Budget Deal Cuts Potential Health Law Tax Revenue

The sweeping $1.1 trillion spending bill that passed this month included three relatively modest changes to the Affordable Care Act. But both supporters and opponents of the law see them as momentous symbols of more permanent, potentially costly, changes to come.

The bill included a two-year delay on the law’s “Cadillac tax” on high-value health plans, a two-year suspension of the tax on medical devices and a one-year moratorium on a tax levied on all private health insurance.

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The most significant of these changes by far is the delay to the “Cadillac tax,” currently scheduled to start in 2018. The provision was designed to reign in high priced insurance policies and the unnecessary health care spending they encourage.

The two-year delay means the government will miss out on about $3 billion in revenue in 2018 and $6 billion in 2019, according to a recent Congressional Budget Office analysis.

But for most, the short-term price tag is not the primary concern, but rather the long-term change it may forecast.

“The big concern with the delay is, it’s not a delay, it becomes a rolling permanent deferral,” said Peter Orszag, an economist who was President Barack Obama’s first director of the Office of Management and Budget.

Opponents of the tax, however, say it only encourages employers to decrease workers’ vital benefits packages.

According to the Kaiser Family Foundation’s recent analysis, about 1 in 4 employers are expected to offer health plans that would incur the Cadillac tax in 2018, but this figure is expected to increase significantly in coming years, as it is tied to insurance premiums as they relate to the rate of inflation. Insurance premiums have been growing more rapidly than that rate for many years.

The analysis shows that about 30 percent of employers will be affected by the tax by 2023 and about 42 percent five years after that, if their health plans remain the same and health costs continue upward at the same pace.

At that point, the tax’s revenue would balloon to an estimated $91 billion by 2025, according to the congressional Joint Committee on Taxation.

Significant potential revenue loss is likewise predicted to accompany the postponement of the tax on medical devices and private health insurance.

Freezing the medical device tax is estimated to cost the government about $1.4 billion in 2016 and $2 billion in 2017, according to another Congressional Budget Office analysis.

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Opponents of the tax say it discourages the development and sales of innovative, lifesaving medical technology, therefore stunting the country’s growth in the field of medical research.

The tax on health insurers was expected to raise as much as $12 billion in 2017, according to the same analysis. But the tax’s challengers assert this is a small price to pay to protect the American consumer, who shoulders this tax through insurance premium increases.

Overall, these alterations to the Affordable Care Act are not anticipated to have a large impact on Washington revenue in the immediate future, but they could be first signs of permanent changes to come.

Many Republicans are still in favor of repealing the law or implementing broader cuts to its regulations.

Supreme Court Upholds Insurance Subsidies for All Americans

The state of healthcare in America became a little more secure today, as the Affordable Care Act survived its second Supreme Court case in the past three years.

The 6-3 ruling ensures Americans in all 50 states will continue to receive insurance premium subsidies under the Affordable Care Act.

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It’s a significant victory for the law, as President Barack Obama stated in his address at the White House following the decision.

“Today … after multiple challenges to this law before the Supreme Court, the Affordable Care Act is here to stay,” he said.

The Supreme Court case King v. Burwell hinged on whether those Americans who purchased insurance plans through the federal exchange were considered eligible for the same subsidies as those who purchased plans through individual state exchanges.

Chief Justice John Roberts wrote the opinion for the court, joined by frequent swing vote justice Anthony Kennedy and liberal justices Ruth Bader Ginsberg, Stephen Breyer, Sonia Sotomayor and Elen Kagan.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” he affirmed. “If at all possible, we must interpret the Act in a way that is consistent with the former and avoids the latter.”

As many as 34 states did not establish their own individual exchanges, and instead elected to use the federal exchange. Had the Supreme Court ruled in favor of the plaintiff, citizens in all of these states would have lost their subsidies and would likely no longer have been able to afford coverage.

The Department of Health and Human Services estimated about 6.4 million Americans would have lost subsidies if this were the court’s decision.

In the report, Roberts acknowledged the ambiguity of the law’s text overall, but stated that the court considered the broader intent of the law for the ultimate decision.

“The statutory scheme compels us to reject petitioner’s interpretation because it would destabilize the individual market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid,” he wrote.

Justice Antonin Scalia wrote the dissenting opinion on the case. He asserted it was not the job of the Supreme Court to clarify or clean up Congress’s sloppy law drafting.

“Today’s interpretation is not merely unnatural; it is unheard of,” Scalia wrote. “Who would ever have dreamt that ‘Exchange established by the State’ means ‘Exchange established by the State or the Federal Government’?”

Even with this victory, though, the Affordable Care Act still faces many challenges in the future, including proposed legislative changes currently moving through Congress as well as other lawsuits currently in the lower courts.

However, some do think this decision will discourage judges from advancing cases for future Supreme Court consideration.

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“It sends a message to the lower courts that they need to take a good, hard look at all the ACA litigation that’s out there and probably clean up and get rid of most of it,” Timothy Jost, a law professor at Washington and Lee University and an expert on the health law, said to the Kaiser Family Foundation.

Overall, experts agree the decision is a step toward stability for healthcare in the U.S., but it does not mean the law is finished evolving.

Drew Altman, a columnist for the Wall Street Journal Think Tank, wrote his primary concerns following the decision.

“Significant challenges remain for the ACA, including: reaching those who are uninsured; stabilizing premium increases in the marketplaces as insurers get a better handle on risk pools; and determining which of the Medicare payment and delivery reform projects implemented under the ACA are working and should be scaled up,” he wrote.

So, the law continues to be a work in progress, a fact even President Obama does not deny.

“Let’s be clear, we’ve still got more work to do to make healthcare in America even better,” he said. “This was a good day for America. Let’s get back to work.”

Podcast Covers King v. Burwell Decision and Fallout

The country has arrived again at an important moment for President Obama’s health care law, the Affordable Care Act.

By the end of this month, the Supreme Court will make its decision on the King v. Burwell case, which challenges the eligibility of citizens to receive tax credits for insurance premium, known as subsidies, in states using the federal insurance exchange.

Related Post: Supreme Court Upholds Insurance Subsidies for All Americans

This week, Tom Quigley talked about the court case during the biweekly podcast Cutting-Edge Benefits by ClaimLinx.

He said he wasn’t surprised there have been so many challenges to the law because it was so rushed.

“They passed the law without reading it, and they even admitted it, saying that this law is so good we’ll have to read it after we pass it,” Tom said during the podcast. “This is what happens — Little words, people challenge it.”

This case focuses on the words “established by the State” in a subsection of the law, which those bringing the case say make clear that subsidies are only available to those individuals living in the states that have created their own exchanges.

Should the Supreme Court vote in favor of the challenge, millions of Americans in 34 different states will lose their subsidies and will likely no longer be able to afford health insurance.

“To me, this case is pathetic,” Tom said. “Everyone knows the intent of what the law meant, and here we are. There’s more important things in this country right now than taking away health insurance from millions because of four words.”

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Tom talks about issues in health care every other Thursday during a podcast, and anyone can call in with questions or comments. Follow the show on Blog Talk Radio for reminders and updates on upcoming topics.

“The health law is like a yo-yo, it goes up and down and all around,” Tom said. “No one knows where it’s going.”

But listening to the show can at least explain it.