Moratorium on Health Insurance Tax

As part of the omnibus budget bill passed by Congress and signed by the President in December of 2015, Congress implemented several delays for pending taxes under the Patient Protection and Affordable Care Act (PPACA). These delays impact the medical device tax, the “Cadillac” tax on high-cost employer health plans, and tax on health insurers.

The tax on health insurers has been delayed for one year and this moratorium is aimed at reducing the potential premium increases to consumers. This delay is for the tax due in 2017, but will have no impact on either the amount or the timing of the tax due in 2018, for calendar year 2017. The “Cadillac” tax and the medical device tax were both delayed for two years.

The health insurance industry reported that the insurer tax could have forced the health insurers to raise premiums by 3% to 4% every year. However, this delay should temporarily help keep premiums relatively stable for those receiving plans from the health exchanges, employer-based insurance, and Medicare advantage plans.  The Centers for Medicaid and Medicare Services issued a Frequently Asked Questions Memorandum on the delay, which can be found at the following link:

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Final rule on Medicaid Prescription Drug Programs

In January of 2016, the Centers for Medicare and Medicaid Services (CMS) issued a final rule on covered outpatient drugs. The rule changes the Medicaid Drug Rebate Program by the Patient Protection and Affordable Care Act (PPACA) and the overall Medicaid drug reimbursement program.  These changes have several goals, including reducing the cost to the federal and state governments and improving beneficiary access to covered outpatient drugs.

CMS claims the changes implemented will help the government save money in the Medicaid Drug Rebate Program, which had been subject to sustainability issues. One key change in the final rule is a definition of the Average Manufacture Price, which in turn gets used to determine rebates and pharmacy reimbursements subject to the federal upper limit. Similarly, the changes to the federal upper limit formula will incentivize pharmacies to use certain generic drugs. The final rules clarify many of the ambiguous sections of the Medicaid Drug Rebate Program by the PPACA, including the manufacturer reporting requirements. The rule also aligns the pharmacy reimbursement system with the actual acquisition cost of the drug.

Overall, the new incentives and changes should improve the reimbursement system and help manage drug costs. This rule becomes effective April 1, 2016, although CMS is allowing comment for 60 days after publication on certain elements of the rule. The new rule can be found at the following link:

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Amendment to the Definition of Small Employer Under the Patient Protection and Affordable Care Act.

On October 8, 2015, the President signed the Protecting Affordable Coverage for Employees (PACE) Act, amending the Patient Protection and Affordable Care Act (PPACA). The amendment modifies a portion of the small employer mandate that was set to take effect in 2016. Under the original provisions of the PPACA, the definition of a small employer would increase to 100, from 50 full time employees, on January 1, 2016.

This amendment leaves the definition at 50 full time employees, unless a state legislature acts and raises the definition to 100 full time employees. This will have a substantial impact on businesses with 51-100 full time employees because the PPACA mandates vary based upon whether an employer is a small or large employer, as defined under the act.

For the state legislatures that previously adopted laws to comply with the definition changes in 2016, the legislature will have to act in order to leave the definition of a small employer at 50 full time employees. Should the state fail to act, the definition of a small employer will change to 100 full time employees on January 1. Neither Nebraska or Iowa previously acted and the definition will remain at 50 full time employees unless the state legislature changes the definition.

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Nondiscriminatory Wellness Incentives

Federal agencies have issued final regulations for the Patient Protection and Affordable Care Act (PPACA).  Group health plans may not discriminate against individuals on the basis of health factors.  However, there is an exception to the nondiscrimination rules for wellness programs.  Wellness programs have been divided into two categories: (1) participatory wellness programs and (2) health-contingent wellness programs.

Participatory wellness programs must be set up to improve the health risk of all similarly situated individuals and not simply reward those who are already in good health.

Health contingent wellness programs must be designed to promote good health and prevent disease.  The program must not be overly burdensome, used to implicitly discriminate based on a health factor, and highly suspect in the method chosen.  The reward must allow a reasonable alternative standard, if it is unreasonably difficult because of an individual’s existing medical condition and it is medically inadvisable for an individual to attempt to satisfy the normal standard.  A plan does not need a specific reasonable alternative standard, but only the disclosure that one can be made available.

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Deadline for Patient Centered Outcomes Research (PCOR) Fee

July 31st is the deadline to pay Patient Centered Outcomes Research “PCOR” fees established under the Patient Protection and Affordable Care Act (“PPACA”),   This deadline applies to all health insurance plan sponsors and health care insurers for a plan year that ends after Sept. 30, 2012 and before Jan. 1, 2013. The fee is paid with Form 720. The IRS has recently posted an updated of such form and a payment voucher on the IRS website.

The fee will be used to fund research regarding clinical effectiveness relating to patient centered outcomes. This research institute conducts research to help assist patients, clinicians, purchasers, and policy-makers in making informed health decisions.

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The Impact of the Supreme Court’s Healthcare Ruling on Physicians

The Supreme Court’s ruling recently upholding the constitutionality of the PPACA signals the continuing expansion of the U.S. healthcare system.

The PPACA extends care to approximately 50 million formerly uninsured individuals.  The uninsured currently forgo many, if not all, of the preventative procedures available.  This will surely change as the PPACA is implemented. Although all physicians will likely see an increase in patients, the majority of the demand will be borne by primary care providers (PCPs), likely without the assistance of an increase in physicians providing primary care services.

To meet the increase in demand, physicians should start looking for investments that will increase efficiency.  As time passes, healthcare reform initiatives like EHR, ACOs, and new physician reimbursement models may become more important for physicians trying to keep up with growing demand.  Individuals providing complementary services–nurse practitioners and physicians’ assistants–are also likely to play an increasingly more significant role going forward as providers look to cut costs.

The Department of Health and Human Services (HHS) recognizes the challenges physicians face as implementation of the PPACA progresses. Signaling primary care as a central focus of the legislation, HHS recently proposed increasing Medicaid reimbursements to Medicare levels for PCPs during 2013 and 2014.  The proposal is expected to boost reimbursements by an average of 34%, incentivizing PCPs to begin preparing for the influx of new patients.  The PPACA also seeks to facilitate the expansion of services into underserved areas by increasing payments to rural healthcare providers.

Although some uncertainty still exists, one thing is certain–physicians need to start taking proactive steps to address the significant expansion of demand for their services.

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Supreme Court Upholds Individual Mandate

The Supreme Court has upheld the constitutionality of PPACA in a 5-4 ruling issued today.  The Supreme Court determined the individual insurance  mandate was not unconstitutional under the Tax Clause of the Constitution.

A key provision of PPACA was deemed unconstitutional.  Under the Act as originally drafted, the Secretary of Health and Human Services would have had the power to withdraw all Medicaid payments from any state that failed to comply with the expanded Medicaid requirements under the Act.  The Supreme Court held that this provision is unconstitutional.  As a result, the Secretary of Health and Human Services may only withhold funds disbursed under PPACA if a state chooses to participate in the program and fails to comply with its provisions.

The Supreme Court’s ruling underscores the importance of planning for the implementation of PPACA.  Several key provisions of the Act take effect in 2013.  These provisions include Medicare tax increases for individuals earning more than $200,000 per year and married persons filing jointly  earning more than $250,000 per year.  The Act also imposes a $2,500 cap on employee health flexible spending account contributions.  Beginning in 2013, employers will no longer be eligible to take a deduction for providing retiree prescription drug coverage.

Additionally, the comparative effectiveness research fee for employers sponsoring group health plans will increase in 2013.  Employers were previously required to pay a $1 fee for each participant in a sponsored group health plan.  That fee will now double in 2013, and will afterward be indexed to national health expenditures.  Employers will also be subject to additional notification requirements regarding exchange programs.  For example, employers in participating states will be required to provide employees with information about options they may have if the employer’s coverage is not affordable.  In light of the major effects that PPACA will have on group health plans and other related policies, it is crucial for employers to review these plans and policies to make sure that they comply with PPACA provisions coming into force in 2013.

Stay tuned for future blogs and articles about the PPACA once the entire opinion can be digested…

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New HHS Rule Could Lead to Boost in Medicaid Reimbursements

Medicaid reimbursements may rise for primary care physicians next year due to a recent rule proposed by the U.S. Department of Health and Human Services (HHS).  The proposed rule would require Medicaid reimbursements at Medicare levels for family medicine, general internal medicine, pediatric medicine, and related subspecialists during 2013 and 2014.

This proposal is similar to the boost in Medicare payments to primary care physicians in 2011, and aims to ensure that primary care networks are prepared for the expected rise in enrollment resulting from the implementation of the Patient Protection and Affordable Care Act (PPACA).  HHS hopes that increased payments will incentivize primary care physicians to expand services over time, ultimately resulting in improved health and lower costs overall.  States would receive approximately $11 billion in new funds under the proposed rule, with no matching requirement.

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ACO Regulations Published

The proposed regulations governing accountable care organizations (“ACOs”) were published on March 31, 2011.

The goal of the ACO model is to reduce Medicare costs and improve care by focusing funds on prevention and quality, rather than the number of times a patient sees a doctor.  The ACO approach shifts from a model that focuses on production (i.e. standard treatments for illnesses) to a model that focuses on health risks and behaviors.  Behaviors are now the main force affecting health status, future expenses and outcomes.

The proposed regulations will reward ACOs that deliver better results for Medicare patients.  They will also require participating groups of primary care doctors to take responsibility for managing the care of at least 5,000 Medicare patients. 

The complete text of the proposed regulations can be viewed by accessing the following link:

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Medical Professionals Coalition Launches Website About the Health Care Bill

A coalition of groups representing doctors, nurses, pharmacists and consumers has launched a website to answer questions about the Patient Protection and Affordable Care Act. The new website can be accessed at The website provides information about how the law affects consumers, depending on state of residence and age. The website also provides a timeline, telling consumers when different parts of the law go into effect.

The coalition includes the American Academy of Family Physicians, the American Cancer Society’s Cancer Action Network, the American College of Physicians, the American Medical Association (“AMA”), the American Association of Retired Persons (“AARP”), the American Nurses Association, the Catholic Health Association and the National Community Pharmacists Association.

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