Government and US FlagRepublican leaders in the U.S. House of Representatives have introduced a bill intended to replace certain key provisions contained within the Affordable Care Act (commonly referred to as “Obamacare”). The Republican-sponsored legislation is named The American Health Care Act (“AHCA”). President Donald J. Trump has placed his support behind the bill.

Republicans revealed the proposed language of the AHCA to the public last week. And, late last week, the bill overcame its first major hurdle by passing through two House committees on party-line votes. The future of the AHCA, as currently written, however, remains uncertain. Most, if not all, Democrats in Congress are expected to oppose the bill. Meanwhile, Republicans are experiencing difficulties in obtaining the support of different factions of their Congressional membership. Some Republicans argue that the AHCA does not go far enough to dismantle the ACA, while other Republicans are concerned about the effects that the AHCA will have on those with lower incomes. Despite Republican control of Congress, the bill will not become law without the support of many of these Republicans.

House Republican leaders created the AHCA under the budget reconciliation process, and, therefore, its scope is limited to amending certain tax provisions in the ACA. Other aspects of the ACA would have to be amended or repealed through alternative legislative measures. Nevertheless, employers should be aware of a couple of the effects that the AHCA would have on them, if enacted:

  • First, the AHCA would effectively eliminate the tax penalties on employers for failing to provide, and on individuals for failing to maintain, minimum essential coverage, as currently required under the ACA. Although the bill would not dispose of the insurance coverage requirements, without the corresponding tax penalties, they would not have their desired effects. Because the employer mandate would technically remain, employers would have to continue to follow the cumbersome ACA reporting requirements, at least for now.
  • Second, the AHCA would leave the 40-percent excise tax on high-cost employer-sponsored health insurance plans in place. This excise tax is commonly referred to as the “Cadillac Tax,” and this aspect of the ACA has been of particular interest to unionized employers whose union employees have negotiated for strong health insurance coverage. Under the AHCA, the Cadillac Tax would now take effect in 2025, instead of 2020. Unlike previous iterations of the bill, however, there are no caps on tax exclusions for such plans.

The AHCA already underwent significant markup at the end of last week and will certainly experience further revisions, as other House Committees review the proposed legislation. The soonest that the AHCA could be placed before the full House is late March. The bill would then proceed to the Senate.

The U.S. Congressional Budget Office just released its report on the AHCA. According to the CBO, the AHCA would result in fewer insured Americans but would reduce the deficit and would eventually reduce insurance premiums, though not initially.

family-getty-crop-600x338As the results of the November 2016 election confirmed, there is a growing push throughout the country to require employers to provide certain types of paid leave to their employees. To date, we have witnessed the imposition of paid leave requirements through ballot initiatives, legislation, and executive orders. The most popular forms of paid leave currently being discussed include paid sick leave and paid parental leave. Some of the recent paid leave initiatives also cover things such as time off for child care under certain circumstances and domestic violence or other similar situations.

In terms of paid sick leave, voters in two states—Arizona and Washington—approved ballot initiatives last month requiring employers to provide paid sick leave to employees who work within those states. Arizona and Washington now join five other states (California, Connecticut, Massachusetts, Oregon, and Vermont) and the District of Columbia, all of which currently require or soon will require employers to provide some type of paid sick leave to their employees. Several counties and municipalities throughout the country have also imposed such requirements on employers.

With respect to paid parental leave, as we previously noted, President-Elect Donald J. Trump has offered a proposal whereby employers will be required to provide their female employees with paid maternity leave. Male employees are not included in President-Elect Trump’s proposal. Should President-Elect Trump follow through on his proposal, it will be the first paid maternity leave mandated at the federal level for private employers. It will also follow similar requirements imposed, or promised to be imposed, in a handful of states (California, New Jersey, New York, Rhode Island, and Washington), the District of Columbia, and a few other major cities in the country (e.g., New York and San Francisco).

Notably, and consistent with the trends discussed above, Democrats introduced a bill in the Ohio legislature earlier this year that would have required employers to provide twelve weeks of paid family leave to Ohio employees. Although the bill did not garner much support in the Republican-dominated Ohio legislature, should Republicans at the federal level suddenly support President-Elect Trump’s paid leave proposal, or other similar proposals, there may be renewed interest amongst Republicans for similar legislation at the state level.

In summary, this year’s election should remind employers that paid leave requirements will likely be imposed upon them in the near future, if they are not already required to provide certain forms of paid leave to their employees now. With both political parties expressing support for paid leave requirements, future changes in this regard are highly probable.

Sick-Leave-Sign-2-smallThe U.S. Department of Labor recently released its final rule requiring federal contractors and subcontractors to provide their employees with paid sick leave each year. This rule implements Executive Order 13706, which President Obama signed in September 2015. The rule takes effect on November 29, 2016, though generally it applies only to new contracts that are awarded on or after January 1, 2017. Nevertheless, covered contractors should begin taking steps to comply with the rule soon.

Under the rule, employees are entitled to one hour of paid leave for every 30 hours worked, up to a maximum of 56 hours of leave per year. Alternatively, contractors may provide 56 hours of leave to employees at the beginning of each year. In either case, the leave must generally carry over from year to year. In some situations, however, the amount of available leave can be capped at 56 hours.

Employees may use the leave for their own illness, preventative treatment or other health care needs, or to care for a family member or domestic partner. Employees may also use the leave in certain domestic violence, sexual assault, or stalking situations.

The rule does not apply to all employees of a covered contractor, but only to those who perform work in connection with a covered contract. There is also a short-term exemption for employees who are governed by a collective-bargaining agreement, if the CBA provides at least 56 hours of paid time off that may be used for sickness- and health- related reasons. These contractors have until the CBA expires or January 1, 2020 (whichever comes first) to comply with the rule.

Because non-compliance can result in significant penalties, including a possible three-year debarment, contractors should review their existing sick leave policies and ensure compliance with the rule before it takes effect. Contractors should also familiarize themselves with the various procedures governing leave administration, including leave tracking, employee notice, and health care-provider certifications.

Many employers have turned to employee wellness programs to curtail rising health care costs and improve productivity. These wellness programs typically involve health screenings and/or services to aid in reducing health risks (e.g. tobacco use, blood pressure), often coupled with financial incentives for the employee’s participation.

Over the past few years, the Equal Employment Opportunity Commission (EEOC) has taken aim at wellness programs and brought a number of lawsuits challenging their legality under discrimination laws such as the Americans with Disabilities Act of 1990 (ADA) and the Genetic Information Nondiscrimination Act of 2008 (GINA), suffering a string of defeats (click here and here) in the process. Last month, the EEOC issued final rules addressing the interaction between wellness programs and the ADA and GINA, and explaining how employers can comply with these laws. The final rules have been met with criticism by many who believe that the rules are inconsistent with the provisions supporting broader use of wellness plans and incentives contained in the Affordable Care Act (ACA). Still, these rules, found here and here become effective in January 2017.

The final rules require, among other things, that employers provide an annual notice to employees, informing them “what information will be collected, how it will be used, who will receive it, and what will be done to keep it confidential.” Employers with wellness programs must provide this notice to employees by the first day of the plan year beginning on or after January 1, 2017. It is important that employers either incorporate the required notice information into those already used (such as for HIPAA) or provide a separate notice with this information, otherwise their wellness programs will not be deemed voluntary. On June 16, 2016, the EEOC released a sample notice for employers to use in connection with wellness programs.

Ebola Hemorrhagic Fever (also known as Ebola or EVD) has caused significant concerns for Ohio employers, particularly as the connections between our local workforce and Dallas healthcare worker April Vinson continue to come to light. Vinson, who has tested positive for the virus, reportedly traveled by air to Cleveland on October 10 and returned to Dallas on October 14. Following her return to Dallas, on October 15, she was diagnosed with EVD. Vinson’s travel activity has sparked tension, fear and in some cases panic amongst those who may have come in contact with her, directly or indirectly.

Employers have been faced with a barrage of inquiries from employees and their labor organizations seeking assurances that appropriate policies have been put in place that protect against the potential of exposure to EVD in the workplace. An employer’s response depends upon several fact specific matters and may implicate dozens of laws and regulations designed to protect employees, including the Occupational Safety and Health Act, the National Labor Relations Act, the Americans with Disabilities Act, the Family Medical Leave Act, the Health Information Portability and Accountability Act, the Fair Labor Standards Act, state workers’ compensation laws, and the federal and state antidiscrimination laws. Employers, however, can and should get out in front of the issue by taking certain proactive steps. This client alert is intended to provide practical guidance for employers as they wade through the legal quagmire that surrounds this issue.

What should I be communicating to my employees?

Effective communications are imperative to an employer’s ability to address any real or perceived concerns about workplace exposure to EVD. Employees want to know how their employer will handle the situation if harm becomes imminent.

There are a number of measures an employer can take to better educate employees about EVD. First, if a significant number of employees have expressed concern about the potential for exposure to EVD, consider conducting an informational meeting to discuss the facts as we know them today. Provide information about how the virus spreads and any preventative measures that should be taken (i.e., washing hands frequently, using hand sanitizer, covering open cuts and wounds, etc.). Reassure your employees that the risk of an outbreak in the United States is very low.

According to guidance from the Centers for Disease Control (CDC), EVD is only transmitted through contact with blood and other bodily fluids of an infected person. People can also become infected from indirect contact by having broken skin or mucous membranes come in contact with materials or utensils contaminated with the body fluids of an infected person. Casual contact, however, generally does not pose a risk of infection. The CDC and other public health officials remain confident that the U.S. will be able to stop further spread of EVD through thorough case review, isolation of infected individuals, contact tracing of people exposed to the virus, and isolation of contacts if they develop symptoms.

If you work in an industry where bloodborne pathogen training is required, review that training with your employees. You do not need to develop new training, as the bloodborne pathogen training is designed to cover all potentially infectious diseases, including Ebola. Remind your employees that they have already been trained to use universal precautions, review the training so that it is fresh in their minds, and answer any additional questions they may have. This should help to put their minds at ease.

You also may want to prepare your Human Resources personnel and/or supervisors on how to respond to employee questions and concerns in an appropriate manner. Consider designating a point person or team to disseminate additional information if and when it becomes available. This will help ensure that a consistent message is conveyed to all employees and that employees’ concerns are treated respectfully and consistently.

What can I be doing now to help my employees?

The CDC and the Ohio Department of Health have issued various protocols and guidelines pertaining to the exposure and spread of EVD.  It is important to continuously review and monitor the latest of these publications.

Review your emergency preparedness plans. Have an idea of how you are going to respond if an employee falls sick on the job. Require employees to immediately report any potential symptoms of Ebola. Collaborate with health authorities regarding issues or questions that may arise if you were to have a reasonable basis for believing that an employee may have been exposed to Ebola or may actually have the virus. Consider whether you will need an isolation room, a disinfecting strategy and a method of contact tracing with respect to an infected or exposed employee. Finally, although employee medical information needs to be kept confidential, if one of your employees is diagnosed with EVD, you will need to immediately communicate with all other employees to protect their health and safety.

If you work in the healthcare industry, keep abreast of the most recent guidelines issued by the CDC for healthcare workers and train affected employees on the recommended infection control precautions. Labor and trade organizations representing healthcare workers have called for the following universal practices:

  • Provide the highest optimal standard of personal protective equipment (PPE) for healthcare workers;
  • Provide extensive hands-on training, ongoing education and review of PPE, equipment and infection control protocols;
  • Identify adequate numbers of appropriately prepared staff to safely meet patient needs.

In addition, because other infectious diseases may present symptoms similar to EVD, it is important to apply standard measures of precaution in all healthcare facilities – such as prevention of needle sticks and sharps injuries, safe phlebotomy, hand hygiene, rational use of PPE, regular and rigorous environmental cleaning, decontamination of surfaces and equipment and safe management of soiled linen and health care waste. It is also a good idea to review respiratory safety, including the proper fit an wear of a respirator, as well as proper cleaning methods.

As information relating to EVD is quickly changing, it is necessary within the healthcare industry to designate a point person or team capable of providing care to a patient who may present signs of infection. This point person, or team, also should be tasked with keeping abreast of the latest recommended procedures and disseminating that information to other caregivers.

How do I manage requests for leave?

Employees have the right to remove themselves from work situations if they reasonably believe that imminent, serious danger to their life or health exists. The OSH Act requires employers to provide employees a workplace that is “free from recognized hazards that are causing or likely to cause death or serious physical harm.” Employees who voice safety concerns also have protection from retaliation. Employers also may face intentional tort or workers’ compensation claims for failing to provide a safe work environment. Each request for leave should be reviewed separately to determine whether leave is appropriate under the circumstances.

In addition, employers generally are not required to pay employees for any such requested leave. It is important to review applicable leave of absence policies and collective bargaining agreements to determine whether paid leave ought to be provided. Employers also will need to insure that any deductions from pay do not affect an exempt employee’s status under the Fair Labor Standards Act.

Where can I find more information about Ebola? 

There are many organizations that provide up to date information about Ebola to the general public including:

Center for Disease Control
World Health Organization
Ohio Department of Heatlh
For information on bloodborne pathogen policies and procedures, please visit www.osha.gov.

Amid the ObamaCare Supreme Court decision watch, the Department of Health and Human Services announced the initial calculations of medical loss ratios (MLR) for the nation’s insurance companies.  Under the Patient Protection and Affordable Care Act, insurers must spend at least 85% of their premium income on paying benefits (80% in the individual and small group markets.)  If they spend a lower percentage, they must provide rebates to their customers.  For employer plans, the rebates are split between the employers and employees based on the percentage of premiums paid by each.  For individuals, the rebate goes to the policyholder.  The rebates are to be paid prior to August 1, 2012, based on the 2011 results (of course subject to what the Supreme Court decides about the law as a whole.)  The HHS announcement provides a state-by-state summary of the rebate amounts, for individual, small group and large employer plans.

The HHS announcement states that insurers who failed to meet the MLR standards will rebate more than $1.1 billion to 12.8 million policyholders, with an average return of $151 per household.  HHS thus gives the total number of individuals affected, but calculates the average payment on a “per household” basis, so care must be taken to gain a clear understanding of the numbers.  In addition, the numbers are not for all policyholders, but only for those in plans where the insurer failed the MLR test.  Consumers Union, the parent of Consumer Reports, has a list of insurers by state and the amounts by which they exceeded the MLR limits.  The list for Ohio is as follows:

Ohio
Individual Market

  • John Alden Life Ins Co: $380,135.00
  • Time Ins Co: $409,486.00
  • Humana Ins Co: $8,900.00
  • Companion Life Ins Co: $1,062.00
  • Mega Life & Hlth Ins Co The: $381,269.00
  • Community Ins Co: $6,633,894.00
  • Total: $7,814,746.00

Small Employer Market

  • Trustmark Life Ins Co: $1,027,486.00
  • John Alden Life Ins Co: $1,008,037.00
  • Humana Ins Co: $77,670.00
  • UnitedHealthcare Ins Co of the River: $700,208.00
  • Humana Hlth Plan of OH Inc: $99,427.00
  • Total: $2,912,828.00

The MLR test is one of the more controversial components of the Affordable Care Act, since, while it sounds fine on the surface to keep insurance companies from spending too much of their premiums on administrative costs, there are both unintended consequences and problems with the definitions.  For example, since the MLR is a ratio, there is a significant incentive for carriers to increase rates.  (15% of $1000 is greater than 15% of $500.)  At least some of the increases in rates since the passage of the Affordable Care Act can be attributed to this effect. As another example, anti-fraud investigation and enforcement efforts by insurers are treated as administrative costs.  Since one of the main drivers of cost increases in health care is fraud, treating fraud prevention as an administrative cost discourages prevention.  This also tends to increase the cost of health care.

In any case, insurers who fail the test must provide their rebates through one of the following methods: a lump sum check in the mail; a lump sum credit to the debit or credit card account from which the payments were made; a credit against 2012 premiums; or a payment through the employer using one of those methods.  If the insurer provides the rebates to the employer, the employer must then go through the exercise of calculating the portion due to its employees and providing them with their appropriate shares. 

This post was coauthored by Inna Shelley.

Princeton economics professor, Uwe E. Reinhardt, recently posted an interesting article on the New York Times “Economix” blog entitled “The Fork in the Road for Health Care.” The post discusses the seeming inevitability of healthcare rationing and attributes rising healthcare costs under employer-provided health policies to rising healthcare prices rather than increased utilization of healthcare services.

For example, the Milliman Medical Index tracking average annual medical costs for a typical family of four has found that average healthcare costs increased from $8,414 to $20,728 between 2001 and 2012, with a 6.9% increase in the prior year alone. Given the fact that about 50% of U.S. households have an income of $50,000 or less, the expected average out-of-pocket family contribution of $8,584 in 2012 begs the question of how our society will handle the rising costs.

Dr. Reinhardt outlines several potential options, including government action to cap health care costs or segregating health care into income classes by eliminating tax preferences and subsidies for high-income groups, setting up “reference pricing” arrangements that tie reimbursement to regional low-cost rates, utilizing high-deductible policies and coinsurance for the middle class, and establishing public health systems for low-income persons similar to the Veterans Administration system to deliver services and control costs.

Regardless of which option society chooses down the road, healthcare rationing by income level may be inevitable (many would say it exits already). As Dr. Reinhardt writes, economists understand that the employer’s portion of healthcare costs is often effectively shifted back to employees in the form of lower pay increases. Thus, shifting increasing healthcare costs to employers is usually counter-productive as these cost increases are almost always offset by stagnant wages and reduced bonuses and are ultimately indirectly shouldered by employees.

At the same time, another study recently released by the Commonwealth Fund looks at individual plans. These plans are generally medically underwritten and are purchased by persons using their own funds. Individual purchasers can buy whatever coverage they choose, since once they meet the underwriting standards, they can select any plan they prefer, so long as they are willing to pay the cost.

The new study finds that over half of the individual policies currently in force will be below the minimum coverage allowed to be provided on the health insurance exchanges under the Patient Protection and Affordable Care Act. Thus, many current individual policyholders will be forced to purchase plans with higher benefits—and consequently, higher costs. As a result, the individual coverage markets will face considerable upward price pressure, as half of the current purchasers must give up coverage they now like in order to buy more expensive options.

Dr. John Goodman, of the Health Alert blog, has written an excellent blog post on the various options for covering health costs, besides conventional third-party insurance (FSA’s, HSA’s, HRA’s, Roth HSA’s and even 401k’s).  The current system is clearly haphazard, and could be improved without legislation.  Individual savings options will become more important in the coming years, whether the Affordable Care Act is upheld, overturned or partially preserved.  It would be a good use of resources to make the current savings options for paying health expenses more effective and more coordinated.

As indicated in our previous post, the Congressional Budget Office and the Joint Committee on Taxation have been examining the impact of the Patient Protection and Affordable Care Act (“Affordable Care Act” or “Obamacare”) on employer-provided health insurance, and the impact of that upon the costs of the Act.  They have now released a summary of their study, which finds that the more employers dump their employees into the Exchanges, the less costly the Act will be in terms of adding to the federal deficit.  The reason is that the study assumed that all the employers who stop providing insurance would add the equivalent amount to employee pay.  Therefore, the employers would pay more payroll tax and the employees would pay more payroll tax and more income tax, thus overcoming the increase in subsidies provided through the exchange.

The report summary states the key conclusions as follows:

CBO and JCT’s Key Findings

  • CBO and JCT continue to expect that the ACA will lead to a small reduction in employment-based health insurance. That projection arises from the agencies’ modeling of the many changes in opportunities and incentives facing employers and employees under the ACA, and it is consistent with the findings of other analysts who have carefully modeled the nation’s health insurance system.
  • Significant changes in some of the key assumptions underlying the estimates lead to somewhat higher or lower projections of the change in employment-based health insurance and the budgetary impact of the ACA. However, differences in the projected change in employment-based health insurance tend to have limited effects on the projected budgetary impact of the law because changes in the availability and take-up of such insurance affect the federal budget through several channels that are partly offsetting. Indeed, one scenario examined here shows that larger reductions in employment-based health insurance than expected by CBO and JCT might lower rather than raise the cost of the insurance coverage provisions of the ACA.
  • In CBO and JCT’s judgment, a sharp decline in employment-based health insurance as a result of the ACA is unlikely and, if it occurred, would not dramatically increase the cost of the ACA.

The “small reduction” in employees provided with employer-based coverage is 3 to 5 million.  In some scenarios modeled, the reduction was a total loss of employer-based coverage of 20 million people.  Again, the assumptions in the study were that the lost benefit costs would be replaced by salaries and wages:

If a firm chose not to
offer insurance coverage under the ACA, some of its workers and their families might enroll in Medicaid or CHIP or be eligible to receive subsidies through the insurance exchanges; as a result, the cost of those programs would increase. At
the same time, the reduction in that firm’s compensation to workers that was
provided in the form of health benefits would generally be offset by an increase in
the compensation it provided in the form of wages and salaries. Because health benefits are generally not taxed but wages and salaries are, that shift in the
composition of compensation would raise federal revenues. In addition, the federal government would generally receive penalty payments from the employer and from any employees who ended up without health insurance.

It is also worth noting that the issue for this study is the effect upon the deficit, not the cost of the provision of coverage.  It is arguable that there could be deficit offsets in the form of increased taxes, but there can be no dispute that having billions of premium dollars of coverage no longer paid by employers and then provided through the exchanges, with subsidies, will affect the cost of the Affordable Care Act.  Even as to the deficit, if employers (especially small employers not subject to employer penalties) simply get out of the health care business without increasing their pay rates the anticipated offsets for higher income and payroll taxes simply will not occur and the deficit will increase.

The CBO has issued a new estimate for the costs of the Patient Protection and Affordable Care Act (“PPACA”). Compared with the original projected total cost of approximately $900 billion over a ten year timeframe, the new estimate is nearly double.  At the same time, the impact on the deficit is more positive than in prior estimates, due, in part, to the inability or unwillingness of small businesses to take advantage of the tax incentives provided in the law  for small employers who provide coverage for their employees. Since the time-frame of the estimate is from the present until ten years in the future (2012-2021), it covers an additional year of full implementation of the law, compared with the 2011-2020 estimate.  The entire report is worth examining, since it demonstrates the changes in the many moving parts of the cost estimation process–from changes in implementation schedules, to changes in economic outlook, to changes in real-world experience compared with initial assumptions, to changes in laws and regulations.  It is also worth noting that CBO has noted the concern of many third parties as to the “rosy” estimates of the number of employers who will continue to offer health insurance to their employees after implementation of PPACA and has promised to issue an analysis “shortly”:

Some observers have expressed surprise that CBO and JCT’s previous estimates did not show a much larger reduction in the number of people receiving employment-based health insurance. CBO and JCT’s estimates take account of the expanded eligibility for Medicaid and the subsidies to be provided through the insurance exchanges, but they also recognize that the legislation leaves in place substantial financial incentives for firms to offer health insurance coverage and also creates new financial incentives for firms to offer such coverage and for many people to obtain it through their employers. Shortly, CBO will release an extensive analysis conducted with JCT of the incentives for firms to offer or not offer health insurance under the ACA, as well as a range of estimates of sources of coverage and federal budgetary outcomes that would result from the ACA under alternative assumptions about employers’ behavior.