The document discusses key provisions of the 2010 Patient Protection and Affordable Care Act (ACA) regarding health care reform. It outlines requirements for health plans to cover adult children until age 26, not impose lifetime or annual limits on coverage, cover preventive services with no cost sharing, and prohibit pre-existing condition exclusions. It also describes the establishment of state-based health insurance exchanges and qualifications for plans to be offered through the exchanges. Minimum coverage levels for plans ranging from bronze to platinum are defined. The implementation timeline for various ACA provisions from 2010 to 2018 is provided.
1. HEALTH CARE REFORM
The Grand Design
Bryan D. Bolton
Funk & Bolton
Baltimore, Maryland
Robert R. Pohls
Pohls & Associates
Walnut Creek, California
Gary Schuman
Combined Insurance Company of America
Glenview, Illinois
2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
February 27, 2011 - March 1, 2011
2. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
“. . . the hazards of sickness, accident, invalidism,
involuntary unemployment, and old age should be
provided for through insurance. This should be a
charge in whole or in part upon the industries, the
employer, the employee, and perhaps the people
at large. “ Teddy Roosevelt (August 1912)
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3. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
March 23, 2010 Patient Protection and
Affordable Care Act
March 30, 2010 Health Care and Education
Reconciliation Act of 2010 3
4. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· High-risk pool established to provide coverage to people with pre-
existing conditions.
· Provide dependent coverage for adult children to age 26.
· Require minimum coverage without cost-sharing for preventive
services, including recommended immunizations, rated A or B by
the U.S. Preventive Services Task Force.
· HHS and states begin annual review of unreasonable increases in
health insurance coverage premiums. A health insurer cannot
implement any unreasonable premium increase without prior
justification to HHS and the relevant state.
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5. HEALTH CARE REFORM 2011 Eastern Claims Conference
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· Require guarantee issue and renewal, and allow rating variation
based only on age, premium rating area, family composition and
tobacco use. Limits out-of-pocket deductibles based on IRC.
· Limits waiting period for coverage to 90 days.
· Prohibits Annual or Lifetime limits on essential benefits.
· No pre-existing condition exclusion permitted.
· Create state-based Health Insurance Exchanges.
· Requires OPM to contract with insurers to offer at least two multi-
state plans in each exchange.
· Create Essential Benefits Package providing comprehensive
services and must cover at least 60% of actuarial value of covered
benefits and limit cost-sharing.
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6. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Minimum essential benefits consists of the following: ambulatory
patient services, emergency services, hospitalization, maternity
and newborn care, mental health and substance abuse services,
prescription drugs, rehabilitative and habilitative services and
devices, laboratory services, preventive and wellness services, and
pediatric, including oral and vision care.
· HHS is required to establish the complete list of essential benefits.
· Essential benefit plans can differ by levels of coverage.
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7. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Bronze (Basic) Level Coverage – equals 60% of full actuarial
value of the benefits provided by plan.
· Silver (Enhanced) Level Coverage – equals 70% of full
actuarial value of the benefits provided by plan.
· Gold (Premium) Level Coverage – equals 80% of full
actuarial value of benefits provided by plan.
· Platinum (Premium Plus) Level Coverage – equals 90% of
full actuarial value of the benefits provided by plan. Not
required to offer Platinum coverage.
· All plans must offer mental health parity.
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8. HEALTH CARE REFORM 2011 Eastern Claims Conference
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A “qualified health plan” means a health plan that:
(A) has a certification that such plan meets the requirements
of each Exchange through which the plan is issued;
(B) provides the essential health benefits plan package;
(C) is offered by a licensed health insurer that:
(i) is licensed and in good standing to offer health
insurance in each State where coverage is offered;
(ii) agrees to offer at least one qualified health plan in
silver and gold levels in each such Exchange;
(iii) agrees to same premium rates inside and outside of
Exchange; and
(iv) complies with regulations. 8
9. HEALTH CARE REFORM 2011 Eastern Claims Conference
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· By 2014, States must establish exchanges to facilitate purchase of
qualified health plans and are charged with enforcing standards.
· States must establish Small Business Health Options Program
(SHOP) Exchange to assist small employers in the process of
enrolling employees in qualified health plans offered in the small
group market.
· Regulations will establish criteria for certification of health plans
as
qualified health plans, but minimum criteria are defined in statute.
· Only qualified health plans may be offered through an exchange,
but a health insurer can offer plans outside of exchanges.
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10. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
An exchange will:
· (1) establish procedures for certification and decertification of
qualified health plans;
· (2) offer a toll free number;
· (3) maintain internet site for standardized comparison of
information on plans;
· (4) assign a rating to each QHBP;
· (5) utilize standard format for presenting plan options;
· (6) inform individuals about eligibility for Medicaid CHIP;
· (7) establish a calculator to determine actual cost of
coverage after any premium credit or cost-subsidy; and
· (8) provide procedures for certification for exemption from
individual excise tax. 10
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· Office of Personnel Management (OPM) shall contract with health
insurers to offer at least two multi-state qualified health plans
through the exchanges to provide individual and small group
coverage.
· Medical loss ratios, profit margins, premiums and other terms and
conditions shall be implemented in a manner similar to FEHBA
Program.
· States may offer additional benefits, but cannot add to Federal
cost.
· Small Employers (100 or fewer employees) may elect to make all
full-time employees eligible for plans through the Exchange.
· In 2017, Large Employers can participate in the Exchange
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· Insurer must offer at least one silver and one gold level plan in the
Exchange and charge same plan premium offered inside and
outside of the Exchange.
· Agents and brokers are permitted to serve as “Navigators” and
may enroll individuals in plans offered through the Exchange.
· Health insurers cannot serve as navigators and navigators cannot
receive consideration from insurer in connection with participation
or enrollment of individuals or employees.
· HHS will establish standards for navigators by regulation.
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13. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Employers offering minimum essential coverage through employer-
sponsored plan must offer free-choice vouchers to employees to
purchase coverage through the Exchange. Voucher amount is
determined by the most generous amount the employer would have
contributed for coverage under employer’s plan.
· If employer contributes less than 60% of costs of employer plan or
premiums exceed 9.8 percent of employee’s income, then employee is
not considered to have minimum essential coverage and is eligible for
premium assistance.
· Employers with more than 200 employees must automatically enroll
new
full-time employees in coverage with the opportunity to opt out.
· Individuals are required to maintain minimum essential coverage
beginning in 2014. 13
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· HHS will award grants to states to establish or expand health
insurance consumer assistance or a health insurance ombudsman.
· A state office of health insurance consumer assistant or health
insurance ombudsman shall: 1) assist with filing and complaints
and appeals; 2) collect, track and quantify problems encountered
by consumers; 3) educate consumers on their rights and
responsibilities; 4) assist consumers with enrollment; 5) resolve
problems with premium tax credits.
· Coverage cannot be rescinded except in the case of fraud or
intentional misrepresentation of a material fact.
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15. HEALTH CARE REFORM 2011 Eastern Claims Conference
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· A group health plan or health insurance issuer must give at least
60 days notice if it makes any material modification in the terms of
the plan or coverage.
· Increases wellness incentive limit currently codified in HIPAA, but
increases incentive from 20-30%.
· Wellness incentive may be increased by regulation up to 50%.
· Cannot require pre-authorization for emergency care in hospital or
for female participants for OB/GYN care.
· Cannot impose conditions for participation in clinical trial.
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16. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Within 24 months of enactment, health plans must use HHS
standards for provision of summary of benefits and coverage
explanation. HHS will work with NAIC to develop standards.
· Standards shall ensure that outline of coverage is: presented in
uniform format, not more than 4 pages in length and in 12-point or
larger font; in a manner understandable to average enrollee;
includes definitions of standard terms; includes coverage
limitations or exceptions, cost-sharing provisions, renewability and
continuation provisions, examples of common benefit scenarios, a
statement the outline is a summary and a web link to the actual
coverage policy or group certificate.
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17. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Certain provisions become
Effective for calendar year
Plans:
• Coverage for adult children
• No lifetime caps
• Restriction on annual caps
6/21/2010 • No pre-existing conditions
2013 for children under age 19
3/23/2010 2014 2018
2011
• 0.9% additional Medicare tax becomes
effective
• 3.8% Medicare ta on unearned income • Exchanges become
becomes operative
Reinsurance Patient
effective “Cadillac” plan • Individual mandate
Program for Protection and
• Medicare Part D subsidiaries effectively tax becomes provisions apply
Retirees becomes Act signed
become effective • Employer
operative into law
taxable responsibility
• $2,500 limitation on health FSAs becomes obligations apply
effective
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18. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· The Act grandfathers plans in effect on March 23, 2010
· A grandfathered plan may provide that individuals who are
covered on March 23, 2010 can continue coverage under the plan
generally without regard to the requirements of the Act
· Family members may enroll in the grandfathered plan in the
future
if family coverage was permitted under the terms of the plan as in
effect on March 23, 2010
· New employees may join the grandfathered plan in the future if
the plan permitted new employees to join on March 23, 2010
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19. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Even though existing plans are grandfathered, certain interim
requirements still apply:
· No lifetime limits (2011)
· Restrictions on annual limits (2011)
· Restrictions on coverage rescissions (2011)
· Extension of dependent coverage to adult children (2011)
· Advance notice of material modifications (2011)
· Uniform summary of benefits (2011-2012)
· No pre-existing condition exclusions for enrollees under the age
of 19 (2011)
· No pre-existing condition exclusions for enrollees of any age
(2014)
· Maximum waiting period is 90 days (2014) 19
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· Coverage requirements for preventive care services
· Coverage requirements for emergency services
· Non-discrimination rules that apply to insured plans
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21. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· The interim requirements first became effective for plan
years beginning on or after September 23, 2010 (6 months
after the law was enacted)
· For calendar years plans, the interim requirements began
to apply on January 1, 2011
· For October, November and December fiscal year plans, the
interim requirements applied on the first day of the
plan year in 2010
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22. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· No lifetime limits
· Restricted Annual Limits
· $750,000 (current)
· $1,250,000 (Sept. 23, 2011)
· $2,000,000 (2012)
· States granted waivers permit health plans to provide much lower
annual limits on coverage.
· Mini-med plans
· Limited benefit plans
· Without these waivers, hundreds of thousands of people would
have lost insurance or experienced a reduction in benefits
· Waivers/Exemptions automatically expire in 2014.
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23. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
To the extent that a plan offers specific benefits that are not
considered “minimum essential benefits” under the Act, the plan
may impose annual or lifetime limits on such specific benefits that
are otherwise permissible under federal law.
Note: The Act does not define the specific
benefits covered by this exception.
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24. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
A plan cannot rescind coverage unless the participant or beneficiary
has engaged in fraud of intentional misrepresentation of material
fact as prohibited by the terms of the plan.
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25. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Adult children must continue to be eligible to be covered until
they turn age 26
· Adult children may be covered as dependents tax-free until the
year they turn age 27
· IRS has clarified that the tax-free status of this coverage runs from
March 30, 2010, and that in 2010 cafeteria plans can permit adult
children to be covered pre-tax mid-year (and make or change h
health care FSA contributions) as if their becoming eligible was a
change in family status (IRS Notice 2010-38, 4/27/10)
· Child is defined as a son, daughter, stepson, stepdaughter, eligible
foster child, adopted child legally placed with the participant for
adoption 25
26. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Up to age 26
· Need not live with their parents
· Need not be financially dependent on their parents
· Need not be enrolled in school
· Will not cover spouse or dependent of the child
· For grandfathered plans prior to 2014, an adult child is only
required to be offered coverage if such adult child is not
eligible to enroll in another eligible employer-sponsored
health plan
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27. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Notice of material modifications to plan benefits must be provided
at least 60 days before the modifications become effective.
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28. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
A plan may not impose pre-existing condition limitations on
enrollees who are under the age of 19.
Note: This requirement expands to apply
to all enrollees beginning in 2014.
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29. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Participants may use emergency room services without the need for
prior authorization. In addition, a plan may not impose any
additional co-payment or co-insurance requirements if the
emergency facility is not part of the plan’s network.
Note: Grandfathered plans are not
required to include this provision.
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30. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Colonoscopies
· Cholesterol
· Blood pressure
· Adult and children vaccines
· Children developmental screening and lead tests
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31. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Administration has granted broad waivers:
· Florida
· Ohio
· New Jersey
· Tennessee
· Temporary waivers granted to four states and more than 900
health plans covering 2.4 million people.
· These waivers allow health insurers to continue offering less
generous benefits than they would otherwise be required to
provide this year under new federal health care law.
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32. HEALTH CARE REFORM 2011 Eastern Claims Conference
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· Many other states, insurers and employers most likely will seek
similar exemptions.
· To receive a waiver, a state, employer or an insurer must
show compliance with the federal requirements would cause
“a significant increase in premiums or a decrease in access
to benefits.”
· Under the current law and rules, health plans this year must
generally provide at least $750,000 in coverage for essential
benefits like hospital care, doctor’s services and prescription
drugs.
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33. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Participants may use emergency room services without the need
for prior authorization. In addition, a plan may not impose any
additional co-payment or co-insurance requirements if the
emergency facility is not part of the plan’s network.
Note: Grandfathered plans are not
required to include this provision.
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The Grand Design February 27, 2011 - March 1, 2011
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35. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Individuals will be required to maintain health insurance (known
as “minimum essential coverage”).
· Individuals who do not maintain such coverage will be required to
pay a penalty equal to the grater of $695 or 2.5% of the
individual’s income.
· Families that do not maintain such coverage will be required to
pay a penalty equal to the greater of $695 for each non-covered
family member (capped at $2,085) or 2.5% of the family’s income.
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36. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Plans may not impose any pre-existing condition limitation.
· As noted above, beginning in 2011, plans may not impose any
pre-existing condition limitations on children under the age of 19.
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37. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Plans may not impose waiting periods that exceed 90 days.
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38. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Plans may not impose coverage rules based on any health status
related factor.
Note: For employers, it is not clear how (or if)
this requirement differs from the existing
HIPAA non-discrimination rules that are
applicable to employer-sponsored plans.
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39. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Wellness programs that do not depend on health status factors:
· Program must be made available to all similarly situated
individuals
· Can reimburse all or a part of the cost for membership in a
fitness center
· Diagnostic testing program that provides rewards for
participation, not outcomes
· Encourages preventive care related to a health condition
· Reimbursements for costs of smoking cessation programs
regardless of outcomes
· Rewards for attending periodic health education seminars 39
40. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Wellness programs currently in existence under existing regulations
may continue to follow those regulations as long as those
regulations remain in effect.
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41. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Insurers required to spend at least $.80 out of every dollar they
collect in premiums on patient welfare.
· A critical Issue for the insurance industry's bottom line.
· What does this mean precisely ?
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42. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
• Include the cost of verifying the credentials of doctors in its
networks
• Ferreting out fraud by identifying doctors performing
unnecessary operations
• Typical business expenses such as insurance commissions to
agents/brokers and taxes paid on investments
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43. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Medical-loss ratio is important because law requires a refund to
consumers if too much is spent on administrative costs.
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44. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Insurance industry wants to "water down" the law by including
too many administrative costs under the guise of patient care
· If six largest for-profit insurers had been required to meet these
new standards last year, they would have been required to
refund $1.9 billion.
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45. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Interim Final Rules For Group Health Plans And Health Insurance
Issues Relating To Coverage Of Preventive Services Under PPACA
Promulgated By
· Department of Treasury, 26 CFR Part 54;
· Department of Labor, 29 CFR Part 2590; and
· Department of Health and Human Services, 29 CFR Part 147.
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46. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· Interim Final Regulations apply to group health plans and group
health insurance issuers for plan years beginning on or after
September 23, 2010; and
· These interim regulations generally apply to individual health
insurance issuers for policy years beginning on or after
September 23, 2010.
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47. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Identifies three reasons for current under-utilization
of preventive services:
· Turnover in health insurance market offers no incentive for
insurers to cover preventive services;
· Preventive services often offer no immediate benefit, making it
easy to postpone in the face of immediate cost; and
· Some benefits of preventive services accrue to society as a
whole and are not factored into individual decisions.
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48. HEALTH CARE REFORM 2011 Eastern Claims Conference
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Require A Group Health Plan and Health Insurance Issuer Offering
Group Or Individual Health Insurance Coverage To Provide Benefits
For And Prohibits Imposition Of Cost Sharing With Respect To:
· Evidence-based items or services that have in effect a rating of A or
B in the current recommendations of the United States Preventive
Services Task Force (Task Force);
· Immunizations for routine use in children, adolescents, and adults
that have in effect a recommendation from the Advisory Committee
on Immunization Practices of the Centers for Disease Control and
Prevention (Advisory Committee);
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49. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Require A Group Health Plan and Health Insurance Issuer Offering
Group Or Individual Health Insurance Coverage To Provide Benefits
For And Prohibits Imposition Of Cost Sharing With Respect To:
· With respect to infants, children, and adolescents, evidence
informed preventive care and screenings provided for in the
comprehensive guidelines supported by the Health Resources and
Services Administration (HRSA); and
· With respect to women, evidence-informed preventive care and
screening provided for in comprehensive guidelines supported by
HRSA (not otherwise addressed by the recommendations of the Task
Force).
Complete list of recommendations and guidelines that are required
to be covered under the interim final regulations can be found at:
http://www.HealthCare.gov/center/regulations/prevention.html 49
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· Individuals will experience improved health as a result of
reduced transmission, prevention of delayed onset, and earlier
treatment of Disease;
· Healthier workers and children will be more productive with
fewer missed days of work or school;
· Some of the recommended preventive services will result in
savings due to lower health costs; and
· The costs of preventive services will be distributed more
equitably.
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51. HEALTH CARE REFORM 2011 Eastern Claims Conference
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Projection of Lives Saved From Increasing
Utilization of Selected Preventive Services To 90 Percent
Lives saved annually if percent
Preventive service Population Percent utilizing utilizing preventive service
group preventive increased to
service in 90 percent
2005
Regular aspirin use …………………….. Men 40+ and women 50+ ………… 40 45,000
Smoking cessation advice and help All adult smokers ………………….... 28 42,000
to quit ……….…………………….. Adults 50+ ………………………………… 48 14,000
Colorectal cancer screening ……….. Women 18-64 ……………………....... 37 12,000
Influenza vaccination ………………… Men 35+ and women 45+…………. 83 620
Cervical cancer screening in the Women 40+ ……………………………. 79 2,450
past 3 years …………………..…………… Women 16-25 ………………………….. 67 3,700
Cholesterol Screening…………………… 40 30,000
Breast cancer screening in the past
2 years ……………………..…………………
Chlamydia screening……………………
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52. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Departments used BC/BS FEHBA standard plan for
comparative purposes:
· BC/BS covers most of preventive services listed in the Task Force and
Advisory Committee recommendations;
· The Departments estimated that adding coverage for genetic
screening and depression screening would increase benefits an
estimated .10 percent;
· Adding lead testing, autism testing and oral health screening would
increase insurance benefits by an estimated .02 percent; and
· This results in a total average increase in insurance benefits for these
services of .12 percent, or just over $4 per insured person.
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53. HEALTH CARE REFORM 2011 Eastern Claims Conference
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· Interim final regulations make clear that a plan or issuer is not
required to provide coverage or waive cost-sharing requirements
for any item or service that has ceased to be a recommended
preventive service.
· Other requirements of Federal or State law may apply in
connection with ceasing to provide coverage or changing cost-
sharing requirements for any such item or service. For example,
PHS Act section 2715(d)(4) requires a plan or issuer to give 60 days
advance notice to an enrollee before any material modification will
become effective.
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54. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· On June 14, 2010, the Department of Health and Human Services
(“HHS”), the Department of Labor (“DOL”), and the Internal
Revenue Service (“IRS”), jointly released an “Interim Final Rule for
Group Health Plans and Health Insurance Coverage Relating to
Status as a Grandfathered Plan under the Patient Protection and
Affordable Care Act” (the “Rule”).
· The Rule addresses the changes an insurer or plan sponsor may
make to health insurance coverage or a group health plan without
loss of its “grandfather” status under PPACA and what
administrative steps a plan must take to maintain “grandfather”
status.
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55. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
· To be a grandfathered plan, the policy or group health plan must have
had at least one individual enrolled in coverage on March 23, 2010, and
the policy or plan must have continuously covered someone since March
23, 2010 (even if not the same individuals). Any new policy, certificate, or
contract of insurance (versus renewal) issued after March 23, 2010 is not
grandfathered.
· If a plan moves from Insurer A to Insurer B (for insured benefits) after
March 23, 2010 – the Plan is no longer grandfathered.
· Grandfathered status applies separately to each benefit package offered
under a policy or plan.
· If a plan offers three options: Option A (self-funded), Option B (insured),
Option C (insured). The Plan replaces the insurer for Option C. Option C
is no longer grandfathered, but Option A and B still are grandfathered
(subject to other grandfather rules).
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56. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
The Rule provides the following changes will cause a policy or plan
to lose its grandfathered status:
· Elimination of Particular Benefit: A policy or plan will lose its grandfathered status if it
eliminates all or substantially all benefits to diagnose or treat a particular condition
(including a necessary element to diagnose or treat a condition).
· Increase in Coinsurance: A policy or plan will lose grandfather status if it increases its
coinsurance percentage by any amount above the level at which it was set on 3/23/10.
· Increase in Copayment: A policy or plan will lose its grandfather status if it increases a
copayment for any service by more than the greater of: (1) $5 (adjusted for medical
inflation), or (2) medical inflation plus 15%, as measured from 3/23/10. The rule contains a
complex formula and examples that illustrate how to apply this requirement.
· Decease in Employer Contribution: A policy or plan will lose grandfather status if an
employer (or employee association) decreases its contribution rate toward the cost of any
tier of coverage (e.g., self or family) by more than 5 percent below the contribution rate on
March 23, 2010.
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57. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
The Rule provides the following changes will cause a policy or plan
to lose its grandfathered status:
· No Previous Limits: A policy or plan that did not impose an overall annual or
lifetime limit on the dollar amount of all benefits on March 23, 2010, will lose
grandfather status if the policy or plan thereafter imposes an overall annual
limit on the dollar value of benefits.
· Previous Lifetime Limits: A policy or plan that imposed an overall lifetime limit
on the dollar amount of all benefits, but no annual limit, will lose grandfather
status if the policy or plan thereafter imposes an overall annual limit on the
dollar value of benefits that is lower than the dollar value of the lifetime limit on
March 23, 2010.
· Previous Annual Limits: A policy or plan that imposed an overall annual limit on
the dollar amount of all benefits will lose grandfather status if the policy or plan
thereafter decreases the dollar value of the annual limit, regardless of whether
the plan also imposed a lifetime limit on March 23, 2010. 57
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· An insurer or plan may add new employees (whether newly hired
or newly enrolled) after March 23, 2010, without loss of
grandfather status. Employees, for example, may move between
benefit options at annual enrollment without affecting the
grandfather status of either option.
· Plans also may transfer employees from one plan to another plan
without impacting grandfather status, as long as there is a bona
fide employment – based reason for the transfer. Changing the
terms or cost of coverage is not a bona fide employment-based
reason. Specifically with respect to mergers and acquisitions, the
Rule states that if the “principal purpose” of a merger, acquisition,
or restructuring is to cover new individuals under a grandfathered
plan, the plan will lose its grandfathered status.
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· The Rule provides that in order to maintain grandfathered status, insurers and
plans must maintain records documenting policy or plan terms that were in
effect on March 23, 2010, and any other documents necessary to verify, explain,
or clarify its status as grandfathered plan. The insurer or plan must make
records available upon request. Participants, beneficiaries, subscribers, or state
or federal agencies must be able to inspect such documents to verify the plan’s
status as a grandfathered plan.
· To maintain grandfathered status, an insurer or plan must include a statement,
in any plan materials provided to participants that describe benefits, that the
insurer or plan “believes” it is grandfathered under PPACA. Additionally, the
insurer or plan must provide contact information for questions and complaints.
The plan administrator’s contact information must be provided, along with
information for the DOL (in the case of an ERISA plan) or HHS (for individual or
nonfederal government plan). The Rule provides model language that insurers
and plans may use to satisfy this disclosure obligation.
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60. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Rule also includes some transition rules for plans that already
made changes prior to publication of the regulation.
· Changes Adopted Prior to March 23, 2010: the Rule provides that a policy or
plan will not lose grandfather status based on changes that would otherwise
cause a loss of such status, if such changes were adopted before March 23, 2010
(even if they take effect after March 23, 2010) so long as such changes were
adopted pursuant to a legally binding contract, insurance filing, or written plan
amendment.
· Good Faith Compliance: the Preamble to the Rule states that for plan changes
adopted after March 23, 2010, but before issuance of the Rule, which “only
modestly exceed” the parameters established by the Rule, the agencies will
“take into account good-faith efforts to comply with a reasonable interpretation
of [PPACA]” in deciding whether such changes have caused the policy to lose
grandfathered status.
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61. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
The Rule also includes some transition rules for plans that already
made changes prior to publication of the regulation.
· Grace Period: For more significant changes to policy or plan
adopted after March 23, 2010, but before the Rule’s issuance,
which contravene the parameters established by the Rule, the
insurer or plan sponsor may revoke such change by the first plan
year beginning on or after September 23, 2010, and not lose
grandfather status. If such changes are not revoked or modified,
then the plan will lose grandfathered status.
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62. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
3/23/2010 PPACA Passed
Florida v. DHHS
Virginia v. Sebelius
Liberty University, Inc. v. Geithner
Thomas More Center v. Obama
3/24/2010 Bellow v. Sebelius
New Jersey Physicians, Inc. v. Obama
3/25/2010 Taitz v. Obama
3/26/2010 Assoc. of American Physicians and Surgeons,
Inc. v. Sebelius
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63. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
3/30/2010 Reconciliation Act Passed 5/14/2010 Baldwin v. Sebelius
4/2/2010 Walters v. Holder 6/3/2010 Physicians Hospitals of
4/7/2010 Calvey v. Obama America v. Sebelius
4/8/2010 Shreeve v. Obama 6/9/2010 Mead v. Holder
4/12/2010 Goudy-Bachman v. DHHS 7/7/2010 Kinder v. Dept. of Treasury
4/22/2010 Fountain Hills Tea Party 7/26/2010 Sissel v. DHHS
Patriots, Inc. v. Sebelius 8/12/2010 Coons v. Geithner
4/27/2010 Burlsworth v. Holder 8/31/2010 Independent American Party of
5/4/2010 Peterson v. Obama Nevada Eagle Forum v. Obama
5/12/2010 U.S. Citizens Association 9/20/2010 Purpura v. Obama
v. Obama 1/25/2011 Pruitt v. Sebelius
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64. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Plaintiffs
29 States (AL; AK; AZ; CO; FL; GA; IA; ID; IN; KS; LA; ME;
MI; MO; MS; ND; NE; NV; OH; OK; PA; SC; SD;
TX; UT; VA; WA; WI; WY)
49 Individuals (plus 2 putative classes)
9 Trade Associations / Public Interest Groups
3 Physician Groups
3 U.S. Representatives
29 State Legislators
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65. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Defendants
Barack Obama, U.S. President
Eric Holder, U.S. Attorney General
Timothy Geithner, U.S. Dept. of Treasury
Kathleen Sebelius, U.S. Dept. of Health and Human Services
Hilda Solis, U.S. Dept. of Labor
Harry Reid, Senate Majority Leader
Nancy Pelosi, Speaker of the House (former)
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66. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Procedural: Tax Bill Must Originate in House
“All bills for raising Revenue shall originate in the House of
Representatives; but the Senate may propose or concur with
Amendments as on other Bills.”
U.S. Constitution, Art. I, Sec. 7
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67. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Procedural: House and Senate Must Pass Same Bill
“Every Bill which shall have passed the House of Representatives and
the Senate, shall, before it become a Law, be presented to the
President of the United States; If he approve he shall sign it, but if
not he shall return it, with his Objections to that House in which it
shall have originated, who shall ... proceed to reconsider it.”
U.S. Constitution, Art. I, Sec. 7
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68. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Procedural: President Must be Natural Born Citizen
“No person except a natural born Citizen, or a Citizen of the United
States, at the time of the Adoption of this Constitution, shall be
eligible to the Office of President...”
U.S. Constitution, Art. II, Sec. 1
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69. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Powers of Congress: General Welfare Clause
“The Congress shall have Power To lay and collect Taxes, Duties,
Imposts and Excises to pay the Debts and provide for the common
Defence and general Welfare of the United States...”
U.S. Constitution, Art. I, Sec. 8
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70. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Powers of Congress: Commerce Clause
“The Congress shall have Power . . . To regulate Commerce with
foreign Nations, and among the several States, and with the Indian
Tribes.”
U.S. Constitution, Art. I, Sec. 8
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71. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Powers of Congress: Direct Taxation Clause
“No capitation, or other direct, Tax shall be laid, unless in Proportion
to the Census or Enumeration herein before directed to be taken.”
U.S. Constitution, Art. I, Sec. 9
“...all Duties, Imposts and Excises shall be uniform throughout the
United States.”
U.S. Constitution, Art. I, Sec. 8
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72. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Freedom of Religion
“Congress shall make no law respecting an establishment of religion,
or prohibiting the free exercise thereof...”
U.S. Constitution, First Amendment
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73. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Freedom of Speech
“Congress shall make no law respecting an establishment of religion,
or prohibiting the free exercise thereof; or abridging the freedom of
speech...”
U.S. Constitution, First Amendment
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74. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Freedom of Association
“Congress shall make no law respecting an establishment of religion,
or prohibiting the free exercise thereof; or abridging the freedom of
speech...or the right of the people to peaceably assemble...”
U.S. Constitution, First Amendment
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75. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Privacy
“The right of the people to be secure in their persons, houses, papers, and
effects, against unreasonable searches and seizures, shall not be violated,
and no Warrants shall issue, but upon probable cause, supported by Oath
or affirmation, and particularly describing the place to be searched, and
the persons or things to be seized.”
U.S. Constitution, Fourth Amendment
“The enumeration in the Constitution, of certain rights, shall not be
construed to deny or disparage others retained by the people.”
U.S. Constitution, Ninth Amendment
“The powers not delegated to the United States by the Constitution, nor
prohibited by it to the States, are reserved to the States respectively, or to
the people.” U.S. Constitution, Tenth Amendment 75
76. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Due Process
“No person shall be . . . Deprived of life, liberty, or property, without
due process of law.”
U.S. Constitution, Fifth Amendment
“Nor shall any State deprive any person of life, liberty, or property,
without due process of law.”
U.S. Constitution, Fourteenth Amendment
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77. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Takings Clause
“. . . nor shall private property be taken for public use, without just
compensation.”
U.S. Constitution, Fifth Amendment
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78. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Equal Protection
“No state shall . . . Deny to any person within its jurisdiction the
equal protection of the laws.”
U.S. Constitution, Fourteenth Amendment
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79. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Individual Freedoms: Involuntary Servitude
“1. Neither slavery nor involuntary servitude, except as a
punishment for crime whereof the party shall have been duly
convicted, shall exist within the United States, or any place subject
to their jurisdiction...”
U.S. Constitution, Thirteenth Amendment
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80. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
State Rights: Uniformity
“...all Duties, Imposts and Excises shall be uniform throughout the
United States.”
U.S. Constitution, Art. I, Sec. 8
“No Preference shall be given by any Regulation of Commerce or
Revenue to the Ports of one State over those of another...”
U.S. Constitution, Art. I, Sec. 9
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81. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
State Rights: Federalism
“The powers not delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the States
respectively, or to the people.”
U.S. Constitution, Tenth Amendment
81
82. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: PPACA is Constitutional
Liberty University, Inc. v. Geithner Appeal (4th Circuit)
W.D. Virginia, Case No. 6:10-cv-00015
“Congress acted in accordance with its constitutionally delegated powers under
the Commerce Clause when it passed the individual and employer coverage
provisions of the Act.”
“The penalty provisions, as ‘mere incident[s] of the regulation of commerce, ...
are not considered taxes.”
“Congress could have rationally believed that the religious conscience objection to
the requirement to purchase individual health care coverage would alleviate
interference with religious adherents’ ability to exercise their faith.”
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83. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: Cases Dismissed (Appeal Pending)
New Jersey Physicians, Inc. v. Obama Appeal (3rd Circuit)
District of New Jersey, Case No. 2:10-cv-01489
Liberty University, Inc. v. Geithner Appeal (4th Circuit)
W.D. Virginia, Case No. 6:10-cv-00015
Thomas More Law Center v. Obama Appeal (6th Circuit)
E.D. Michigan, Case No. 2:10-cv-11156
Baldwin v. Sebelius Appeal (9th Circuit)
S.D. California, Case No. 3:10-cv-01033
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84. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: Cases Dismissed (No Appeal Pending)
McKenzie v. Shaheen Case Dismissed 5/26/2010
D. New Hampshire, Case No. 1:10-cv-00167
Anderson v. Obama Injunction Denied 7/28/2010
E.D. Michigan, Case No. 2:10-cv-11156 (Appeal Dismissed 9/8/2010)
Shreeve v. Obama Case Dismissed 11/4/2010
E.D. Tennessee, Case No. 1:10-CV-71
U.S. Citizens Association v. Sebelius Speech/Association/Privacy
E.D. Ohio, Case No. 5:10 CV 1065 Claims Dismissed 11/22/2010
Bryant v. Holder Case Dismissed 2/3/2011
S.D. Mississippi, Case No. 2:10-CV-76-KS-MTP 84
85. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: Cases Dismissed Voluntarily
Sollars v. Reid Dismissed 4/2/2010
N.D. Indiana, Case No. 1:09-CV-361
Burlsworth v. Holder Dismissed 8/8/2010
E.D. Arkansas, Case No. 4:10-CV-258
Trial Court Decisions: Dismissal Forthcoming
Physician Hospitals Association v. Sebelius
E.D. Texas, Case No. No. 6:10-cv-277
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86. HEALTH CARE REFORM 2011 Eastern Claims Conference
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The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: PPACA is Unconstitutional
Virginia v. Sebelius Appeal (4th Circuit)
E.D. Virginia, Case No. 3:10-cv-00188
“Neither the Supreme Court nor any federal circuit court of appeals
has extended Commerce Clause powers to compel an individual to
involuntarily enter the stream of commerce by purchasing a
commodity in the private market.”
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87. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: PPACA is Unconstitutional
Virginia v. Sebelius Appeal (4th Circuit)
E.D. Virginia, Case No. 3:10-cv-00188
“...without the benefit of extensive expert testimony and significant
supplementation of the record, this Court cannot determine what, if
any, portion of the bill would not be able to survive independently.
... [¶] Accordingly, the Court will sever only [the individual mandate]
and directly-dependent provisions.”
87
88. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: PPACA is Unconstitutional
Florida v. DHSS Appeal to 11th Circuit
N.D. Florida, Case No. 3:10-cv-00091 (Expected)
“It would be a radical departure from existing case law to hold that
Congress can regulate inactivity under the Commerce Clause. If it
has the power to compel an otherwise passive individual into a
commercial transaction with a third party merely by asserting --- as
was done in the Act --- that compelling the actual transaction is itself
‘commercial and economic in nature, and substantially affects
interstate commerce’ [see Act § 1501(a)(1)], it is not hyperbolizing to
suggest that Congress could do almost anything it wanted.”
88
89. HEALTH CARE REFORM 2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
The Grand Design February 27, 2011 - March 1, 2011
Trial Court Decisions: PPACA is Unconstitutional
Florida v. DHSS Appeal to 11th Circuit
N.D. Florida, Case No. 3:10-cv-00091 (Expected)
“Congress’ failure to include a severability clause in the Act (or, more
accurately, its decision to not include one that had been included
earlier) can be viewed as strong evidence that Congress recognized
the Act could not operate as intended without the individual
mandate.”
“Moreover, the [government] ha[s] conceded that the Act’s health
insurance reforms cannot survive without the individual mandate.”
89
90. HEALTH CARE REFORM
Questions?
Bryan D. Bolton
Funk & Bolton
Baltimore, Maryland
Robert R. Pohls
Pohls & Associates
Walnut Creek, California
Gary Schuman
Combined Insurance Company of America
Glenview, Illinois
2011 Eastern Claims Conference
Waldorf=Astoria Hotel · New York City
February 27, 2011 - March 1, 2011