Health Care Reform Implementation Update - February 4, 2013

by Cozen O'Connor

Several agency actions on the Affordable Care Act out of HHS and Treasury last week include proposed regulations detailing exemptions from the shared responsibility tax, such as an exemption for those who would qualify for expanded Medicaid but live in states that choose not to expand the program; a final rule that addresses the meaning of affordability with respect to employer-provided coverage; and a proposed rule to guide nonprofit religious organizations that wish to object to contraception on religious grounds. 


On Wednesday (1/30), the Departments of Health and Human Services and Treasury issued proposed rules that define who is exempt from the ACA’s shared responsibility (individual mandate) tax, how eligibility for an exemption will be determined, and how the amount of the tax will be calculated and collected.  While the general rule remains that if an individual fails to have minimum essential coverage, he or she must pay the shared responsibility tax, the proposed rules lay out nine exceptions: 1) religious groups that are opposed to the acceptance of public or private insurance benefits; 2) members of health care sharing ministries in existence since 1999; 3) incarcerated individuals confined after a final disposition of charges; 4) aliens not lawfully present in the United States; 5) members of federally recognized Indian tribes; 6) individuals without access to affordable minimum essential coverage (where the cost to the individual of coverage through an employer or the exchange exceeds 8 percent of the individual’s household income); 7) individuals whose household income is below the tax filing limit for the taxable year in which the exemption is claimed; 8) individuals who lack minimum essential coverage for one three-month period in a given year; and 9) specific enumerated hardship exemptions.

The new regulations published Wednesday (1/30) also include an answer to the question of who is eligible for premium tax credits when an employee has an offer of employment-based coverage that is "affordable" for the individual, but not for his family.  Under the ACA, an employee who is offered adequate and affordable (which under the ACA means the employee does not have to pay more than 9.5 percent modified adjusted gross household income) insurance coverage is not eligible for a premium tax credit.  This final regulation is the second final regulation on the premium tax credit issue; however, the first final regulation did not address what would happen if an employed individual could afford individual coverage for 9.5 percent or less of household income, but family coverage tipped the percentage over that number.  Under the new final rule, an employer must offer coverage for an employee and his or her children; however, the employer will not be penalized if family coverage is unaffordable so long as self-only coverage is affordable.

The new regulations also say that the IRS will not penalize low-income residents who fail to get health insurance if they live in states that decline to raise Medicaid eligibility under the Affordable Care Act.

On Friday (2/1), HHS announced a proposed rule to guide nonprofit religious organizations that wish to object to contraception on religious grounds.  According to an agency press release, the proposed rule provides an opportunity for these organizations to receive an accommodation to provide their enrollees separate contraceptive coverage with no co-pays, at no cost to the religious organization.

CMS also released a final rule on Friday (2/1) on the ACA's Sunshine Act.  The rule requires drug, device and biologic manufacturers to report to CMS payments and gifts they make to physicians and teaching hospitals each year.

CMS announced it will expand competitive bidding for durable medical equipment and supplies within Medicare, which has a projected savings of $25.7 billion for the Part B Trust Fund and $17.1 billion for beneficiaries between 2013 and 2022.  The next round of this competitive bidding program will expand the program from nine non-metropolitan areas to 91 areas, which include major cities.

On Thursday (1/31), CMS announced a new initiative with the goal of improving care and reducing costs for Medicare.  The agency selected 500 organizations to participate in the Bundled Payments for Care Improvement Initiative.  CMS will use the initiative to test how bundling payments for episodes of care results in more coordinated care for beneficiaries and lower costs for Medicare.

On Friday (2/1), Cindy Mann, the Center for Medicaid and CHIP Services Director, sent a letter to state Medicaid directors providing guidance on section 4106 of the ACA.  The provision establishes a one-percentage point increase in the federal medical assistance percentage (FMAP) as of January 1, 2013.  The increase, Mann says in the letter, will be applied to expenditures for adult vaccines and clinical preventive services to states that cover, without cost sharing, a full list of specified preventive services and adult vaccines.

Gary Cohen, one of the directors of the HHS office leading the bulk of the implementation effort, said on Thursday (1/31) that the federal marketplace (exchange) would be ready in eight months, when open enrollment begins for 2014.

According to The Hill, on Thursday (1/31), White House senior economic adviser Gene Sperling said the White House is not willing to make cuts to Medicaid but would consider cuts to Medicare.


The Healthcare Information and Management Systems Society's (HIMSS) EHR Association submitted comments to HHS advocating for a delay in the Meaningful Use Stage 3 incentive program for electronic health record systems until three years after a participating provider reaches Stage 2.  HHS has already pushed the start of Stage 2 back by a year.

The Essential Health Benefits Coalition, which is made up of business groups, health plans and health care providers, is urging HHS to follow private-sector approaches as it develops a final rule on the essential health benefits that individual and small-group plans must cover.

The U.S. Small Business Administration launched a new blog and website to educate small business owners about the ACA, breaking the law's key provisions down by how they affect different sized businesses.


Sens. Tom Coburn (R-Okla.) and Claire McCaskill (D-Mo.) announced a bill on Wednesday (1/30) that would repeal a provision of the ACA many states say allows Massachusetts hospitals to receive extra Medicare dollars at the expense of other states’ hospitals. Twenty states along with the National Rural Health Association recently called for repeal of this provision.


On Thursday (1/24) in his State of the State address, California Gov. Jerry Brown called for the state Legislature to convene a special session to review the state's compliance with the federal Affordable Care Act.

The California Hospital Association announced that nearly 400 California hospitals joined the Centers for Medicare and Medicaid Services' Partnership for Patients initiative, making California the nation's leader in the number of hospitals that have volunteered to participate in the initiative.


The 4th Circuit Court of Appeals set a February 27 deadline for Lynchburg University’s brief in Liberty University's case and scheduled oral arguments for May.  In November, the Supreme Court ordered the appeals court to consider Liberty’s claim that the Affordable care Act violates the school’s religious freedoms.  Liberty is challenging the individual mandate and the provision requiring employers to offer health insurance to their workers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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