Last week, I addressed a group of small business leaders regarding the ACA.  In taking questions from the audience, I discovered certain misconceptions among this group concerning the ACA, including the following:

• Misconception: Muslims are exempt from the ACA’s individual mandate requiring nearly all Americans to have health insurance by 2014.

Correction: While certain religious sects are exempt from the individual mandate, only those currently recognized by the Social Security Administration as being exempt from Social Security requirements are eligible for an exemption from the individual mandate.  These sects consist  mainly of the Amish and certain other Mennonite sects.  Because Muslims are not exempt from participating in Social Security, they are not exempt from the individual mandate requirement.  Those seeking a religious exemption from the individual mandate requirement must apply for such an exemption through a health insurance exchange to be established by the individual states or the federal government.

• Misconception: The ACA encourages rationing of care and will interfere with the relationship between physicians and their patients.

Correction: The ACA has created the Patient Centered Outcomes Research Institute (“PCORI”), a private, non-profit entity.  PCORI is designed to benefit physicians and their patients by providing information on which treatments are most effective, and expressly prohibits the rationing of care.  While some believe PCORI is modeled after the United Kingdom’s National Institute for Health and Clinical Excellence (“NICE”), such is not the case.  Unlike NICE, any findings generated by PCORI may not be used to promulgate practice guidelines or make coverage decisions.  Further, the ACA includes patient safeguards so as to ensure that coverage decisions made by the U.S. Department of Health and Human Services (“HHS”) are not based on age, terminal illness, or a patient’s quality of life preference.  Therefore, PCORI will not interfere with the physician-patient relationship.  

• Misconception: The ACA does nothing to address medical professional liability reforms.

Correction: While the ACA does not include any liability reform provisions, such as caps on the non-economic (i.e., pain and suffering) portions of medical malpractice awards, the ACA establishes a competitive grant program for states to develop, evaluate, and implement innovative professional liability reforms.  This program is in addition to the $25 million medical liability reform alternative grant program the Obama administration rolled out in September 2009—one  being implemented by the Agency for Healthcare Research and Quality.

• Misconception: Employers have until December 31, 2014 to impose a $2,500 employee contribution limit on employer-offered healthcare flexible spending accounts (“FSAs”).

Correction: Employers have until the end of 2014 to amend their FSAs to reflect such $2,500 employee contribution limit, but all such FSAs must be operated beginning this year in accordance with this new limit.  Also, if an employee works for two or more separate companies (i.e., ones that are not controlled by the same owner(s)) and participates in more than one FSA, he or she may contribute up to the $2,500 limit to each FSA.  In addition, there is no limit on employer contributions to FSAs; and the $2,500 employee contribution limit does not apply to other employee-funded plans such as a dependent care FSA or a Health Savings Account.  Further, there shall be inflation adjustments that shall serve to increase the $2,500 employee contribution limit in future years.  

• Misconception: Employers are liable for any additional Medicare tax they fail to withhold and that their employees subsequently pay.

Correction: Under the ACA, employers are obligated to withhold an additional Medicare tax of 0.9% (i.e., an increase from 1.45% to 2.35%) on taxpayers with earned income in excess of certain threshold amounts (i.e., $200,000 for an employee who is single; $250,000 if the employee is married and filing jointly; or $125,000 if the employee is married and filing separately).   However, an employer is not liable for any additional Medicare tax it fails to withhold and that the employee later pays.  But employers will be liable for any penalties resulting from their failure to withhold.  In addition, employers are not required to match the extra Medicare tax payment as they are required to do for the basic Medicare tax – they need only pay 1.45% on all earnings – so there is no extra cost to the employer for the additional Medicare tax other than administrative expenses; and an employer must withhold such extra Medicare tax on compensation in excess of the applicable threshold, even if the employee is ultimately not liable for it (e.g., a married employee whose wages, together with his or her spouse, do not exceed the $250,000 threshold for couples that are married and filing jointly).  Further, employers have no duty to inquire about the earned income of an employee’s spouse. 

Health care payors (plans, insurers) are emerging quickly as one of the dominant players in the mobile health (mHealth) marketplace.  Apps to exchange information with patients regarding appointment reminders, to coordinated care among various providers for diabetes and other conditions, and to provide patients with personal health records (PHRs) are becoming all the rage.  Payors command a unique place in the healthcare industry; not only do they receive and distribute the healthcare dollars but they maintain deep files of information on the consumers whose care they pay for.  With their reserves of funds, payors are also uniquely positioned to invest in the use of mobile health in the delivery of health care.  They can develop and distribute apps from basic-to-sophisticated, from those that merely provide good diet tips to beneficiaries, to those that collect and transmit critical health data to physicians and other providers.  They can also incentivize beneficiaries to adopt mHealth solutions by, for instance, offering to reduce premiums in exchange for compliant behavior. Further, the employers who pay for health coverage may incentivize, or penalize, employees that do not utilize mHealth tools offered by payors.   

As the mHealth field develops, it will be interesting to see who pays for it.  In the private healthcare market (i.e., separate from Medicare and Medicaid), the costs for many mHealth services may be picked up by the payors, but the payors may also seek to shift the costs to the providers by, for instance, requiring participation in mHealth initiatives under the provider-payor contract and payor policies. Suddenly the hospital or physician will have to use an app to collect data from the patient on his or her heart condition, whether or not the provider currently has the right platform for the app, the correct privacy and security measures in place, etc.  The advent of health insurance exchanges (HIEs), health information organizations (HIOs), provider-maintained electronic health records (EHRs) and accountable care organizations (ACOs) under the Affordable Care Act may also change the marketplace, and how costs are distributed.  If you’re a provider, review you payor-provider contract and start tracking the costs of mHealth and other initiatives imposed by payors, to prepare for a wireless health care future. 

On March 12, 2012, the U.S. Department of Health and Human Services (HHS) released the long-anticipated Final Rule and Interim Final Rules (the "Rules") on the Patient Protection and Affordable Care Act's (ACA) state health insurance exchanges ("Exchange(s)"), a key element of President Obama's healthcare reform plan. Set to go into effect on January 1, 2014, the goals of the Exchanges are to enhance competition, improve availability of affordable health insurance options and allow small businesses the same purchasing power that large businesses currently enjoy. As described in the Rules, the Exchanges will operate as competitive marketplaces, allowing individual consumers and small businesses to directly compare pricing and quality of health insurance options, among other factors.

The Final Rule incorporates two proposed rules originally published in mid-2011 that together implement what HHS refers to as the Exchange establishment and eligibility rules that address the eligibility, enrollment and plan function of the Exchanges. Affording substantial discretion to states in the design and operation of the Exchanges, the Final Rule details minimum federal standards for the establishment and operation of the Exchanges, minimum standards that health insurers must meet in order to participate in the Exchange and offer a qualified health plan, and standards of participation for the Small Business Health Options Program.

Read the full text of the Duane Morris Alert.

The Centers for Medicaid & Medicare Services (“CMS”) recently released a final rule establishing the new medical loss ratio requirements under the Affordable Care Act (“ACA”).   Under the ACA, individual and small group market insurers are required to spend at least 80 percent of premium dollars on medical care and quality improvement, and large group market insurers must spend at least 85 percent of premium dollars on the same services.  The final rule describes the technical process for calculating medical loss ratio and also provides details on insurers’ annual medical loss ratio reporting requirements, as well as the ACA’s requirement that insurers grant rebates to consumers in the event the insurer fails to meet the required medical loss ratio. 

Read the full text of the rule here, or HHS’ fact sheet on the ACA’s changes to medical loss ratios here.