The Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act in a 5-4 decision. The Court ruled that the individual mandate is a tax that Congress has the authority to impose. It limited but did not invalidate the pieces that expand Medicaid. The decision means that key components of the healthcare reform law can move forward including individual and employer responsibilities, health insurance exchanges, insurance market reforms, and quality improvements.

1. Decision regarding the
Patient Protection and Affordable Care Act
June 29, 2012
1:00 p.m.

3.  Individual and Employer Responsibilities
 Medicaid and CHIP Expansion
 Premium Subsidies for Lower Income

 Health Insurance Exchanges
 Insurance Market Reforms
 Quality and Delivery System Reforms

4.  In a 5 – 4 decision the Supreme Court upheld the
Constitutionality of the Patient Protection and
Affordable Care Act.
 The Court ruled that the Individual Mandate is a tax
and that Congress therefore has the authority.
 The Court limited, but did not invalidate, the pieces
that expand Medicaid.

5. "Our precedent demonstrates that Congress had the power to
impose the exaction in Section 5000A under the taxing
power, and that Section 5000A need not be read to do more than
impose a tax. This is sufficient to sustain it." The Court holds
that the mandate violates the Commerce Clause, but it becomes
irrelevant because five Justices find the mandate to be
constitutional under the taxing power.
On the Medicaid issue, the Medicaid expansion is
constitutional, but it is unconstitutional for the federal
government to withhold Medicaid funds for non-compliance with
the expansion provisions. "Nothing in our opinion precludes
Congress from offering funds under the ACA to expand the
availability of health care, and requiring that states accepting
such funds comply with the conditions on their use. What
Congress is not free to do is to penalize States that choose not
to participate in that new program by taking away their existing
Medicaid funding."

6.  Michigan Attorney General
 National Small Business Association
Vice President and General Counsel, David Burton
 Small Business Association of Michigan
President and CEO, Rob Fowler
Vice President, Small Business Services, Scott Lyon
 Clark Hill, PLC
Kristi Gauthier, Esq.

7. For Small Businesses and Individuals
 Individual Mandate
 Employer ―Mandate‖/Play or Pay
 Individual Subsidies and Small Business Tax Credit
 Health Insurance Exchanges
 Expansion of Medicaid and CHIP
 Dependent Coverage to age 26
 Summary of Benefits and Coverage (not an SPD)

8. New Fees
 Pharmaceutical Companies - $16 billion between now
and 2019 and then $2.8 billion/year thereafter
 Insurance Carriers - $47.5 billion between 2014 and
2018 and then indexed to inflation
 Medical Devices taxed at 2.9%
 Changes to FSAs for over-the-counter drugs
 Contributions to FSAs limited to $2,500
 Medicare Part A tax increase for individuals earning
$200,000+ and couples earning $250,000+
 Cadillac Tax - 2018

9. Insurance Carrier Related Changes
 Loss ratios hold at 80% for individuals and 85% for small
businesses
 Guarantee issue and renewability (no recession)
 No lifetime limits
 Modified community rating
 ―Precious Metals‖ - Platinum, Gold, etc. and Essential Benefits
 Deductibles limited to - $2,000/$4,000
 Waiting periods limited to 90 days
 Children with medical conditions – No pre-ex
 Preventive Services - Immunizations for children and cancer
screenings for women
 No salary discrimination for eligibility
 CO-OPs in market

10.  Michigan Senate Passed - Still Needs Action in Michigan House
 Orbitz for Health Insurance
 Spreadsheet comparison of products from various insurers
 Uniform enrollment
 Assign a rating based upon relative quality and price to each
qualified health benefits plan
 Inform individuals of eligibility requirements for the state's
Medicaid program, CHIP program and any applicable state or
local public program and screen and enroll eligible individuals
in these programs
 Establish a navigator program
 Assist qualified employers in facilitating the enrollment of
employees in small group qualified health benefits plans

11.  Premium assistance based on Federal Poverty Level
(FPL)
◦ Those earning under 133% of FPL generally eligible
for Medicaid
◦ Premium assistance to those from 133% to 400% of
FPL
 Cap on individual premium cost for 2nd-Lowest Cost
Silver Plan – 70-%/30%
 In addition, those with lower incomes get better
benefits (Cost Sharing)
◦ 100-150% of FPL 70% value raised to 94%
◦ 150-200% of FPL 70% value raised to 87%
◦ 200-250% of FPL 70% value raised to 73%

12. Small Business Tax Credit (Part 2) – Tax credit equal
to 50% of the employer’s health insurance costs, if:
◦ 10 or fewer full-time equivalent employees
◦ Average annual wages of less that $25,000 (not including owner’s or
owner’s family member wages)
◦ Employer pays 50% or more of the premium
 Companies with between 11 and 25 workers and an average
wage of less than $50,000 are eligible for partial credits
 Credit only available for two years
 Credit only available if small employer purchases coverage
from the SHOP Exchange

13. Individual Mandate - Requires all U.S. citizens and legal residents to have
qualifying health coverage or face a penalty/tax if they do not. Those under
FPL or those that do not file a tax return – no penalty
The percentage will be 1.0% in 2014, 2.0% in 2015, and 2.5% thereafter, or a
flat dollar amount assessed on each taxpayer and any dependents
(e.g., family)
The annual flat dollar amount phased in—$95 in 2014, $325 in 2015, and
$695 in 2016 and beyond (adjusted for inflation), assessed for each taxpayer
and any dependents.
The amount is reduced by one-half for dependents under the age of 18.
The total family penalty is capped at 300% of the annual flat dollar amount.
Percentage of the ―applicable income,‖ defined as the amount by which an individual’s household income exceeds the applicable filing threshold for the
applicable tax year. The filing threshold comprises the personal exemption amount (doubled for those married filing jointly) plus the standard deduction
amount.

14. Employer ―Mandate‖/Free Rider - Employers with more than 50 FTE must offer
either ―affordable‖ coverage or potentially be subject to a ―free rider‖ penalty
The Penalty
 $2,000/FTE after the first 30 employees
The Calculation
 Employees scheduled to work at least 30 hours per week in a typical
month, plus
 For all those under 30 hours a week, the aggregate of all hours worked in a
typical month divided by 120, (do not include any seasonal employees that
work fewer than 120 days in the prior year).
 Take the total number of full-time employees in Step 1 and add that to the
number of Full time equivalents that results from the calculation in Step 2
above.
 If the number is 50 or below then there is no ―free-rider‖ penalty.
◦ Employers with more than 200 employees will be required to auto enroll employees into the
health plans offered.

15. In 2018
An excise tax on insurers or employer health
insurance plans with aggregate values that
exceed $10,200 for an individual and $27,500 for
a family takes effect.
Tax is indexed to the CPI-U beginning in 2020.
Cadillac Tax is 40% of the value above the
threshold.

16. Questions
www.sbam.org/healthcarereform
Scott.lyon@sbam.org
SBAM – 1- 888-Get-SBAM