Health Care Reform Implementation Update – July 28, 2014

Last week, two courts issued contradictory rulings on the authority of the federal government to provide subsidies in states using the federal exchange. The House held hearings regarding the Affordable Care Act’s (ACA) effects on Medicare Advantage plans, a Government Accountability Oversight (GAO) report on ACA subsidy applications, and whether or not a lawsuit against President Obama should move forward. At the agencies, Secretary Burwell announced a major staff appointment, and the Internal Revenue Service (IRS) released the long-awaited forms regarding the ACA employer mandate.


On July 23, Senator Mark Warner (D-Va.) sent a letter to the Department of Treasury requesting that the agency create less burdensome regulations regarding the ACA employer mandate or delay the mandate for another year. In the letter, Senator Warner expressed his concern that regulations released in March did not address all of the problems he had expressed in earlier communications about the employer mandate regulations.

In a vote of 7-4 along party lines, the House Rules Committee passed House Resolution 676 (H. Res. 676), which allows Speaker John Boehner (R-Ohio) to advance his plan to file a lawsuit on behalf of the House against President Obama and his administration. The central focus of the lawsuit is that the president overstepped his constitutional authority when the administration delayed implementation of the employer mandate under the ACA. Now that H. Res. 676 has passed out of the committee, it is expected to be debated on the House floor this week.

On July 23, the House Ways and Means Subcommittee on Oversight held a hearing regarding a GAO report investigating health care subsidies under the ACA. According to the report, 11 out of 12 of the fake applications submitted by GAO investigators attempting to gain approval for the subsidies were accepted. Although the GAO representatives at the hearing claim that the investigation is still underway and that the sample represented in the report is too small to “draw conclusions,” Republicans on the committee claim the report highlights that fraud is prevalent in implementation of the ACA. The GAO says that more complete results of their investigation could be released in the next several months.

On July 24, the House Ways and Means Subcommittee on Health held a hearing on the future of Medicare Advantage (MA) health plans. Republican members focused on the proposed cuts to MA plans due to provisions in the ACA that require the Centers for Medicare and Medicaid Services (CMS) to reduce payment reimbursement to private health plans. The Congressional Budget Office (CBO) has estimated that cuts to MA plans will total more than $300 billion by 2023.

On July 23, Congressman Dan Maffei (D-N.Y.) introduced the “Members Play by the Same Rules Act,” legislation, which would eliminate subsidies for congressional members who purchase ACA health coverage. The bill would also require House and Senate members to purchase ACA coverage through the exchanges designated for their home states. Congressmen Ron Barber (D-Ariz.) and John Barrow (D-Ga.) cosponsored the bill upon its introduction.


On July 24, the IRS posted to its website drafts of forms employers will have to fill out in compliance with the employer mandate. The forms signal that the IRS is planning to move forward with the twice-delayed ACA requirement that large employers provide health insurance to certain employees or pay fines for not providing the coverage.

Also on July 24, the Department of Health and Human Services (HHS) announced that health plan enrollees will receive more than $330 million this year in refunds as a result of the medical loss ratio (MLR) provisions of the ACA. Under the provisions, health plans that do not spend at least 80 to 85 percent of their premiums on medical care and quality improvement activities are required to return a portion of those expenses back to consumers. Since 2011, insurers have returned approximately $9 billion to consumers under the MLR provisions.

The Health Resources and Services Administration (HRSA) released what it called an interpretive rule regarding its 340B discount program. In the rule, HRSA restated its position that orphan drugs that are not used to treat rare diseases can be purchased at discounted rates under HRSA’s 340B program. The rule is effective immediately. In May, the U.S. District Court for the District of Columbia ruled that HRSA did not have the authority to issue a legislative rule to allow certain types of safety net providers to purchase orphan drugs at a discounted rate when they are not used as treatment for rare diseases.

In a “frequently asked questions” (FAQ) document prepared by the Departments of Labor, Health and Human Services, and Treasury, the government clarified health plan notification requirements regarding opt-out of the ACA’s contraceptive mandate. According to the FAQ, if a health plan provided by a closely held corporation that is subject to the Employee Retirement Income Security Act (ERISA) wishes to exclude coverage of contraceptives without employee cost-sharing in the middle of a plan year, it must provide a notification to its employees of the coverage reduction. The FAQ was released in the wake of the Supreme Court’s Hobby Lobby ruling, which held that closely held, for-profit employers could assert a “religious objection” to the ACA contraceptive coverage mandate.

On July 23, Sylvia Burwell announced that Leslie Dach will be joining that Department of Health and Human Services in the newly created senior counselor position. Dach previously served as the executive vice president of corporate affairs at Wal-Mart. His new responsibilities include execution of the second open enrollment for the federal exchange.


On July 22, two different U.S. appeals courts came to different conclusions on the legality of the government providing premium subsidies for individuals receiving health coverage through the federal exchange. In Halbig v. Burwell, a three-judge panel at the U.S. Court of Appeals for the District of Columbia held that the government could not provide such subsidies, while in King v. Burwell, a panel at the U.S. Court of Appeals for the 4th Circuit said that it could. Following the Halbig ruling, the government announced that it would request an en banc rehearing before the full appeals court panel on the decision. At issue is an Internal Revenue Service (IRS) regulation that said that the government could provide the premium subsidies for qualifying individuals in both federal and state exchanges notwithstanding the ACA’s language that subsidies can be given in states with state-run exchanges. According to a recent estimate, approximately 5.4 million of the 8 million individuals who enrolled in exchanges during the open enrollment period enrolled in the federal exchange.

Also on July 22, the Obama administration filed a legal brief saying that it plans to modify the religious objection accommodation process that is currently in place for certain religious nonprofits that object to the ACA’s contraceptive mandate. Under the current policy, nonprofits are required to fill out a form that permits a third-party to provide the coverage. The administration is developing the new process in response to a recent Supreme Court order that said Wheaton College, which sued the government because of the mandate, could simply file a letter with the government rather than fill out the form. The new process is still under development, but according to the brief, the administration will issue an interim final rule on the new process within a month.

On July 21, a judge dismissed the lawsuit brought by Senator Ron Johnson (R-Wis.) challenging the policy that required congressional lawmakers and their staff to obtain government-subsidized health coverage through exchanges. The judge wrote that Johnson did not have standing to challenge the policy because he was not injured by it.


In letters dated July 16, HHS informed all U.S. territories that they are officially exempt from the ACA requirements that states must follow. HHS had previously claimed that territories fit the definition of state and would have to abide by ACA requirements. HHS, however, reversed that decision after “a careful review” of the ACA statute. In the letters, HHS states that CMS will release regulations soon that will clarify and confirm this new position.


The Kaiser Family Foundation released a report showing that out-of-pocket costs for individuals on Medicare have increased significantly since 2000. The report used data from the Medicare Current Beneficiary Cost and Use file between 2000 and 2010. According to the report, long-term care facilities represent the biggest cost to seniors who are on Medicare. In order to curb these costs, the Kaiser report recommends preventing unnecessary hospitalization and improving post-acute care.

To view our compilation of recent health care reform implementation news, click here.

To view and search our library of Health Care Reform Implementation Updates, visit our Affordable Care Act Databook.

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