The ChamberPost

Interim-Final or Government Knows Best

by Blair Latoff

Randy Johnson and James Gelfand write on The Daily Caller:

Americans have long been fascinated—and often disgusted—by how Congress passes laws. Many citizens became irate when they learned that most members of Congress hadn’t even read the health care bill, which clocked in at about 2,300 pages. Speaker Nancy Pelosi said famously, “We need to pass the health care bill to find out what’s in it.”

...The massive health care bill leaves major decisions to the regulators who will implement the legislation. It authorizes over a hundred rulemakings, and grants an unprecedented amount of discretion to federal departments and agencies, like the Department of Health and Human Services and the Internal Revenue Service. The federal government has already begun writing regulations and rules to fill in the gaps. Unfortunately, the administration is abusing the rulemaking process, poisoning it with the same lack of transparency and steamrolling tactics used to pass the underlying bill.

Regulations matter; they have the force of law, but they are never voted on by your representatives in Congress. The system is supposed to guarantee transparency, fairness, and input from affected parties. In fact, in 1946 Congress enacted a law called the Administrative Procedure Act (APA) that was designed to keep the federal agencies accountable to people when they draft rules. It laid out a straightforward process wherein agencies first must issue a proposed version of a regulation with reasonable time for the public to comment on the proposal, before issuing a final rule. The thought was that the government could benefit from the input of those in the real world who will have to comply with the new regulation before it hardens into final form—a pretty logical assumption!

Unfortunately, these safeguards are being subverted by the administration with the issuance of so-called “interim-final” regulations, which become effective before comments are collected and evaluated by the agencies. The U.S. Chamber of Commerce has already counted at least ten different times where agencies skipped these steps.

The administration claims the rush is justified because of the timeframe in which provisions of new laws come into effect. But this is a problem created by the administration itself when it jammed through the health care legislation without thought to these important steps. Yes, the agencies are ostensibly collecting comments on the “interim-final” rules, but as the courts have noted, this is akin to giving an artist recommendations on his painting after the canvas has already dried.

...It is critically important that the government listen to the people who will be affected by regulations. If offering health insurance becomes too much of a burden on employers, they will consider dropping coverage. The more complicated it becomes to hire and retain workers, the more hesitant businesses will be to expand and create jobs. The tougher it is to obtain capital, the fewer opportunities there will be for entrepreneurs and small businesses to start or expand their operations. Regulations need to work for employers so that they can stay focused on their primary business, rather than be mired in complicated and unworkable government rules.

Read the whole thing.

Health Care Reform: Kill the Job-Killers

by James Gelfand

My latest on the National Journal Health Care Experts Blog, in response to the questions "What's Next To Change In The Health Reform Law?" Click through for supporting links.

The 1099 paperwork burden needs to go for many reasons - not only will it hurt businesses and cost jobs at a time when we can ill-afford it, but even the IRS taxpayer advocate says it will not be helpful in raising revenue, just causing a paperwork nightmare. What is sad is that Democrats in Congress are holding 1099 repeal hostage - they don't want to let another crisis go to waste, so they decided to tell Americans that if you don't want the 1099 nightmare, you have to agree to a host of other tax increases. Americans want Washington to cut spending, not find creative new ways to raise taxes.

We built a website for businesses to share their stories about implementing the new health care law (http://www.HealthReformImpacts.com) and nearly all of them talk about the 1099 provision and the devastating effects it will have. If Congress wants to help businesses and get rid of this mandate, they need to stop playing games (and writing letters) and pass Senator Johanns' S. 3758, the Small Business Paperwork Mandate Elimination Act, along with Rep. Lungren's House companion, H.R. 5141. But it seems like they might not want to do that. Maybe they will change their minds after November.

The next piece that needs to be repealed is the job-killing requirement that businesses purchase government-approved health insurance or pay crippling fines. At $2,000 to $3,000 per employee, these fines will destroy countless businesses, especially those with low profit margins. Think about restaurants, retailers, service industry, etc. Even worse, the mandate will disproportionately harm low-skill, low-income workers, because they'd be more likely to trigger $3,000 fines. Say goodbye to janitors, servers, cashiers... and say hello to more independent contractors, more outsourcing, more forced part-time status... all the things we do NOT need in this economy.

Luckily Senator Hatch has introduced S. 3501, the American Jobs Protection Act. This bill would repeal the mandate, saving jobs and helping to ease the paralyzing fear that is keeping businesses from expanding and hiring. This is next on the list, and it needs to get done before 2014 - if we are serious about wanting to spur the economy and create jobs, it should be passed immediately.

Digging Up Bad Ideas

by James Gelfand

// Below is my National Journal Health Experts answer to "Will New 'Public Option' Fare Better?"

It's almost as if they want to give the GOP an excuse to make the election even more about health care than it's already going to be... maybe they really do believe that the bill is going to be a net positive in the eyes of voters.

There was no other provision during the legislative debate that was nearly as divisive, or as enraging to the grassroots, as the government-run "option". Even the Blue Dogs balked at the idea of this one (which uses Medicare rates "plus a little"). We know that a plan like this would make everyone else's health care more expensive, and thus end up being the only plan as people were forced to migrate into it... and once it is the only plan, time for all the problems you see in countries with single-payer (have your pick: waiting lines, government rationing, shortages, etc.).

We have been through all the rotten things about this proposal over and over on this blog. See here, or here, or here. It would be a deficit nightmare, as it becomes a gigantic Medicare program covering all Americans (even if forcing doctors to accept artificially low payments is a good way to game a CBO score).Perhaps this proposal is an attempt to rally the despondent base, but it seems more like a political gaffe. Remember the Kaiser polls that repeatedly showed that when you surround this issue with lovey-dovey rhetoric, people are neutral, but as soon as you mention possible consequences of a government-run health plan, people become vastly opposed?

I think the "Repeal and Replace" caucus is going to owe the Progressive Caucus a nice thank-you note for this one.

Health Care Reform and The Deficit

by James Gelfand

Over at the National Journal Meghan McCarthy asks:

Should Congress or new authorities created by the law take additional steps to reduce the deficit through policy changes? Should certain provisions be abandoned, even if it means less federal savings?

The Congressional Budget Office last week released its long-term budget outlook, and Office of Management and Budget Director Peter Orszag said: "Slowing the rate of health care cost growth is the single most important action we can take to reduce our long-term fiscal shortfall." He called enactment of the reform law a "key step toward a healthier fiscal future."

I think the OMB is confused:

Health Care Reform: Hard To Keep Your Plan

by James Gelfand

Over on the National Journal I talk grandfathering:

If you are a business, especially a small business already struggling to keep up with the costs of providing health insurance to employees, you want to keep the plan you have – you want it to be grandfathered. Grandfathered plans are exempt from some expensive new mandates in the PPACA...At first glance, employees and consumers might want their plans to be subject to these new rules… but when they see the price tag associated with this, many will balk. There is no free lunch. And under PPACA, the choice is simple – if an employer’s plan loses grandfathered status, either they purchase a more expensive plan, or they stop providing coverage.

So how do you lose grandfathered status? Marilyn summed it up nicely. Basically a plan can only make very limited changes to coverage, is heavily restricted in terms of increasing cost-sharing, and if fully-insured, a plan may not change carriers. This will make it very hard to keep the plan as is.

Proponents will say nonsense like this: “You can keep your plan, it will just have new consumer protections!” or “This is a fair rule that gives lots of flexibility to plans!” Some even say these rules will lower costs. But the cold, hard truth is simple. If your plan’s new “consumer protections” make it more expensive, you, and your employer, will have even more trouble affording it. If you want to buy a plan with more coverage, you should be free to do that, but this is the government forcing employers either to buy a more expensive plan, or to have no plan.

Read the entire post and these two from the NFIB and NCPA.

Health Care Reform - The Admin Costs

by James Gelfand

Then:

[Reconciliation Bill] SEC. 1005. IMPLEMENTATION FUNDING.

(a) IN GENERAL.—There is hereby established a Health Insurance Reform Implementation Fund (referred to in this section as the ‘‘Fund’’) within the Department of Health and Human Services to carry out the Patient Protection and Affordable Care Act and this Act (and the amendments made by such Acts).

(b) FUNDING.—There is appropriated to the Fund, out of any funds in the Treasury not otherwise appropriated, $1,000,000,000 for Federal administrative expenses to carry out such Act (and the amendments made by such Acts).

Now:

Costs to HHS, especially the Centers for Medicare and Medicaid Services, and the Office of Personnel Management for implementing the changes in Medicare, Medicaid, and the Children’s Health Insurance Program, as well as certain reforms to the private insurance market. CBO expects that those costs will probably total at least $5 billion to $10 billion over 10 years.

Hey, what's (“at least”) $4 to $9 billion anyway. 

Health Care Post-Op: What Businesses Large and Small Need to Know

by James Gelfand

Today the Chamber held an event, and released this booklet, "focusing on the issues and timeline surrounding businesses complying with the new health care law." C-SPAN was there:

Aftermath: Managing Plan Costs and Avoiding Penalties Under the New Health Care Law

by James Gelfand

Now that both the “Patient Protection and Affordable Care Act” (PPACA) and the reconciliation “fixer” bill, the “Health Care and Education Reconciliation Act” have been signed into law, employers must take a new look at the offering of health insurance benefits. Yesterday we looked at "To Offer, or Not to Offer?" Up today is "Managing Plan Costs and Avoiding Penalties."* 

Employers will need to take specific steps to make sure their plans meet new requirements in order to protect employers from “shared responsibility” penalties (the “free-rider” or employer mandate) and to protect employees from “individual responsibility” penalties (requiring individuals to have qualified health insurance). Further, the structure and value of a plan may have serious implications for employers as well.

Purchasing Traditional Insurance: Employers purchasing a fully-insured plan (a traditional health insurance product in which the insurer pays claims and takes on the risk) will need to verify that said plan is a qualified benefit going forward – by October of 2010 plans will need to meet new requirements relating to lifetime/annual limits, rescissions, and excess waiting periods. They will need to allow individuals up to the age of 26 to be listed as dependents. When the shared responsibility provisions kick in, in 2014, employers will need to verify that plans meet the essential benefits requirement (to be defined by the Secretary of HHS) and the actuarial requirements laid out in the law. There will be limitations on imposing annual limits, and firstdollar coverage of prevention with no cost-sharing will be mandated for everything selected by the U.S. Preventative Services Task Force. Starting in 2011 these plans will need to have new limits on Health Savings Accounts and Flexible Spending Arrangements as well. Also, starting in 2014, there will be a tax specifically on fully-insured products, which could result in increased costs associated with these plans.

Self-Insuring: The alternative will be to self-insure (employer can form an ERISA plan in which the employer pays claims, manages risk, and will likely use an insurance company only to administer claims and offer stop-loss insurance for high-cost claims), which will shield employers from both state coverage mandates and the new health insurance tax, but will entail two key new risks: the employer will then become responsible for seeing to it that the plan meets all the new requirements (as well as new outside requirements under the Genetic Information Nondisclosure Act, the Mental Health Parity Act, and others), and, if the plan’s costs per beneficiary exceed certain amounts after 2017, the plan sponsor will be fined by the so-called “Cadillac tax.” Self-insured plans will need to report their costs and may be forced to
“rebate” money to beneficiaries if the plan’s administrative costs exceed 15% starting in 2011. Depending on what definitions are developed for administrative costs, this could potentially be very challenging for plans attempting to innovate cost-containment strategies.

Sending Employees to the Exchange: Employers wishing to have a firm grasp on health insurance costs will have the option of offering Exchange plans to their employees – small employers will be eligible at the outset, and states may allow large employers to participate starting in 2017. This may allow a defined contribution from employers, provided the contribution was significant enough to avoid “responsibility” penalties.

// Update - Part III "Offering Other Health-Related Benefits" is here.

*This information is not not legal advice, but is intended to serve as an outline to the new realities employers face in this landscape of compliance responsibilities.

Aftermath: New Realities for Businesses in the Wake of the Health Care Law

by James Gelfand

Now that both the "Patient Protection and Affordable Care Act" (PPACA) and the reconciliation "fixer" bill, the "Health Care and Education Reconciliation Act" have been signed into law, employers must take a new look at the offering of health insurance benefits. This below is not legal advice, but is intended to serve as an outline to the new realities employers face in this landscape of compliance responsibilities. Businesses face important choices to include:

• Offering vs. Non Offering: Small Business Tax Credit; Plan Requirements; Plan Costs vs. Penalty Costs; Vouchers; Affordability Penalties for Offering Firms; Employees’ Subsidy Eligibility
• Plan Cost Considerations: Purchasing Traditional Insurance; Self-Insuring; Sending Employees to the Exchange
• Other Benefit Considerations: Long-Term Care; Retiree Prescription Drug Plans; Compensation: Salary vs. Benefits; Consumer-Directed Account Options

Today we will look at the first of these: To Offer, or Not to Offer?

Small Business Tax Credits: Employers of different sizes have different concerns here. The smallest employers (those with 25 or fewer employees and an average workforce salary of $50,000 or less) may wish to consider utilizing the small business health insurance tax credits. These credits may pay for up to half of the costs of providing health insurance to employees, and will last two years past the creation of Exchanges (the credit is 35 percent before 2014 and 50 percent for two years after). However, there is no transition after the two year cutoff, so for some firms costs could double the next year, or they may be forced to drop a benefit that employees had relied upon or grown accustomed to.

Employers with between 25 and 50 employees are not eligible for subsidies, and will not be fined for failing to offer health insurance; however, if they do offer a plan, the plan will need to meet essential benefit and actuarial standards, or employees will still be subject to the individual mandate penalty.

Plan Requirements: In order to be a qualified health plan (and thus to exempt an individual from the individual responsibility penalty and an employer from the shared responsibility penalty), a health plan must meet both the actuarial requirements enacted in the PPACA (generally a 60 percent actuarial value), as well as cover all of the "essential benefits." The essential benefits will be promulgated by the Secretary of Health and Human Services prior to the mandates taking effect in 2014.

Plan Costs vs. Penalty Costs: For employers with more than 50 employees who choose not to offer coverage, no fines will be levied if all employees’ incomes are above 400 percent of the Federal Poverty Level (FPL). If any employees are below 400 percent of FPL, the likely fine will be $2,000 times the number of employees minus 30 (provided that at least one employee gets an Exchange credit). The same goes for employers who have plans that do not meet government requirements. An employer’s number of employees is calculated via adding all employees who work 30 or more hours a week, to the number of "full-time equivalent" workers (roughly translated as, if one adds up the hours per week of all the part-time employees, how many times this can be divided by 30).

Vouchers and Affordability Credits for Offering Firms: Employers with more than 50 employees who do offer qualified health insurance to employees will also have new concerns. Many employers pay large portions of health insurance premiums on behalf of employees, and employees pay the remaining portion. If any employee’s contribution constitutes between 8 and 9.8 percent of his or her income, the employer is required to offer this employee a voucher that is equal to the employer’s expected contribution, to be used to purchase health insurance in an Exchange. If an employee’s contribution exceeds 9.8 percent of his income, he may (if income is below 400 percent of FPL) obtain an Exchange subsidy, incurring a $3,000 fine for the employer. If enough employees have low enough incomes and get Exchange credits, an employer offering a qualified plan could be fined just as much as an employer offering no health insurance and paying the free-rider penalty.

Employees’ Subsidy Eligibility: Employees who do not meet these two specific "affordability" requirements and otherwise have an offer of a qualified plan from an employer are not eligible for Exchange credits. Thus the offer of an employer plan may be disadvantageous to some employees, who would be eligible for more generous subsidies if they were not offered a qualified plan through their employer. Further, in many cases the $2,000 per employee fine will be significantly less than the average employer contribution to employees’ premiums. An offering employer will also need to list the value of the benefit on employee W-2s starting in 2011. Employers will now need to weigh the decision whether or not to offer plans against the possible savings the employer could obtain by opting for the penalties, the possible fines that low-income employees could generate, and the possible subsidies that employees could receive if there is no plan offered.

// 15 Apr 2010 Update - Part II "Managing Plan Costs and Avoiding Penalties" is here. (link corrected April 21, 2010)

Myth and Fact: Organizing for America Misinformation on Health Care Bill

by James Gelfand

On March 10th David Plouffe, President Obama's former campaign manager and current White House advisor, sent out an email with a set of facts on behalf of Organizing for America about the "President’s Proposal" for health reform – which is, in actuality, a proposal for the House to pass the same bill that the Senate passed on Christmas Eve, and then for the Senate to pass a "fixer" bill using the nuclear option, budget reconciliation, with 51 votes. The email (and this page) contain a number of claims about this proposal, many of which are questionable at best. Below is our analysis:

Organizing for America Claim: "If you have health insurance through your employer and like your plan, you can keep it."

Fact Check: False

Explanation: This was debatably true in the Senate bill, but the President’s own proposal document lays out on page 3 why this is false in the section labeled "Extend Consumer Protections against Health Insurer Practices." The proposal would effectively end the ability to "grandfather" plans and keep them in operation after the bill is enacted, instead forcing an exhaustive and onerous list of new mandates on all plans, including employer and "grandfathered" plans. These include forcing all plans to cover "children" up to the age of 26, prohibiting rescissions (withdrawing coverage when customers mislead an insurer on their enrollment forms), mandating a new appeals process, mandatory state and federal annual rate reviews, banning annual and lifetime limits, banning all pre-existing condition exclusions, banning plan differences for highly compensated employees, and forcing all plans to cover government-designatedpreventative services with no cost-sharing. While most group health plans do not practice rescissions or have preexisting condition exclusions, the new government mandates will lead to reduced plan flexibility and higher costs. All of these policies will increase the costs of a plan, and while some of these changes may have merit, it is undeniable that forcing these changes will cause many plans to change, and some to cease operation.

Organizing for America Claim: "If you're a small business owner, you'll receive new tax credits that make it easier for you to provide coverage for employees if you choose to do so."

Fact Check: False.

Explanation: Senate bill H.R. 3590 included a credit that would cover 50% of premiums for a business with 10 or fewer employees with average wages of $20,000, if that business provided highly comprehensive health benefits and if the business paid the vast majority of every employee’s premium. This credit phases out at a maximum of 25 employees and $40,000 annual compensation for employees. The credit is available for a few years, and then ends abruptly, with no transition period. This credit is highly unworkable for two reasons – first, its short and abrupt nature will dissuade employers from using it due to concern about a large spike in out-of-pocket expenses the day that the credit suddenly ends a few years later. Second is its extremely limited nature – according to the U.S. Census Bureau, the average firm with 10 or fewer employees has an average wage of $27,000, meaning the vast majority of small businesses will not even be eligible for half of the credit.