So just what does it mean to me as an employer if my state doesn’t opt to expand Medicaid?

Medicaid Expansion

Medicaid is a partnership between the federal government and the states. States are able to design their own programs within the boundaries set by federal regulations and the federal government ponies up a large share of the money. The current Medicaid program requires states to cover only certain categories of needy individuals: pregnant women, children, needy families, the blind, the elderly and the disabled. Today, approximately 60 million people are enrolled in the program; expansion would add another 17 million. The ACA’s Medicaid expansion provisions require states to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133% of the federal poverty level (roughly $31,000 for a family of four). The ACA offered expansion of Medicaid on very generous terms – the law calls for the federal government to pick up all costs of the Medicaid expansion from 2014 through 2016. Subsequently, the federal payment level gradually decreases, to a minimum of 90%.

The challenge to the ACA was that it unconstitutionally coerced states to expand Medicaid by threatening to withhold all federal Medicaid grants for non-compliance. Instead of just refusing to grant new funds to states that did not comply with the new conditions, it would withhold those states’ existing Medicaid funds. The counter argument was that the Medicaid expansion provisions were simply modifications of the existing program that offered financial inducements to comply with the new law. The Supreme Court held that, while states could be required to comply with certain conditions in order to receive funds, they could not be penalized if they chose participate in the new program by taking away their existing Medicaid funding. Simply put, the Court found that the ACA provisions were unconstitutional because the government cannot coerce states to expand Medicaid by threatening to withhold existing federal Medicaid funds. Additionally, the Court further found that the unconstitutional provisions could be severed and remedied, leaving the rest of the statute intact.  The end result is that states may decide to opt out of the Medicaid expansion.

States that choose not to participate in the expansion will be faced with questions about how Medicaid programs will function and how it will affect the population that would have been Medicaid eligible through the expanded coverage.  Opting out of the expansion would save the states some money in the long run. Within hours of the Supreme Court’s decision, Republican officials in several states said they were likely to oppose expanding the program.

What does this mean for employers?

For employers with above 50 lives, this could mean additional penalties under the ACA. If a state doesn’t expand Medicaid coverage, employers with over 50 lives may be subject to more plan affordability penalties than they would be were the state to expand. Under the employer mandate, employers are subject to penalties if they fail to offer group health plan coverage or they offer coverage that fails to meet certain quality and affordability standards (generally if premium for single coverage exceeds 9.5% of employee’s household income or if the plan fails to provide at least a 60% “actuarial value” and the individual enrolls in the Exchange). If Medicaid coverage is not expanded, individuals who would have been eligible for Medicaid under the expanded conditions will now likely find coverage under an Exchange and be eligible for federal subsidies. This could increase an employer’s exposure to shared responsibility under the employer mandate.

Employers with less than 50 lives and not subject to the employer mandate will also be affected. States that choose not to expand Medicaid will force more people to be dependent upon their employers or an Exchange for health insurance. Coverage under the Exchange will be challenging to navigate at the onset, will vary state by state, and may or may not be a viable option for many employees, effectively forcing the employer to step in. When employees cannot afford their insurance, it tends to leave employers in a sticky situation.

No matter what the size of an employer, allowing states to opt out of the Medicaid expansion provisions will likely result in more people (who typically were not insured in the past) seeking coverage on an Exchange. This certainly does not bode well for the overall experience of the Exchange-based plans, ultimately affecting rates and affordability for employees.


This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2012 Emerson Reid, LLC. All Rights Reserved.

US Supreme Court Upholds Affordable Care Act


US Supreme Court Upholds Affordable Care Act

The US Supreme Court today (June 28, 2012) upheld the Affordable Care Act (ACA), ruling that the law’s individual mandate is a constitutional exercise of Congress’s power to impose taxes. With the Court’s decision, compliance efforts likely will move ahead at full speed with major provisions of the ACA becoming effective in 2013 and 2014.

In a 5-4 decision, Chief Justice Roberts, joined by Justices Ginsberg, Breyer, Sotomayor and Kagan, concluded, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

In the Court’s analysis of the ACA’s Medicaid provisions, it held that it would be unconstitutional for the federal government to withhold all Medicaid funding in order to force states to comply with the Medicaid expansion. Chief Justice Roberts wrote, “Nothing … 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.”

The Court ruled that the Anti-Injunction Act, which limits lawsuits challenging a tax before it is assessed, does not apply because Congress specifically provided that the penalty payment enforcing the individual mandate would not be treated as a “tax.” Notwithstanding acceptance of Congress’s penalty label for purposes of application of the Anti-Injunction Act, the Court ruled that for purposes of determining whether the individual mandate is constitutional, the penalty payment falls within Congress’s general power to tax and, therefore, is upheld.

The decision arises from cases brought by the state of Florida (and joined by 25 other states), the National Federation of Independent Business, and several individuals challenging the constitutionality of the individual mandate and the Medicaid expansion. The cases were later consolidated.

In their dissent, Justices Kennedy, Scalia, Thomas and Alito wrote that the law should have been struck down in its entirety.

With the exception of the limitation on the federal government’s authority to withhold Medicaid funding, all provisions of the ACA stand and compliance efforts likely will move ahead at full speed. In preparation for the major coverage expansion to occur under the ACA in 2014, the Administration is expected to release a host of regulations dealing with the definition of minimum essential coverage, employer coverage and reporting requirements, and an array of new taxes and fees. Clients should be aware of provisions of the law set to take effect in 2013 and 2014, including those listed in the table below.

Provisions of the Affordable Care Act That Take Effect in 2012, 2013 and 2014


• Medicare hospital value-based purchasing program
• Increase in physician quality reporting requirements in Medicare
• Additional Medicare pilot programs on alternative payment methodologies, e.g., accountable care organizations
• Increased requirements for hospitals to maintain not-for-profit status
• Fees from insured (including self-insured) plans transferred to the Patient-Centered Outcomes Research Trust Fund


• Increase Medicare payroll tax by 0.9% on high-income earners
• Impose a 3.8% tax on net investment income of high-income individuals
• $500,000 cap on health insurers’ deduction for executive compensation
• Eliminate employer deduction for Medicare Part D subsidy
• FSA limitations
• Excise tax on medical device manufacturers and importers
• Medical expense deduction floor increases to 10%
• Nationwide bundled payment pilot begins in Medicare
• Increased Medicaid reimbursement for primary care
• Medicare physician comparison data available to the public
• Reductions in Medicare payments for select hospital readmissions
• Expanded coverage of preventive services by Medicaid


• Employer mandate and individual mandate
• Employer and insurer reporting requirements
• New health insurance market reforms take effect
• State health insurance Exchanges established
• Premium tax credits and cost-sharing subsidies available to certain individuals in Exchange insurance products
• Medicaid expansion to new populations (100% federal match to states for newly-eligible populations through 2016)
• Annual fee on health insurers
• Medicare/Medicaid DSH payment cuts begin
• Independent Payment Advisory Board (IPAB) issues first report to Congress if Medicare spending exceeds growth target


• Excise tax on high-cost employer-sponsored coverage (2018)

Political reactions

The Court’s ruling will not end the political debate over health care, which will remain a central issue in the 2012 elections and beyond. The law stands as the centerpiece of the domestic record  of President Obama, who today said, “Whatever the politics, today’s decision was a victory for people all over this country whose lives will be more secure because of this law and the Supreme Court’s decision to uphold it.” The President added, “With today’s announcement it is time for us to move forward to implement and, where necessary, to improve this law.”

In comments in response to the ruling, presumed Republican presidential nominee Gov. Mitt Romney said, “What the Supreme Court did not do on its last day in session, I will do in my first day in office. I will act to repeal Obamacare.”

Following the release of the decision, House Majority Leader Eric Cantor (R-VA) announced that the House on July 11 will hold a vote on legislation to repeal the ACA in its entirety. The measure likely will pass the Republican-controlled House, but it is unlikely to advance in the Democratic-controlled Senate.

Repeal of the ACA has been a primary focus of congressional Republicans and remains a central objective of many Republicans’ campaigns in the November elections. Efforts to repeal all or part of the law will remain difficult unless Republicans maintain control of the House, win the presidency, and win at least a majority in the Senate in the November 2012 elections.

Republicans to date have not coalesced around a proposal to replace the ACA. Further efforts to control rising health care costs, including reforms to federal health entitlement programs and health-related tax expenditures, will be at the center of budget and deficit-reduction debates that are expected to dominate Washington after the November elections.

Background on the law

The Affordable Care Act was enacted in March 2010; it comprises the Patient Protection and Affordable Care Act of 2010 (which President Obama signed on March 23, 2010) and the Health Care and Education Reconciliation Act of 2010 (which the President signed on March 30, 2010).

The primary goals of the ACA are to: (i) expand coverage to an estimated 32 million Americans without health insurance; (ii) reform the delivery system to improve quality and drive efficiency; and (iii) lower the overall costs of providing health care.

To accomplish the goal of expanding coverage, the ACA mandates that all Americans maintain a minimum level of health coverage (the so-called individual mandate) or face a tax penalty. The law expands Medicaid coverage and provides federal premium tax credits and cost-sharing subsidies to assist low and moderate income individuals without affordable employer-sponsored insurance in obtaining health insurance through state-based insurance Exchanges. The ACA mandates, for the first time, that employers with 50 or more full-time employees provide certain minimum benefits or pay penalty fees.

The law also implemented insurance market reforms, including a ban on exclusions for pre-existing conditions, premium rate restrictions, extension of dependent coverage through age 26, and mandatory coverage of preventive services.

A mix of Medicare and Medicaid reimbursement cuts; provisions to reduce fraud, waste, and abuse in those public programs; other delivery system reforms; and a series of tax increases on individuals, corporations and the health industry are used to offset the cost of the law.

For more information

A video highlighting key elements of the Supreme Court’s decision will be available on

An Ernst & Young Thought Center webcast discussing the ruling’s implications for individuals, employers, and health care providers has been scheduled for July 17. Follow this link to register.

Women’s preventive care enhancements
May 21, 2012, 3:52 pm
Filed under: National Healthcare, Women's Health

The Affordable Care Act (ACA or health care reform law) requires nongrandfathered health plans to cover evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA) department of HHS.

In guidelines released August 1, 2011, HHS outlined required preventive care services for women. The guidelines require nongrandfathered individual and group health plans to include these services without cost sharing:

  • Well-woman visits
  • Screening for gestational diabetes
  • Testing for human papillomavirus (HPV)
  • Counseling for sexually transmitted infections
  • Screening and counseling for human immunodeficiency virus (HIV)
  • FDA-approved contraception methods and contraceptive counseling
  • Breastfeeding support, supplies and counseling
  • Screening and counseling for interpersonal and domestic violence

For group health plans (whether insured or ASO), these services must be provided at the first plan year on or after August 1, 2012. For individual plans, the services must be provided in new policies beginning on or after August 1, 2012, and existing policies beginning at the start of the next policy year following August 1, 2012 (generally January 1, 2013). System and market considerations may accelerate the effective date in the individual market in some states.

The guidelines require coverage of contraceptive methods “as prescribed.” This language appears to limit the coverage requirement to contraceptive methods that require a prescription; future guidance may clarify this issue. The guidelines allow plans to encourage lower-cost contraceptives by charging cost-sharing for brand-name contraceptives when a generic is available.

The initial guidance about these requirements allowed a narrowly defined group of religious employers (essentially just churches) to choose not to cover contraceptives and sterilizations as part of preventive care benefits. Many other religious groups, such as religiously affiliated hospitals and universities, will not qualify for this exemption. On February 10, 2012, the administration announced its intention to issue revised regulations. According to a White House Fact Sheet, the revised regulations will:

  • Exempt churches, other houses of worship and similar organizations from covering contraception on the basis of their religious objections.
  • Establish a one-year transition period for other religiously affiliated organizations while this policy is being implemented.

What’s Coming for the HSA in 2013
May 10, 2012, 3:58 pm
Filed under: National Healthcare

What’s new for 2013? HSA contribution limits, HDHP minimum deductibles and out-of-pocket maximums will increase.

HSA Contribution Limits:

  • Individual (self-only HDHP): $3,250($150 increase from 2012)
  • Family: $6,450 ($200 increase from 2012)

Limits for catch-up contributions (for persons over age 55): $1,000 (unchanged from 2012)

HDHP Minimum Required Deductibles:

  • Self-only: $1,250
  • Family: $2,500

HDHP Out-of-Pocket Maximum:

  • Self-only: $6,250 (a $200 increase from 2012)
  • Family: $12,500 (a $400 increase from 2012)

For more information view the IRS change

Just what is this “Summary of Benefits & Coverage” that I am required to submit to my employees come September?

The Affordable Care Act (ACA) requires all group health plans, including grandfathered plans and self-insured plans, to provide participants and beneficiaries a summary of benefits and coverage (SBC). The effective date for compliance with the SBC requirements under the ACA was delayed pending further guidance (proposed regulations had been issued in August 2011). The Departments of Labor, Treasury and Health and Human Services (the Departments) issued final rules regarding these provisions which will take effect beginning in September 2012.


Who Must Provide an SBC?

For fully-insured plans, both the carrier and the plan administrator (typically the employer) are responsible for providing the SBC to participants and beneficiaries. The final regulations provide that as long as either one of them provides a complete SBC in a timely manner, the requirement will be deemed satisfied for the other party. Employers should reach out to their carriers to discuss who will take on this responsibility. For self-insured plans, the plan administrator is responsible to provide the SBC and employers should contact their third-party administrator for assistance. The final regulations clarify that a single SBC may be provided to a participant and any beneficiaries at the participant’s last known address. If a beneficiary’s last known address is different than the participant’s, a separate SBC must be furnished to such address.

What is Required to be in the SBC?

  • The following information must be included in the SBC:
  • Uniform definition of standard insurance terms and medical terms;
  • Description of the coverage, including cost sharing for each category of benefits;
  • Exceptions, reductions and limitations of coverage;
  • Cost sharing provisions including deductibles, coinsurance and copay obligations;
  • Renewability and continuation of coverage provisions;
  • Coverage examples;
  • Statement that the SBC is only a summary and that the plan document, policy or certificate of insurance should be consulted;
  • Contact information for questions and to obtain the plan document, policy or certificate of insurance;
  • Internet address to obtain a list of network providers;
  • If the plan has a prescription drug formulary, an internet address to obtain information on prescription drug coverage; and
  • Internet address to review the uniform glossary, and a statement that paper copies are available, as well as contact information for how to get them.

Helpful Links

Compliance Guide:

Summary of Benefits and Coverage Template:

Instructions for Completing the SBC – Group Plans:

Uniform Glossary of Coverage and Medical Terms:

Wage Theft Prevention Act Annual Notice Deadline
January 9, 2012, 7:33 pm
Filed under: National Healthcare

The Wage Theft Prevention Act is a new Act that went into effect April of 2011.  The Act gives greater protection to workers, and makes changes in the way they are notified of their pay rates and receive wage statements.  Pursuant to the Act, beginning in 2012, all New York employers must provide an annual pay notice to all employees (exempt and non-exempt) who work in New York (they must also do so upon hire).  The annual notice must be provided to employees between January 1st and February 1st of each year.  The notice must include the following information:

• Dates of work covered;

• Employer’s address and phone number;

• The rate of pay and the manner in which it is paid (hourly, salary, commission, etc.)

• Gross wages; net wages;

• Deductions;

• Allowances against minimum wage; and

• For non-exempt employees, the regular rate, overtime rate, and the number of regular and overtime hours worked.

The notices may be provided to employees electronically, as long as employees can acknowledge receipt and print the notice. A copy of the notice must be maintained by employers for six years.

Under the law, employers can be assessed a penalty of $50 per week per employee if proper notice is not given (employees have a separate cause of action up to $2,500).

The New York State Department of Labor provides FAQs that contain further information and can be found at:

Essential Benefits: What are they?
October 17, 2011, 12:45 pm
Filed under: National Healthcare

The essential benefits package will become the standard for health coverage and will be used as the basis for establishing the different benefit levels of plans that will be offered in the health insurance exchange. In addition, all new health plans that are sold to individuals will have to cover, at a minimum, all of the health care services in the essential benefits package. In 2014, all Small Group (1 to 100 Employees) will include these essential benefits as well. This will help ensure that every health plan provides the quality of coverage and financial protections necessary to safeguard families from the devastating financial effects of illness.

Right now, the Department of Health and Human Services (HHS) has come out with an estimation of what these benefits will be.  They are as follows:

  • Ambulatory Patient Care
  • Emergency Room Services
  • Hospitalization
  • Maternity & Newborn Coverage
  • Mental Health & Substance Abuse
  • Prescription Benefit
  • Rehab
  • Prevention & Wellness
  • Pediatrics Including Oral & Vision

There may be some more tweaks to this, but this is a solid estimation that you can pretty much take to the bank!

Something you should know about the National Healthcare Bill that is due to take effect in 2014 – even if you do everything right, you can still get hit with a fine!
October 3, 2011, 3:54 pm
Filed under: National Healthcare

To explain this is layman’s terms we need to start off with a couple of definitions:

Exchange:  is a set of state regulated and standardized health care plans, from which individuals may purchase health insurance.

Full Time Employee:  30 or more hours worked during the week

Full Time Equivalent (FTE):  a calculation where you add up all the employees who  work 30 hours or more per week, and then give partial credit to those employees who work less than 30 hours per week.

For example, let’s look at a company that has 70 actual people working for it:

35 Employees work 30 hours or more per week = 35 Employees

20 Employees work 20 hours per week = 13.33 Employees ((20 x 20) / 30)

10 Employees work 15 hours per week = 5 Employees ((10 x15) / 30)

5 Employees work 10 hours per week = 1.66 Employees ((5×10) / 30)

FTE count is 55 Employees

Household Income:  Total taxable Income recorded per household (not per individual)

What you should know:

Point 1:

In 2014, if you have 50 or more employees you are obligated to offer them Group Health Coverage or potentially face a fine.  If you decide not to, and 1 employee enters the Exchange to get health coverage, you not only get hit with a $2,000 fine for that employee, you are hit with a fine for ALL your calculated FTE employees.  However, the legislation exempts the first 30 employees from the fine calculation (i.e., if the employer has 55 FTE employees as in the example above, the employer pays the fine for 25 employees).

In our example above, for that one employee going to the Exchange, the employer would be hit with a fine of $50,000 (Total Employees 55 – 30 exempt = 25 x $2,000) for that year alone.  This is a steep penalty, but if you weigh it against the potential cost of health insurance, it may be worth paying the fine.

Point 2:

In 2014, if an employer offers Group Health Coverage, it must be deemed Affordable.  If an employee’s contribution to an employer-sponsored health plan is greater than 9.5% of that employee’s HOUSEHOLD income, it is deemed Unaffordable.    If this employee applies to and is accepted by the Exchange, the employer will be fined $3,000 for that employee, and any other employee that enters the Exchange under similar circumstances.

There are numerous issues with this setup, but two of the most obvious are:

  1. As an employer, you are not allowed to ask an employee what their household income is.
  2. By 2014, non-discriminiation laws will be in effect, so you must treat ALL employees the same in regards to contributions.  This is either done as a percentage of the premium or flat dollar amount; you are unable to do it as a percentage of income.   For example, the employer contributes $300 per month towards the premium or the employer contributes 75% of the cost of the premium on a monthly basis.

What this means for you as an employer?

  • Some employers may decide to take the penalty for not offering coverage since in our example a $50,000 fine is still far less than health insurance premiums for 55 FTEs annually.  This will result in even more uninsured just due to cost.
  •  Even if you do your homework, know that there are elements to this law that may put you out of compliance.

What brokers are trying to do?

We are working with our lobbying group, National Association of Health Underwriters (NAHU, to have this changed so that employers are allowed to create a Safe Harbor, if you have looked at the lowest wage employee’s contribution when you set up your contributions.  Also, we are advocating for a “Last Look” by employers so they can correct this immediately to go into compliance.

What you can do?

Call your Congressman.    Let them know you have some concerns and that some of these fines would be detrimental to your company.