Obamacare expected to keep lawyers busy in 2013

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Few pieces of federal legislation will have a more wide-ranging effect on the practice of law in 2013 than the Affordable Care Act.

Initially, lawyers and clients were in a holding pattern, as various lawsuits sprung up leaving them to wonder whether the law would withstand constitutional challenges.

“There were a lot of employers who were in denial,” said Milwaukee business and tax lawyer Tom Nichols of Meissner, Tierney, Fisher & Nichols. “First they expected the Supreme Court to kick it out. Then they expected the elections to go differently. Now they’re facing up to it.”

Lawsuits remain regarding mandatory coverage of contraception for religious-type employers. But the overarching message is that now is the time to prepare for the wide-ranging effects of the law, said Guy Du Beau, a Madison health lawyer.

The act is some 2,000 pages in length. And since the law passed in 2010 and into 2011, there was a pretty steady stream of regulations, said employment lawyer Eric Stewart of DeWitt Ross & Stevens in Milwaukee

It would be difficult for any one lawyer to gain in-depth knowledge of every aspect of the law, Du Beau said, so his firm, Axley Brynelson, created a team of lawyers from various practice groups to study it.

Here is a look at some of the issues on the horizon:

Employment impacts

According to Stewart, the biggest unknown for employers is what the insurance exchanges will look like under ACA.

Each state can set up their own health insurance exchange, from which individuals may purchase insurance. Or, the states may opt out, and individuals within those states will rely upon federally-subsidized exchanges.

Wisconsin is not setting up its own exchange, Stewart said. The federal exchange should be up and running by the end of 2013.

In the meantime, employers need to start complying with a new requirement that kicks in Jan. 1, where there will be a cap on health flexible spending accounts of $2,500.

Also, next year employers must withhold an additional .9 percent Medicare surcharge for employees earning more than $200,000 annually, Stewart said.

Then there’s the issue of the employer shared-responsibility mandate, the so-called “play or pay” provision. This takes effect in 2014, when employers of 50 or more full-time employees must decide whether to provide healthcare coverage. They can opt to pay a penalty in lieu of providing coverage, leaving workers to buy their own health insurance from the exchanges. Stewart explained that it’s a “look back provision,” meaning that the government will calculate the number of fulltime employees in 2013 for when it takes effect in 2014.

“What’s important,” he said, “is if you’re straddling that 50-employee threshold, and you’re not planning on having a health insurance plan in 2014, you’re going to want to be under 50 employees during 2013.”

In response, some employers are considering restructuring their businesses into smaller entities, or restructuring jobs so they are part-time, less than 30 hours per week. It’s particularly common among employers who hire people with low or no skills, in industries such as hospitality, retail and landscaping, where the profit margins are smaller.

Tax impacts

On Nov. 20, proposed regulations defined “essential health benefits” detailing minimum coverage standards. Employers will face penalties for substandard plans, Nichols said, at a rate of $2,000 per full-time employee. The big unknown now, he said, is how much insurers will charge employers for these plans.

Also on Nov. 30, the government released regulations regarding the new “transitional reinsurance fee” to be paid by providers of group-health plans starting in 2014. For three years, employers must pay annually an estimated $63 per enrollee or more to the government. The monies will fund reimbursements to insurance companies that are hit with sizeable claims related to care for individuals with preexisting conditions, once the individual mandate has kicked in, also in 2014. So in 2013, businesses have to plan for this expense.

Another often-overlooked provision of ACA, which could potentially place a sizeable burden on employers, Nichols said is a new in 2013 3.8 percent Medicare tax on net investment income for individuals grossing more than $200,000 annually or $250,000 on a joint return.

“For closely-held businesses, it’s more intrusive than people think, because it might affect transactions among businesses – inter-company and intra-company,” Nichols said. For example, some entrepreneurs who own multiple small businesses might lend money from one to another in a lean year, to keep each afloat. Now those kinds of transactions will be scrutinized more closely by the government.

Health law impacts

Du Beau said healthcare providers are keeping their eye on the portions of ACA’s Medicaid provisions that the Supreme Court upheld last June, and how their state governments act in response.

Medicaid programs are essentially state programs, paid for in part by the federal government, he explained. For the next two years, there will be near-total Medicaid funding for states, as long as they agree to expand coverage to levels that the federal government thinks is appropriate.

“That’s huge,” Du Beau said. “A lot of governors are looking at their state budgets and saying, ‘Wow, I can wipe out my Medicaid expenses for the next two years.’ But as a consequence, they have to agree to a higher level of service down the line.”

Wisconsin is still formulating its policy, he noted.

In addition, health care providers are looking at forming alliances as “accountable care organizations,” pursuant to provisions in the law that have already taken effect in 2012, and related regulations.

The idea is that rather than developing areas of specialization in competition with other providers, hospitals and other providers work collaboratively and share resources, without risk of anti-trust enforcement. Planning for such alliances involves looking at legal issues, but also areas such as electronic medical records and other IT concerns, as well as weighing the loss of autonomy in some areas versus the benefits received, Du Beau said.

“They’re just in their infancy,” he said of the alliances, “but I predict in the next five years, they will take off.”

Health care clients are additionally bracing for new nondiscrimination policies under ACA, taking effect in 2013, where Medicare and health insurers cannot discriminate in payment to any operator providing services within the full scope of their licensure.

It’s meant to create more use of midlevel providers, Du Beau said, such as a nurse practitioner instead of a physician.