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Beyond the Individual Mandate: Additional Considerations for Businesses & Health Care Providers Under the Current State of Health Care Reform

The Supreme Court’s recent decision (NFIB v. Sebelius, No. 11-393, June 28, 2012) on the constitutionality of the individual mandate provision of the Patient Protection and Affordable Care Act (ACA) has drawn the bulk of recent public attention on health care reform. Business owners and health care providers, however, should not overlook a number of important issues that remain in its wake. Here are just three of the major issues that will continue to impact the current state of health care laws.

1. “Exchanges” likely will be the next major battleground. 

The individual mandate of the ACA requires uninsured individuals to obtain health insurance or pay a penalty (or tax). In order to make it easier for individuals and small businesses to obtain or provide health care insurance, the ACA relied upon each State to create “Exchanges”. American Health Benefit Exchanges and Small Business Health Option Program (SHOP) Exchanges, would serve as a clearinghouse for health care options. The Exchanges, however, also were the trigger for a penalty provision for companies employing 50 or more full-time employees but not offering health insurance benefits. If any of the uninsured employees then utilized the Exchanges to obtain health care insurance, the business would face a potential penalty of between $2,000 and $3,000 a year for each uninsured employee.

The ACA, however, does not have an explicit mechanism to require States to create Exchanges, though there are financial incentives to do so. If States do not create Exchanges (as many governors have already indicated they may not due to the potential expense) the Exchanges would have to be created and funded by the federal government; a situation that some commentators have said is not necessarily certain because Congress may not provide sufficient funds.

If no Exchanges exist within a State, then there may be no penalty trigger for businesses that do not provide health care insurance. As with the individual mandate, the question then becomes whether the entire ACA can operate without the Exchanges in force. Businesses and health care providers should expect a major political and legal fight over the refusal of individual States to provide Exchanges.

2. The ACA regulatory framework continues in full force for health care providers, group health plans and health insurance issuers.

The Supreme Court decision focused on the individual mandate as well as the issue of whether States can be financially punished by the federal government for failing to expand Medicaid coverage. The Court said no. For businesses and non-profit entities involved in health care-related activity, the ACA contains literally hundreds of new requirements untouched by the Supreme Court decision. Many are simply extensions of requirements that already existed for businesses involved in any way with Medicare and Medicaid. Other provisions are potentially more onerous. 

Either way, absent additional court review of the entire law or legislative amendment, these provisions will remain viable. In addition, many of the provisions require the Secretary of the Department of Health and Human Services (HHS) to propose new rules or regulations for implementation of the various mandates. Those will continue as well.

One important and broadly applicable provision in the ACA is a new statutory framework requiring health care providers and suppliers to return Medicare overpayments within 60 days. The Secretary of HHS followed up on this provision earlier this year by proposing a new detailed federal regulation setting forth policies and procedures for the prompt return of overpayments.

HHS essentially made mandatory its prior, voluntary overpayment framework, which included a Web-based reporting mechanism. The new regulations also set forth provisions for determining the size of the overpayment, when the 60-day clock would run, and options for how overpayments are to be repaid.

3. Significant enforcement mechanisms still exist under health care laws.

The Supreme Court may have struck down a Medicaid penalty provision against the States, and a fight over Exchanges may soon arise, but for now, the ACA still maintains significant enforcement provisions that apply to large and small businesses, as well as all health care providers, group health plans and health insurance issuers. Those tempted to ignore the health care laws should bear in mind that within the intentionally broad and all-encompassing nature of the ACA, additional criminal and civil penalty provisions abound. 

The most common penalty provisions relate to any false statements made in connection with health care matters. For example, the ACA allows the Secretary of HHS to require health care plans to document and certify compliance with the ACA. The Secretary then may institute and assess financial penalties for failure to comply with the paperwork requirements or for any false statements made in connection with the forms.

In addition, any intentional false statement to the federal government or participation in a scheme to defraud involving a health care matter may give rise to criminal penalties. The ACA further directed federal judges, through the U.S. Sentencing Commission, to consider increased incarceration for health care offenders. The government also still maintains the manpower, including federal investigators and attorneys, to ensure enforcement. In short, it still remains extremely difficult to fight City Hall, or in this case, the federal government, by either ignoring the law or lying about compliance.



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