Supreme Court To Hear Oral Arguments On ACA Tax Subsidies; IRS Issues Guidance On Cadillac Tax, Publishes Health Insurance Providers Tax Regulations
All Eyes On The Supreme Court
On Wednesday, March 4, the attention of many lawmakers will turn to the Supreme Court, where oral arguments are slated for the statutory interpretation case of King v. Burwell. The issue in this case is whether the Affordable Care Act (ACA) provides tax subsidies to individuals who purchase insurance through the federal exchange, in addition to the subsidies for those who purchase insurance through state-based exchanges, which is explicitly stated in the law. Since implementation of the ACA, individuals meeting certain income levels who buy insurance through either a state- or federally-administered exchange have been receiving tax subsidies, pursuant to Internal Revenue Service (IRS) interpretation. However, the plaintiffs in King argue that the statute only provides subsidies to people who purchase insurance from “an Exchange established by the State,” as written in plain English in the health reform law. The government contends that the legislative intent of the law was to treat all exchanges in the same manner with regard to subsidies and that this one cited phrase is contradicted by the rest of the law.
It has been estimated that seven to eight million people would lose their subsidies if the Supreme Court rules against the Administration. This decision could be a detriment to Republican legislators, who are eager to see the ACA repealed but do not want to face the wrath of voters losing their health insurance. While the Administration insists it does not have a contingency plan if the federal subsidies are indeed found to be outside of statutory authority, Republicans such as House Committee on Ways and Means Chairman Paul Ryan (R-WI) and Senate Committee on Finance Chairman Orrin Hatch (R-UT) have publicly stated the need for and their intent to form a contingency plan.
This Week’s Hearings:
Tuesday, March 3: The House Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a hearing on “National Institutes of Health.”
Wednesday, March 4: The House Committee on Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies will hold a hearing on “Food and Drug Administration Budget.”
Thursday, March 5: The House Committee on Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining the 340B Drug Pricing Program.”
Thursday, March 5: The Senate Committee on Health, Education, Labor, and Pensions (HELP) will hold a hearing titled “America’s Health IT Transformation: Translating the Promise of Electronic Health Records Into Better Care.”
IRS Releases Guidance On Cadillac Tax
On Monday, February 23, the IRS released a notice titled “Section 4980I – Excise Tax on High Cost Employer-Sponsored Health Coverage (Notice 2015-16).” Section 4980I of the Internal Revenue Code levies a 40 percent excise tax on certain high cost employer-sponsored health insurance plans, known as “Cadillac plans.” The tax was imposed by the ACA to discourage misuse of generous health benefits and services that drive up medical spending. It is part of the ACA’s financing plan, and is expected to be a significant source of revenue after it goes into effect on January 1, 2018.
The notice describes potential approaches related to the definition of applicable coverage, the amount categorized as “high cost,” and dollar limits on coverage. Additionally, the notice suggests exempting limited-scope dental and vision coverage from the excise tax. Notably, an exemption for employees engaged in a “high-risk profession” drew fire from the Chairmen of the Senate Finance and Judiciary Committees, Sen. Orrin Hatch (R-UT) and Sen. Charles Grassley (R-IA), who criticized the proposal as providing exemptions to certain occupations that are most affiliated with organized labor unions.
The IRS invites comments on the offered approaches, which could be incorporated in future proposed regulations. The deadline for submitting comments is May 15, 2015.
CMS Extends 2014 Meaningful Use Attestation Deadline
On Wednesday, February 25, the Centers for Medicare and Medicaid Services (CMS) announced that the deadline for doctors to attest to the Medicare meaningful use program for 2014 was extended from February 28 to March 20. As of the beginning of February, 24 percent of eligible providers had attested to meaningful use.
The American Medical Association (AMA) praised CMS’s decision to extend the deadline, while expressing concern that the program is not working. AMA President Steve Stack encouraged policymakers to make the program “more flexible, remove measures that physicians are having the most difficulty in meeting, and revamp the certification process.”
CMS Proclaims ICD-10 End-to-End Testing A Success
On Wednesday, February 25, CMS released results from the first week of end-to-end testing of the tenth edition of the International Classification of Diseases (ICD-10), and declared it a success. Under current law, ICD-10 will become the coding system of the United States on October 1.
A fact sheet released by CMS shows that out of the 14,929 test claims received from January 26 through February 3, 81 percent were successfully submitted and processed through the agency’s billing system. The reasons for rejected claims included invalid submission of ICD-9 and ICD-10 diagnosis or procedure code and non-ICD-10 related errors, such as issues setting up the test claims. CMS Administrator Marilyn Tavenner concluded in a blog post that “CMS is ready for ICD-10” claims processing, and a majority of the health community will be ready by the October 1 deadline.
IRS Publishes Health Insurance Providers Tax Regulations
On Thursday, February 26, the IRS published in the Federal Register a notice of proposed rulemaking and temporary regulations titled “Health Insurance Providers Fee.” The temporary regulations attempt to clarify Section 9010 of the ACA, which imposes an annual fee on “covered entities” that provide health insurance in the United States. The health insurance tax is part of ACA’s financing plan, and is projected to raise approximately $100 billion over ten years.
Section 9010(c) provides a broad definition of a covered entity followed by a series of excepted entities, including governmental entities and nonprofits incorporated under state law. After the Health Insurance Providers Fee final regulations were published in November 2013, IRS received questions on how to apply the exclusions to the general definition of a covered entity. Last year, IRS published Notice 2014-47 to resolve those questions for the 2014 fee year. These temporary regulations adopt the general approach of Notice 2014-47 for the 2015 fee year and subsequent years.
The deadline for submitting comments and a request for a public hearing is May 27, 2015.
Court Decides On State-Action Antitrust Immunity
On Wednesday, February 25, the Supreme Court ruled in the case of North Carolina State Board of Dental Examiners v. Federal Trade Commission, holding that state professional boards that regulate their competitors must be supervised by the state government in order to invoke state-action antitrust immunity.
In this case, the North Carolina Dental Practice Act states that the North Carolina State Board of Dental Examiners is the agency of the state to regulate the practice of dentistry. The Board creates, administers, and enforces the licensing system for dentists in North Carolina. Six out of the eight members of the Board are licensed dentists, complemented by a dental hygienist member and a consumer member.
After the Board heard complaints that non-dentists were charging lower prices for whitening services than dentists, among other actions, the Board issued over 45 cease-and-desist letters to the non-dentists whiteners, often stating that practicing dentistry without a license is a crime. The Dental Practice Act does not specify teeth whitening as a practice of dentistry. Non-dentists effectively ceased offering whitening services in the state.
The Federal Trade Commission alleged that the Board’s actions constituted an anticompetitive and unfair method of competition, but the Board insisted that its actions were immune from antitrust laws because it was acting within the sovereign capacity of the state.
The Court found that because a majority of the Board’s decision-makers are active marketplace participants in the occupation of the regulation, the Board could only invoke state-action antitrust immunity if it had active supervision of the state. Because North Carolina did not actively supervise the Board, the requirement for state-action antitrust immunity was not met in this case.