Introduction. The Patient Protection and Affordable Care Act (ACA) - also broadly referred to as "Health Care Reform" (HCR) - was signed into law just over a year ago. Several legal challenges have threatened certain of the law's most sweeping provisions, including coverage mandates and imposition of taxes for failure to retain coverage. But Health Care Reform pushes forward with significant focus on the development and implementation of mandated "Exchanges" as a distribution channel for individual and small group coverage. States are grappling with ACA's requirements, including the Exchanges. Thus far, New Hampshire has authorized funding for a consultant to examine ACA's requirements for an Exchange for the state, but rejected a contract with the most viable consultant citing a lack of New Hampshire representation on the team and a possible predisposition for an expansive and costly system. Massachusetts is ahead of the curve toward ACA compliance having implemented the Commonwealth Choice program several years ago and implementing the Exchange-like "Health Connector" (http://www.mahealthconnector.org/), which serves as a model for other states.
With the broadest requirements of ACA taking effect January 1, 2014, incremental progress and, yes, reform of Health Care Reform, occurs in the interim. This article addresses some intervening changes and developments toward full implementation.
Repeal of Expanded 1099 Requirements. As a means of funding Health Care Reform, the ACA provided that all businesses must file 1099s for all vendors to whom $600 or more was paid. On April 14th, President Obama signed the "Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011," repealing the expanded 1099 reporting requirements of the ACA. The repeal removes what was seen by many as a burden on America's small businesses. This is the first amendment to the ACA.
As a result, the pre-ACA 1099 reporting rules remain in effect. Specifically, businesses must continue to issue 1099s to service providers for payments of $600 or more; however, payments to corporations remain exempt from this obligation.
IRS Issues Interim Guidance on Expanded W-2 Reporting and Seeks Comment. The ACA requires that employers report the cost of employer-provided coverage on W-2s. Last fall, the IRS made the requirement optional for all employers for 2011 W-2s (to be issued in January 2012). With interim guidance issued on March 29th, the IRS made the reporting requirement optional for small employers (issuing fewer than 250 W-2s) until at least 2012 W-2s (to be issued in 2013), and possibly longer depending on further guidance.
The ACA's purpose for including the cost of employer-provided coverage on W-2s is to assure that employees are aware of the cost and benefit of health coverage. The reporting is informational and does not cause excluded employer-provided health coverage to become taxable.
The interim guidance can be found at www.irs.gov/pub/irs-drop/n-11-28.pdf. The guidance is provided in a Q & A format and provides information on which employers are affected, reporting methodology, applicable coverages and cost determination. Comments on the interim guidance are due by June 27th and the guidance provides both a mailing address and an email address for submission of any comments.
HHS Proposes New Rules on Accountable Care Organizations. In an effort to better coordinate patient care among providers, to improve treatment outcomes and to lower health care costs, the ACA created incentives for physicians, hospitals, long-term care facilities, other providers and medical suppliers to participate in voluntary "Accountable Care Organizations" (ACOs). The ACO program is to be implemented for Medicare patients through what is termed the "Medicare Shared Savings Program." In its simplest form, the participants in an ACO would, in addition to current payments for services and supplies under the Medicare payment system, share in savings to the Medicare system to the extent that benchmarks, quality performance standards and minimum savings levels, are met or exceeded.
On March 31st, HHS proposed new rules, which include quality performance standards for ACO participants. The proposed rules provide quality measures and scoring in five (5) key areas - patient/caregiver experience of care, care coordination, patient safety, preventative health, and at-risk population/frail elderly care. The rules do not require Medicare patients to use ACOs and do not limit choice of providers. However, the rules do provide incentive for providers and suppliers through the use of ACOs to work together to mitigate the risks and frustrations of fragmented care, incomplete or unavailable medical records, ineffective provider communications, and duplicative and incompatible treatment. The proposed rules can be found at http://www.ftc.gov/opp/aco/cms-proposedrule.PDF. Comments are due by June 6th.
In related action, the IRS issued Notice 2011-20 requesting comments in connection with the implications for 501(c)(3) tax-exempt organizations, typically hospitals, but also some long-term care facilities, by participating in ACOs and deriving the benefit of the Medicare Shared Savings Program. The Notice is available at www.irs.gov/pub/irs-drop/n-11-20.pdf, and comments are due by May 31st.
Conclusion. In the current political climate, Health Care Reform is no longer seen only in the context of how to best fund and deliver health care services to Americans. Health Care Reform is now part of an ongoing debate on health insurance reform, the appropriate size and role of government, and the extent to which government should be able to guide or even control health care decisions. We expect to see more attempts to make changes, perhaps even radical changes, to the ACA in the months to come. Whether President Obama will resort to his veto power to thwart such attempts remains to be seen.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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