to build exchanges on penalty of losing subsidies.  Remember the good old days when MIT economists only got their names in the paper for winning Nobel Prizes?

Anyhow, there's a good chance the government is going to lose that argument.

Suppose the Supreme Court says the statute says what it says and therefore the IRS tax collectors cannot just usurp the spending power to fix the problem.  Is that the end of all of Obamacare?  No subsidies, no employer mandate, no individual mandate?

I think there's a solution that the Chief Justice might like.  It goes back to the basics.  If the court finds a legal violation, it always needs to decide what to do about it.  That's the remedy.

Courts like to fix problems with money.  Ordering the wrongdoer to pay the victim is clean and easy.  Judgment for the plaintiff, defendant is ordered to pay damages, end of case.

Courts don't like to order people around, especially if it will require further monitoring.  It's a hassle to say "judgment for the plaintiff, defendant must do the following acts."  Why?  Because what if the defendant does a bad job?  Or does not comply at all?  Court orders, which we call injunctions, are a hassle to enforce.  The rules for issuing injunctions generally say that the court should order the least burdensome and intrusive remedy to fix the problem.

How can a court fix the King v Burwell problem?  Focus on the plaintiffs.  The plaintiffs only have a case because the invalid subsidies harm them.  Can we prevent that harm while still having the subsidies in the federal exchange states?

Yes.  The Court could issue an order saying that the employer and individual mandates are invalid in the federal exchange states.  That directly addresses the complaints of the plaintiffs.  But the court could then refuse to order the federal government to stop paying out the subsidies.  You can have your subsidies, IRS, but you can't collect the penalties on individuals and employers.

That solution avoids the sweeping damage to millions of people that aren't even parties to the litigation.  It avoids the institutional confrontation between the executive and judicial branches.  It makes the court appear to be saving as much of this screwed up statute as possible.  It also sends the message to the President that we have a government of divided powers and the executive cannot just do whatever he feels like.  Wiping out the unpopular employer and individual mandates in 30+ states would be a big deal, but not so big as wiping out the subsidies in those states.

And as a happy bonus, it upholds the law as Congress wrote it.  It upholds the constitutional principle that the spending power resides with Congress, not the IRS.

I'm hoping someone, somewhere, will pick up on this argument and that it will find its way into the public discourse and maybe even into the briefs.  Please throw me a bone with a citation if you're the kind of person in a position to make that happen!

Is this a winner?  Please leave your comments!  Thanks for reading.

Monday, August 11, 2014

Obamacare's Impact on Adjunct Professors

About 70% of all faculty at colleges in America are not tenured or even on a tenure track.  Even at 4 year colleges, about 64% of the faculty is not on the tenure track.  What that means is that a huge proportion of classes are taught by part-time adjunct professors.  They generally get low pay and no benefits.

The Affordable Care Act, better known as Obamacare, tries to "help" adjunct faculty by requiring large employers to offer insurance to all full-time employees.  Most university's would meet the 50 employee limit and be considered large.  But it's unlikely they'll offer insurance to adjuncts, what they will do is make sure none of their adjuncts can claim full-time status.  And even though full enforcement of the employer mandate has been delayed, ACA's "look back" rules require employers to take action now to determine their employees' status in future years.

If an employee averages more than 30 hours per week, that employee is considered full-time.  For hourly workers, that's easy to track but for salaried workers, the IRS has provided a hodgepodge of methods for employers to keep part-time workers part-time.  The IRS recently posted guidance directly addressing the question of part-time, adjunct faculty.

So how does this work?  I have extensive experience teaching as an adjunct at several different colleges but the compensation methodology is pretty much the same.  Most colleges have a per credit hour rate that is adjusted depending on the experience and education level of the instructor.  For example, the rate might be $800 per credit hour.  For a three credit class, the professor would receive $2400.  The professor will have a contract setting forth expectations for teaching the class, when and how grades will be submitted, and any technical training the professor needs to complete to teach the class.  From there, the professor teaches the class, turns in the grades, and gets paid.  Some colleges pay as the class proceeds, others pay all at the end.

Of course, no one tracks the hours worked.  Classroom time is easy to track, but preparation and grading time are not.  Heck, I even spend some time interacting with students outside the classroom.  I think I'm like a lot of adjunct professors, I have little idea how many hours I spend on my classes.  And my employers know even less about what I'm doing.  Most adjuncts would probably get depressed knowing how much time and effort teaching a class takes, it's better to just do it for the love of teaching.

Universities have been scrambling around, looking for some kind of formula to determine how many hours their adjuncts can teach.  Can some assumption be made relative to the number of hours worked per credit hour?  What about comparing the credit hours taught relative to what full-time faculty teach?  Asking adjuncts to track hours is probably impossible, there's a good chance we'd all quit if given such an onerous administrative task.

None of these methods are universally workable, especially considering that semesters no longer have uniform lengths, full-time professors are not a good benchmark because they have research and administrative duties adjuncts typically don't, and different adjuncts commit different amounts of time to their classes.  This isn't even to mention the proliferation of online classes, where there is not even easily measurable classroom time.

So the IRS came up with this:

"Until further guidance is issued, employers of adjunct faculty (and of employees in other positions that raise analogous issues with respect to the crediting of hours of service) are required to use a reasonable method for crediting hours of service with respect to those employees that is consistent with section 4980H."

Somewhat more helpful is this one method that is approved, but IRS notes is not the only possible method:

Credit "an adjunct faculty member of an institution of higher education with
(a) 2 1/4 hours of service (representing a combination of teaching or classroom time and time performing related tasks such as class preparation and grading of examinations or papers) per week for each hour of teaching or classroom time (in other words, in addition to crediting an hour of service for each hour teaching in the classroom, this method would credit an additional 1 1/4 hours for activities such as class preparation and grading) and, separately,

(b) an hour of service per week for each additional hour outside of the classroom the faculty member spends performing duties he or she is required to perform (such as required office hours or required attendance at faculty meetings)."

Let's work an example.  Suppose the faculty member is teaching one 3 credit class with the standard 3 hours of class time per week.  The faculty member is also required to have 1 hour of office time.  So under Part (a), there would be 3 * 2.25 = 6.75.  We add the hour office time, giving us 7.75.  For this particular institution, it appears that teaching 3 sections would probably work (3 * 7.75 = 23.25, below 30).

The problem with this rule is that even slight variation in our assumptions could make it unreasonable.  What if the professor is teaching multiple sections of the same class?  We can then assume the prep time is probably lower than for someone who is teaching different classes.

Another weakness is it's not clear that even the IRS method of estimation would be binding on the employee.  IRS can determine that it will not seek to enforce the penalty if the method is followed, but could an employee track the actual hours worked and force the employer to offer insurance if the actual hours go over 30?  I suppose some judge will get to decide that some day if the employer mandate ever takes effect.

And what about all those online classes with no regular meeting times?  There are also mixed online and classroom sections.  There's no guidance from IRS on online teaching as far as I can tell.

If you're working with a university either in administration or as an adjunct, I'd like to hear what your institutions are doing.  Feel free to make a comment or send me an email.  Here are what my institutions have done:

Northwood University:  Adjuncts can only teach one class at a time.  It's my understanding this rule was enacted directly in response to ACA.  Northwood has a lot of different schedules, with traditional semesters as well as compact 6-8 week semesters. I have had classes on differing schedules overlap a couple weeks, but they allowed that.

Concordia University:  There's no formal rule as far as I can tell.  I have only taught one class at a time for them so far, I don't know if there's a formal prohibition going over that.

Saginaw Valley State University:  SVSU has a collective bargaining agreement limiting adjunct faculty.  If I remember correctly, the maximum was 14 credit hours per year.  I once taught 9 credit hours in one semester for them, but I suspect they would avoid doing that now.  Likewise, I once taught two 4 credit classes in the summer session, which meant I was in the classroom 16 hours per week.  Under the current guidance, they should avoid that kind of teaching load if they are not going to offer insurance (16 * 2.25 = 36).

Thanks for reading.  If you need more guidance on how ACA affects employers, check out The Small Business Guide to Obamacare.

Tuesday, July 22, 2014

DC Circuit Guts Obamacare in Halbig v. Burwell

Today, the D.C. Circuit ripped out the heart of the Affordable Care Act, better known as Obamacare.  In Halbig v. Burwell, the federal appellate court ruled that ACA does not authorize subsidy payments for health insurance purchased in states with a federal exchange.  In other words, if you live in a state using the federal exchange you have to pay the full price for your health insurance.  This is a big deal because 36 of the 50 states do not have their own exchange and therefore their citizens will not be eligible for help with their premium payments, assuming the ruling stands up on appeal.  It's a complex case and I'll break it down for you here.

The Result
Let's start with the result and then work backwards to how the court reached its conclusion.  Obamacare sets up a system of online exchanges where people can buy health insurance.  Depending on your income level, you can get a subsidy (government assistance) to help pay for your insurance.

The court found that ACA distinguishes between states that set up their own exchanges and those states that rely on the federal exchange.  So here's the impact of the ruling:

1) If you live in a state with its own exchange, in dark blue on this map from Freedom Works, the ruling has no impact.  Obamacare clearly allows subsidies for insurance in these states.

2) If you live in a red state, your state did not set up its own exchange and therefore you are not eligible for a subsidy.

3) If you live in a light blue state like Michigan, where I live, it's not clear what the impact is.  These hybrid exchanges are partnerships between the state and federal government.  They are not provided for in the statute, so it would seem the logic of the ruling would be that subsidies should not be allowed there either.  However, a court will have to sort this out, maybe even state by state.

I believe the Freedom Works map is up to date, but you should check your own state's health exchange website to be sure which kind of state you live in.

If you are receiving a subsidy for your health insurance and you live in an affected state, there's no need to panic yet.  The Obama administration has announced they will continue to pay the subsidies while the case proceeds:

“This ruling does not have any practical impact on their ability to continue to receive tax credits right now,” Press Secretary Josh Earnest said of people who could be affected by the ruling, calling it something that should only be of interest to “legal theorists.”

Of course, note the use of the phrase "right now."  And I guess everyone asked to pay back their subsidies, if the case stands up and the court orders repayment, will become a highly interested "legal theorist."

So how did we get here?

The Problem
The ACA says that subsidies are available through an "exchange established by the State."  The legal question is whether this language excludes subsidies to people who buy insurance through the federal exchange.

The IRS, to avoid the problem, decided to interpret the language so as to authorize payments to anyone who purchases health insurance on any kind of exchange anywhere.  Did IRS go too far?

The court accepted the argument that this language tied the subsidies to the state exchanges to create a carrot to reward states that set up their own exchanges and penalize those that don't.  The court also leaves open the possibility that Congress just assumed all the states would so love this new law that they would all go along without the widespread resistance that happened in reality.

Generally, courts defer to administrative agencies like the IRS when they make these kind of interpretations.  The principle goes back to a case called Chevron and is deeply imbedded in US law.  The basic idea is that for the modern administrative state to function, it should be given broad authority to do so without undue court interference.  Only if the court is stuck with a clear statute is it going to overrule a reasonable interpretation by the agency.  In this case, the court thought the statute too clear to give IRS so much power to rewrite the law.

Why it Matters
One of the problems in reining in administrative agencies is that there is usually no one who can sue.  The court limits who can sue under a doctrine called standing.  A lawless act is not enough, you need someone who can say that lawless act harms me directly and the court can and should do something to fix it.  So who did the "free money" hurt?

There were two kinds of plaintiffs in this case:

1) Individual mandate plaintiffs.  The obligation to purchase insurance under Obamacare disappears for people who make too little money.  However, by handing out the subsidies, the IRS makes people who would otherwise make too little to be penalized subject to the penalty.  The "free money" therefore harms some low income people who choose not to buy insurance by making them eligible for the subsidies but also subject to penalties.  It seems a bit backwards, but that is how the court found standing.

2) Employer mandate plaintiffs.  The other group of plaintiffs potentially impacts a lot more people.  Generally, Obamacare requires large employers to purchase government approved insurance for their full-time employees.  If an employee is entitled to an offer of insurance and does not get one, then the employer faces steep penalties if the employee (1) goes to an exchange AND (2) purchases a subsidized policy.  The employer mandate penalty only occurs if the employee gets a subsidy.

The employers are therefore saying, hey, your "free money" harms me because it means I get penalized.  So stop giving out unauthorized free money.

Most of the time, the government handing out unauthorized money would not harm anyone directly as required by the standing rules.  The government has a real problem here because the potentially improper subsidies harm real people.

Where to Go from Here
This case screams for an emergency appeal to the Supreme Court.  It affects millions of people in one of their most basic needs--access to the healthcare system.  If the case continues to plod along throughout the lower courts, it will not be clear whether millions of people must pay back billions of dollars.  States will not know the consequences of having an exchange or not.  And employers will not know whether the employer mandate applies to them.

Here are the options, as I see them today:

1) The government could continue to pay out subsidies and hope for the best.  I think this is most likely what they will do.  They will appeal to the Supreme Court as quickly as possible and try to get a favorable ruling.  Professor Tribe of Harvard Law School said he would not be the family farm on the government getting a favorable ruling, but I'm sure he'd agree that you shouldn't bet against it either.

2) Go to Congress and fix the problem.  Can't happen with the current composition of the House and Senate, especially in an election year.  So I wouldn't even bother if I were the government.

3) Comply with the court's order by cutting off subsidies in states relying on the federal exchange.  No one could predict the politics of this move and therefore the government will hesitate to do so.  Would people drop their coverage without the subsidies?  Would they blame the Democrats who wrote the law or the Republicans sympathetic to the lawsuit?  Would people see it as unfair that insurance rates vary so much depending on where people live?  If I were up for reelection this fall, this is a headache I'd rather avoid.

I can tell you one thing about option 3.  It would sure put some pressure on the states without exchanges to set up their own.  They would have to justify to their people why they have to pay more for their insurance and pay taxes for people in other states to have lower rates.

4) Moot the case.  A lawsuit can only go forward if there is something to fight about.  The government could make the case go away and still pay the subsidies if it decides not to enforce the employer and individual mandates in the states without their own exchanges.  The only reason anyone is suffering harm is because the subsidies trigger penalties that would not otherwise be triggered.

It's hard to imagine having the employer mandate disappear in 36 states, but the government has delayed and exempted so many companies that it's not clear the employer mandate will ever go into effect.  I believe it's not crazy to think the administration could decide to drop the employer mandate, which it doesn't wish to enforce anyway, and use the case as an excuse to blame Republicans.

There's one other problem with mooting the case this way.  Employers in states with exchanges would find themselves at a competitive disadvantage, facing a cost employers in other states would not have.  It's not unthinkable that businesses would lobby their state legislatures to get rid of their exchanges so that the mandate would not apply.

5) A grand bargain.  Perhaps the President could persuade Congress to fix the problem with the statute by trading something Republicans really want.  It would have to be something big--approval of the Keystone Pipeline, drilling in ANWAR, or elimination of the employer mandate in Obamacare.  I just don't see this President being able to pull off that kind of deal and it might be impossible in an election year anyway.

So there it is, the mess of the day.  If you got this far, thanks for reading.  As always, feel free to make a comment and I'll try to respond.

Monday, June 2, 2014

Three Lessons from My Obamacare Approved Surgery

I haven't posted anything recently, but I have a good excuse.  I had major surgery on January 2 and have been recovering since.  Also, I have had several opportunities for adjunct faculty work which has been consuming a good deal of my time.  We'll get to how Obamacare impacts adjunct instructors in a future post, but I have some pointers from my surgery and the financial process surrounding it first.

1. Game the System by Shopping for the Right Policy
In January 2014, the first Affordable Care Act exchange policies became effective.  Open enrollment ran through the spring making many choices of policy available.  Because insurers may no longer exclude pre-existing conditions, it pays to shop around if you need expensive healthcare.  "You've had a major back injury for 15 years and need $50,000 worth of surgery tomorrow?  Sure, we'll pay for that."  Why?  They have no choice.

I looked at two options.  My current, grandfathered high deductible plan and the possibility of moving to a Blue Cross Blue Shield Obamacare-approved policy.  Because I was going to need an expensive procedure, I looked at top of the line ACA policies.  A slightly higher premium is worth it when you're going to wipe out a low deductible and out of pocket maximum quickly.

Let's use $50,000 total cost as an estimate.  With my "substandard" high deductible health plan, I pay the first $3500 and the insurance company pays the rest of covered costs.  That's it, no more complications.  So with that plan, I pay $3500 and the insurer pays the rest.  Because I pay through my health savings account, the funds are tax deductible.

The premium is lower for my current plan, but it does not cover prescriptions.  Thanks to Canadian pharmacies, the cost of prescriptions turned out to be merely nominal.

The only attractive Obamacare plan I could find with my chosen surgeon and hospital in network was from Blue Cross Blue Shield of Michigan.  Given that I was looking at a major expense immediately, I looked at their top of the line gold PPO policy (BCBSM does not offer a platinum policy).  The math gets a bit more complicated, so bear with me.

Deductible:  $150
Out of Pocket Maximum: $5100 ($4950 coinsurance maximum, i.e. the deductible of $150 counts toward the out of pocket maximum)
Hospital care and surgical services:  Covered 80% after deductible is met (There is a wrinkle of a $500 copay for hospital care, but we're dealing with big enough numbers here that we hit the out of pocket maximum).

So, if I'm doing this right, I pay the first $150.  That leaves $50,000 - $150 = $49,850.  The insurer picks up 80%, or $39,880.  That leaves my share as $9,970.  Because $9,970 > $5,100, I get tagged for $5100.  The insurer therefore pays $44,900.

It looks like my little substandard high deductible plan is a better deal than the Affordable Care Act plan by about $1600.  If my prescriptions cost more, that might offset the higher out of pocket maximum and higher premium.  In my case at least, it was not enough to make a difference.

I'll hang on to my grandfathered plan for as long as they'll let me.  Bottom line for you--if you're going to have a major procedure during the open enrollment period you should run the numbers and figure out the best deal for yourself.  Keep in mind that if you give up your grandfathered plan, you're never going to get it back.  If it's a close call and your happy with your old plan and you're one of the lucky few that gets to keep it, then I'd probably stick with the old plan.

But Chris, you say, this is not fair.  Insurance companies are people, too.  It's wrong to take advantage of the pre-existing condition rule to screw over the underwriters.  My answer--tough.  The insurance industry was instrumental in passing the Affordable Care Act.  They wanted the government to force millions people to become their customers.  They set the rules, they set the rates.  We have every right as smart consumers to follow the incentives their rules create.  If they didn't like it, they should have lobbied against the act, it's as simple as that.

2. Watch that EVERYONE Providing Service is in Network
People on Medicare tend to be extremely savvy about the health insurance world.  My parents warned me that many times anesthesiologists are billed separately from the hospital and the surgeon.

Being paranoid, I checked and double checked with the hospital's billing department.  I also double-checked the list of network providers.   It turned out everyone was in network, critical for me because my plan pays almost nothing for out of network.

Many exchange policies will not pay for non-emergency out of network service.  People have been burned already by anesthesiologists who were out of network even though the hospital was in network.

Be sure to check with BOTH the insurer's list of network providers and the providers themselves.  Everything is in flux and the lists may not be up to date.  Do not trust just one source.

3. Read and Understand Your Bills
Being an insurance lawyer, I'm probably more fearful than most about the risk of a denied claim.  I tell myself that as a lawyer you only see the really weird claims, not the routine paid claims.  All will be well.  When I finally received my big bill from the hospital and the statement of benefits from my insurer indicating it had been paid, I was greatly relieved.

I was therefore a bit taken aback when I received the anesthesiologist's bill for $3,875.  I also received a notice from the insurer that it had been sent off for a process called "repricing."  Repricing is insurance jargon for changing the bill to reflect the negotiated rate between the insurer and provider.  In this case, the repriced rate was only $1,674.  The insurer promptly paid that amount.

Is it fair the uninsured pay more than double the rate for this service?  In other areas of commerce, this is called price discrimination and in certain cases can get people in big trouble.  In healthcare, it seems to be business as usual.

The story doesn't end there.  The anesthesiologist re-billed me for the balance of $2,211.  I knew I had met my deductible and I thought I understood the re-pricing system.  I was unable to defeat my insurer's security (i.e. phone system) to talk to someone about the problem, but I contacted the anesthesiologist's billing department and they promptly fixed the mistake.

I knew what the problem was and could articulate why the bill was inappropriate.  How many people would have just paid it?  How many people would have been forced to pay a large bill that was not really due?

It pays to stay on top of this stuff.  If you have a story or questions about mine, please post a comment.


Friday, December 13, 2013

Obamacare--Six Things to Watch for in 2014

We've been following a number of developments in the health insurance arena.  Here are some things to watch for as the Affordable Care Act (aka Obamacare) takes effect in 2014.  Given the delays and political maneuverings surrounding implementation, it's hard to be definitive.

1. Are there more uninsured Americans on January 30, 2014 than on January 1, 2013?

Obamacare imposes "minimum essential benefits" on every insurance policy--benefits that most policies don't have.  There are exceptions for "grandfathered" plans, but those exceptions are so narrow few policies meet them.  That is why we are seeing millions of people in the individual health insurance market lose their insurance.

Couple that phenomena with the chaotic rollout of Obamacare.  Some people have signed up for Medicaid and a few have signed up for Obamacare policies, but nowhere near as many that have lost their coverage.  Government figures are troubling, as they have an unhatched chickens problem--they assume everyone who "enrolls" online will actually buy a policy.  It's very hard to see what's going on. We won't know for sure until we see how many people actually pay for a policy or sign up for Medicaid.

Let's put is mathematically:

If:  Number of People Who Lose their Insurance > Number of People who Sign Up for Insurance

Then: The law is in big trouble.  The biggest selling point for the Affordable Care Act is that more people will have good health insurance.  If that proves false, then the argument to keep the law evaporates.

2. Will doctors and hospitals accept Obamacare policies?

Have you been to an emergency room lately?  The ones I've been in have little signs saying, basically, that the hospital will treat you for an emergency but if you are on Medicaid, you'll be sent somewhere else as soon as possible.  Why?  Because Medicaid work does not pay enough to make it worth it.  Also, few doctors take Medicaid.

If Obamacare policies become stigmatized like Medicaid, you probably won't want to have one if you can help it.  There are reports that 70% of the members of the California Medical Association are not going to accept Obamacare policies.  Hospitals are having trouble figuring out what the Obamacare policies will pay for and what they won't.  Some may just throw up their hands and say we won't deal with this.

Other major, high-end hospitals like Cedars-Sinai in Los Angeles, Memorial Sloan Kettering in Manhattan, and Anderson Cancer Center in Houston are either excluded or severely limited in what care they can provide to Obamacare policy holders.  If you need that high quality care, you might not be able to get it.

Our doctors advised us to check with both the insurance company and the healthcare providers' own staffs to make sure they would be in-network.  That proved good advice, as many doctors and hospitals are not in network.

In Insurancese, the phrase to look for is "narrow networks."  This means the network the policy covers has fewer doctors and hospitals and excludes more doctors and hospitals.  The strategy is twofold.  It's easier to negotiate with fewer doctors and hospitals and force them to make concessions.  Also, insurance companies exclude the most expensive hospitals and doctors to keep costs down.

If you start hearing a lot about narrow networks, that's not a good thing.

Want the straight story on healthcare reform?  Check out THE SMALL BUSINESS GUIDE TO OBAMACARE

3. Will work?

At the heart of the crisis is a website that simply does not work.  Users have immense trouble signing in and worse, data transmitted to insurers is riddled with errors.  Indeed, parts of the website have not even been built yet.

If does not work, and work soon, the whole project will implode.  A website that kind of works is worse for insurance companies than one that does not work at all.  Who is going to wait around for hours and try and try again to get health insurance?  People who really need it--meaning the sick, injured and old.  Who is most likely to try for 15 seconds and give up?  People who are healthy and have better things to do.

A bad insurance pool is far worse for insurance companies than no pool at all.  If insurance companies find themselves about to be wiped out, they will withdraw support for the project and seek to replace Obamacare with something else.

Look for that to start happening in the summer if the website is not fully functional by February or so.

If fails to work properly, then that brings us to the next thing to watch out for.

4. Will the President suspend the individual mandate?

Obamacare requires that just about every American buy health insurance or pay a fine.  Suppose someone living in a state that does not expand Medicaid and cancels individual policies.  Further suppose that person tries and fails to sign up for insurance through  Let's also say this person does not have job-provided health insurance.  I would say that's not an outlandish or rare scenario.

How can the government fine that person for failing to obtain insurance?

My answer--it probably can't.  I suspect a court would find a way not to enforce the mandate.  This President, if he holds to form, would not allow a court to strike down the mandate.  That would just look bad.  He would suspend the mandate by decree, citing fairness and justice, for at least a year.

If I were handicapping whether the individual mandate applies in 2014, I'd say it's about 50-50.

5. Will the "essential benefits" rules wreck the employer-provided health insurance market?

Remember the Bible story where the prophet Nathan confronts King David?  David had knocked up his best general's wife and to cover it up, sent him to the front where he's killed in battle.  Nathan goes to David and tells him a story about a poor man with one little lamb that he loved very much--and a rich man who had everything.  The rich man takes the poor man's lamb and barbecues it.  David says such a man should die.  Nathan replies, "you're the man."

Those of with our little individual health policies, that gave us a bit of security, really liked them.  People with government or union negotiated gold-plated health plans sneered at those plans.  They took what little we had, because they said they weren't good enough.  Not everyone will be able to afford the replacement policies with their high premiums and astronomical deductibles.  Most people can't even go online to order a new policy because the exchanges don't work.

Mr. President--you're the man.

The same rules that made individual plans illegal apply equally to employer provided plans.  Very few employer provided plans meet the requirements.  So expect current plans to become illegal and replaced with vastly more expensive policies.

Remember, the employer mandate only applies to companies with more than 50 employees.  In addition, the President has decreed that the employer mandate won't apply in 2014.  No employer has to comply with the employer mandate in 2014.

Imagine you're a business owner facing vastly increased health insurance costs and no mandate to provide those benefits.  What would you do?  Exactly.

Watch for the government to try to head off loss of coverage for millions of American workers.  I don't know what they will do, but they'll hopefully do something.  It would be nice if they come up with something other than blaming the Republicans.

6. Hobby Lobby Supreme Court Case

The Supreme Court agreed to hear a pair of cases regarding Obamacare's requirement that insurance policies cover contraception, including the controversial morning after pill.  Some employers object to paying for contraception because their religion teaches that any kind of contraception is wrong.  Others object because some of the drugs kill a fertilized egg, which they believe is a human life.

Does an American employer have the right to say "I don't want to be involved with contraception or abortion?"  Does an American employee have the right to health insurance free from moralistic intrusion from the employer?  We're about to find out.

Arguments will likely take place in March.  I'd expect a decision at the end of the term, in late summer.

It seems politically that tying Obamacare to abortion is a recipe for strife in perpetuity.  It's already happening, with some states like Michigan banning abortion coverage in Obamacare policies.  It's just not a good way to get people to accept the law.

2014 is the big year for Obamacare.  We'll see what happens.  Thanks for stopping by.

Wednesday, November 27, 2013

Supreme Court to Hear Hobby Lobby Obamacare Abortion Mandate Case

Sorry, dear readers, for being out of commission for so long.  I've started up a new class I'm teaching and have found myself navigating the healthcare system myself.  Enough excuses, back to the action.

One of the aspects of the Affordable Care Act, popularly known as Obamacare, that erodes its popularity is that it seeks to do far more to transform America than to just provide universal health insurance coverage.  Most people would like to see sick people be able to get good health care and for people to have access to health insurance if they want it.  However, Obamacare seeks to do far more to advance the agenda of the left.  One example is the requirement that all health insurance cover contraceptives, including those that cause abortions.

Under Obamacare, the Secretary of Health and Human Services (HHS) has the power to define what benefits a health insurance policy must have.  If HHS determines that a policy does not have everything it is supposed to have, HHS has the power to assess huge penalties on both the employer and the insurance company.

Using that power, HHS requires that all health insurance policies cover contraceptives.  The Catholic Church condemns the use of any contraceptives, so a Catholic employer trying to follow church teachings could object to being forced to pay for contraceptives.  Even more troubling, the mandate requires coverage of abortificants, drugs that induce an abortion after conception.  Many Protestants and others who would have no problem with other kinds of contraceptives believe these kinds of drugs are wrong.  They don't want to be involved in paying for them, whether directly or indirectly.

Can businesspeople be forced to buy a product they find morally objectionable?  Or does the business simply have to leave their moral values behind when they go into business?  Or is the business merely a bystander to the decisions made between its employees and their doctors.

We're about to find out.

Yesterday, the Supreme Court agreed to hear two cases challenging Obamacare's requirement that companies provide health insurance covering contraceptives, including those that induce abortions.  The key issue is whether a private, for profit, corporation is a "person" within the meaning of federal law and under the Constitution and therefore has freedom of religion.  In other words, does a corporation have freedom of religion?  If so, does the contraceptive mandate violate that freedom of religion.  As my old bosses used to say, that's a toughie.

In one case, Sebelius v. Hobby Lobby Stores, Inc., the lower court held that Hobby Lobby does have constitutional and statutory religious rights and that the abortion mandate likely violates those rights.  The court returned the case to trial court for further proceedings.

In a second case, Conestoga Wood Products, Inc. v. Sebelius, the lower court held that a for-profit, secular corporation does not have any freedom of religion whatsoever and denied the company's claim. Although the court seems to believe that a church organized as a corporation would have freedom of religion because it is not for profit, or even a for profit religious publishing company would have freedom of religion and freedom of the press, a for profit business in the eyes of the court has no such rights.  Therefore, the company must comply with the mandate to provide abortion inducing drugs.

A third case, Autocam Corp. v. Sebelius, may also reach the Supreme Court.  In that case Catholic business owners object to the contraceptive mandate as well as the requirement that policies pay for sterilization procedures.  They lost in the lower court and recently appealed to the Supreme Court.  Don't be surprised if the Supreme Court takes up this case as well.

These are complicated cases, but here's the gist of the legal issues to be decided:

  • Is a for profit corporation a person entitled to protection of freedom of religion under federal law and the Constitution?  If not, the case is over and the companies lose.
  • If so, does the contraception mandate violate either federal law or the Constitution?  If yes, then the government can't enforce the mandate.  Such a ruling would open the door to other challenges as well.

Corporations have some constitutional rights that real people have, but not all of them.  For example, corporations can't vote.  They also have no right against self-incrimination under the 5th amendment.  However, corporations do have limited free speech rights.  For example, companies have a right to advertise their products but face limitations to prevent fraud or health dangers.  In addition, corporations have some rights to participate in the political process, most notably by spending money in political campaigns to support one side or the other.

It seems obvious that certain corporations have to have first amendment rights.  I don't think anyone would argue that The New York Times, Inc. lacks the protections of the freedom of the press.  In addition, it seems equally obvious that a local Baptist Church organized as a corporation would have freedom of religion.  If they don't, then the corporate form would become completely unworkable for these kinds of organizations.

What gets tougher is where the company's purpose is to sell a product that has nothing to do with religion but the owners want to follow their religious beliefs in running the company.  The problem for a court is that if we recognize that right, we have to measure whether the belief is genuine and the law violates the belief.  For example, could someone claim that their religion forbids the paying of taxes? The line-drawing exercises would become tedious and dangerous, requiring courts to determine what religious beliefs and are entitled to protection and which ones aren't. That's the reason the Court might hesitate to recognize a general freedom of religion for corporations.

Given the ethical lapses American business has had over the last decade or so, I applaud companies that  stick to their moral beliefs.  One of the things I always tell my students is that ethics are expensive.  It's easy to be moral when it's free, it gets a lot tougher when it costs money.  For the Court to send the message that business is a religion and morality-free zone could cause enormous amounts of harm.  "It's just business" has been an excuse for too long. We should laud companies that state their values and stick to them.

What if the corporations lose?  These companies might so strongly oppose the contraceptive mandate, especially the part that raises the abortion issue, that they would just drop coverage for their employees.  Given the financial incentives under the Affordable Care Act (aka Obamacare) to drop coverage, these moral objections would be just one more factor to let employees get their own coverage elsewhere.

We'll keep you posted as the case develops.  Observers say we should expect arguments in March 2014 with a decision later in 2014.

Monday, November 11, 2013

The Same Rules Wiping Out the Individual Healthcare Market Apply to the Employer Market

People are finally awaking to the fact that comprehensive health insurance reform impacts them directly.  Millions of people in the private, individual market are losing their coverage.  PPACA, or Obamaare, requires every policy to have certain minimum essential benefits.  A very narrowly written and interpreted grandfather clause allows a few people to keep their insurance even without the new required coverage.

"My employer provides insurance coverage, I don't have to worry because Obamacare does not affect me."  Wrong.  Because the President suspended enforcement of the employer mandate, 2014 employer-provided policies do not have to have the minimum essential benefits.  But in 2015, barring major changes in the law or a continued promise not to follow the law, they will.  Here's what an employer-provided plan has to have:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services 
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Many employer-provided plans lack maternity coverage, mental health and substance abuse coverage, and prescription drug coverage.  Many policies may fail for failing to provide pediatric dental and vision care.  If your policy lacks even one of the things on that list, it's likely illegal under Obamacare.  Maybe the grandfather clause will save you, but so far it has saved few people in the individual market.


Recent soothing words from the government may lead people to believe that only a few people are impacted and will lose their current policies and provider networks.  Barring major changes, that's not true.  Take steps to protect yourself now, or better yet, contact your members of Congress and ask them to repeal or fix the law.

Now for Today's Obamacare Headlines.

Rightwing Rants

Obamacare is an "old" "new program"

This is what betrayal looks like

Obamacare not worth the cost to young people

Leftwing Cheerleading

Where things stand after the big Obamacare apology

Hard News

Obamacare enrollment data to be released

Republicans blast cancellations

For Industry Insiders

5 states where Obamacare subsidies matter most

Medicare beneficiaries confused about enrollment

Actuary analyzes risky PPACA policies