November Instant Focus-Update on Healthcare Reform

The HealthSmart Focus newsletter provides information on legislative, legal and regulatory changes affecting the healthcare industry. Focus is researched and written by Sarah A. Bittner, Associate General Counsel for HealthSmart Holdings, Inc., and is published for the benefit of our clients, partners and other interested parties. This newsletter is designed to communicate general information regarding employee benefit matters. Nothing in this newsletter shall be deemed to constitute legal opinions or legal advice.

What Obama's Win Means for Healthcare Reform

President Barack Obama was reelected to a second term after securing a commanding lead in the election with 332 electoral votes versus 206 votes for Romney. Most experts believe this victory will ensure the survival of healthcare reform. The Affordable Care Act (ACA) represents a major overhaul to the U.S. healthcare system, calling for a multitude of insurance reforms which are intended to extend health coverage to more than 30 million uninsured Americans beginning in 2014. While President Obama was successful in his reelection, future attempts to advance other aspects of healthcare reform will be difficult when facing another four years with a divided Congress. Republicans still hold the majority in the House and Democrats remain in control of the Senate.

Although the ACA is here to stay, the bigger question is how it will be carried out in the coming months. One issue is the expansion of Medicaid, which is expected to cover more than half of the 30 million uninsured. With the Supreme Court's ruling largely upholding the law, states are permitted to opt out of the scheduled Medicaid expansion without losing their existing Medicaid funds — even though the federal government would cover the costs of new enrollees through 2016 and at least 90% of costs thereafter. As such, states are now faced with the decision whether to expand Medicaid programs to cover residents with incomes up to 133% of the federal poverty level. In 2013, most states will be led by Republican governors and legislatures, some of which have already vowed not to participate in Medicaid expansion (Texas, Florida, Mississippi, South Carolina, Louisiana, and Georgia). However, analysts believe that most states will not forego federal funding and will plan to move forward with Medicaid expansion, even if expansion occurs sometime after 2014.

Another issue on the horizon is the impending deadline for states to obtain their Exchange certification from the Secretary of Health and Human Services (HHS). Under the ACA, states are required to establish a state-based Exchange by January 1, 2014. If a state does not establish its Exchange, the federal government will establish a federally-facilitated Exchange in that state. States are required to submit their Exchange implementation specifications to the Secretary for certification by November 16, 2012. By January 1, 2013, HHS is required to determine whether a state's Exchange will be fully operational by January 1, 2014 so that open enrollment can begin in October 2013.

As of September, less than 20 states had begun the process of implementing Exchanges. This begs the question once again of how predominantly Republican states will approach implementation of the healthcare reform law. These states will have to make a decision whether to begin the implementation process, or risk having the federal government step in. States that do not obtain federal approval by January 1, 2013 may seek approval during subsequent years. However, they must do so at least 12 months prior to the state Exchange's first effective date. Those Exchanges will also be required to cooperate with HHS in the transition from the federally-facilitated Exchange in place on 2014 to the newly approved state Exchange.

Currently, the Affordable care Act remains the subject of several lawsuits seeking to overturn the requirement that religious organizations cover birth control under the preventive care mandate. All other reforms and mandates under the ACA remain largely intact.

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