Guest Article

The 2010 Health Care Legislation — Here Today, Gone Tomorrow?

By Alvin D. Lurie
October 6, 2010
Copyright 2010, A.D. Lurie

The best laid schemes o' mice and men
Gang aft a-gley...
-- Robert Burns

Drastic health care reform legislation was voted into law less than six months ago by the 111th Congress. Is it possible that it will be voted out of law by the 112th Congress? It is possible. But it would take a trifecta to pull off:

• New legislation to repeal and/or amend the recent reform law with the requisite majorities in both houses of Congress after the elections in November
• Enough votes in the Senate to invoke cloture in order to cut off filibustering by Democrats opposing the repealer efforts (i.e., 60 votes under the present rules of the Senate); and
• Enough votes in both Houses to override the anticipated veto by the President of the repealer law (2/3 of the members voting in each House), to enact repeal without the President's signature

Of course, in the unlikely eventuality that President Obama were not to exercise his veto power, the third leg would be obviated.

If there was any doubt that the Republicans were serious about their loudly proclaimed intent to repeal the health care law if they gained control of the Congress in November, it is now abundantly clear that is precisely what they will attempt. On September 23, they issued their "Pledge to America," which is described as their blueprint of goals. High on that list, right along with permanent extension of the Bush-era tax cuts, jobs creation and a "drive for a smaller government," is "repeal and replace(ment of) the government takeover of health care."

Even if, having succeeded in the midterm elections and passed the new health care law — but failing to override the likely presidential veto — their attempt could be repeated in the Congress elected in 2012, assuming the President were not then to be reelected and the Republicans captured the White House, or even if Obama held onto his office but was so weakened by increased Republican gains in the 113th Congress that he decided not to veto the repealer, as a way to win Republican support for other initiatives on which he hoped to build his legacy.

Other creative options also could be considered by the Republican leadership that would not require delaying repeal efforts until success in the 2012 elections. The first would be for the Republicans, if they win control of the Senate in November, to change the rules governing filibusters so they could be shut off with less than the current 60 votes — say down to 51 — so that, with a simple majority of the full membership in the 112th Senate, they could pass the repealer in the Upper Chamber. Passage in the House, which is not subject to the filibuster rule, could be effected with just a majority of a quorum.

Another tactic that might be effective would be to borrow a page from the playbook with which the Democrats accomplished the health care reform legislation in March of this year, by breaking up the repealer legislation into two separate bills, one of which were designed to satisfy the reconciliation tactic, which precludes filibuster because of not dealing with matters having a revenue effect. So the Democrats first got the House to pass the exact bill which the Senate already had adopted (called the Patient Protection And Affordable Care Act, or "PPACA"), and then placed the rest of their reform agenda into a separate "reconciliation" bill (called the Health Care And Education Reconciliation Act, or "HCERA"), which passed with only simple majorities in both Houses.

The task for Republicans in 2011 might require a further refinement, utilizing three separate bills, since they would not have the benefit of a bill which the Democrats had already adopted which the Senate could then simply rubber-stamp. They first would draft a bill to repeal PPACA, but incorporate in the repealer the features of PPACA that both the Republicans and Democrats could embrace, but without the costly over-regulating government bureaucracy and deficit escalation that the Republicans have criticized, and without any elements having a revenue impact. Next, a bill could be drafted to repeal HCERA, but retaining from it only elements meeting the same criteria just described for the PPACA repealer. A third bill would incorporate any elements that had been excluded from the previous two that had revenue impact. Presumably only the first two would be insulated from filibuster; but that problem for the third bill could be minimized, if not eliminated, by revision of the filibuster mathematics noted above. Were the Democrats to propose amendments to any of the bills that would retain the "big government" features of the present legislation, those would be highlighted by their proposed amendments and so subjected to the scrutiny and pointed analysis that had not accompanied the present acts, and with specific attention focused on the enormous costs to government and private business in implementing the reforms enacted — costs that by themselves could harm the economy greatly by compelling small businesses and even large ones to restrict their hiring.

Those are some of the scenarios by which repeal of this year's health reform law could be accomplished, while preserving the major benefits it was designed to accomplish. But no one should be deceived that the process would be easy or certain of attainment. It would certainly trigger a repeat of much of the debate that characterized the recent reform efforts and, more significantly, the preoccupation with its attainment that occurred in so much of our government. It will not soon be forgotten that the White House and the Congress had been grappling with health reform for over six months before it was enacted this past March, almost to the exclusion of all else — not least the severe economic downturn that had crippled the Nation and much of the developed world for over a year — essentially putting on hold the President's ambitious agenda, to say nothing of the financial recovery itself. That alone might well discourage a return to health care legislation for some time.

By the time the recent legislation had finally been rammed through Congress, in a messy process that once again demonstrated the wisdom of the famous Bismark simile of the making of sausages and legislation, its most immediate effect on people everywhere in the Country was health care fatigue. Surely many in the White House and Congress were glad to be done with it, and hoped not to have to cope with it soon again. But worse than that, the rancor and outright hostility engendered between the Democratic and Republican congressmen and women had escalated to a dangerous level during the health reform debates, that bordered on legislative dysfunction, making it seem that no significant legislation, let alone the health care reform, could get through that body, until the Democrats designed the reconciliation stratagem (too clever by half, some might say) that enabled passage of the legislation without Republican votes.

The principal obstacle in the early phases of consideration of the legislation by the relevant committees of the House and Senate had been the so-called "public plan option", which the White House had made the centerpiece of its argument for passage of the legislation, the absolute sine qua non , allegedly as a way to pressure the insurance companies to meet the competition by modifying health insurance policies, e.g., lowering premiums, eliminating restrictive coverage and rescission provisions, inter alia. That was the very thing that attracted most of the Republican fire. But the House eventually passed a bill including the public plan element, over solid Republican objection and also that of some dissidents among Democrats.

That course was apparently not going to work in the Senate, where the filibuster-proof margin of 60 affirmative votes was elusive. So, quite suddenly the public option proposal was dropped by the Democratic leadership late in December 2009 and led directly to the Senate's willingness to adopt health care reform legislation without the noxious public option provision, in direct conflict with the bill passed by the House several months previously, which produced the apparent necessity for convening a congressional conference committee to resolve the differences between the two bills. But that, the Administration recognized, would result in a stalemate as the Senate Republicans exercised their filibuster power to block the legislation. So, to preempt such eventuality, the tactic was devised for the House to adopt the Senate bill verbatim, in substitution of the bill the Lower Chamber had previously passed, but on the understanding that, after its signing by the President, a so-called "sidecar bill" would immediately be introduced in both Houses, which would include provisions that the Republicans would oppose but could not block, because the bill could arguably be designed as a so-called "reconciliation bill" that would insulate it from filibuster under the Senate rules, enabling its passage by the full Congress on straight majority votes in both Houses without Republican votes.

Republicans vehemently argued against the legality and appropriateness of employing such a procedure for passage of this most drastic reformation of the health laws of the United States, and on which the Country was divided almost right down the middle. But the maneuver was successfully accomplished by the Democratic leadership, resulting in the adoption of health care reform legislation in two separate bills enacted one week apart, (i) the ungainly- named Patient Protection And Affordable Care Act, and (ii) the Health Care And Education Reconciliation Act. (Note the word "reconciliation" that just happened to be incorporated in the title of the second bill.)

Together the two acts added approximately 2500 pages of statute law, that will doubtless be supplemented by a technical correction act, and by many multiples of that number in interim and temporary rules, final regulations, technical procedures, advisory opinions, guidance, and other announcements, as the three cognizant agencies — IRS, Labor, and Health and Human Services — bear down for many years to come on their separate and joint responsibilities under the law. Furthermore, if one supposes that Congress is now done with health care reform for the foreseeable future, one might profitably examine the post-ERISA federal legislative activity that ensued after the major overhaul of the pension and retirement law in 1974, producing for a considerable period thereafter additional legislation almost every year, and that continues to the present day, albeit at a slackened pace, 36 years after ERISA's enactment.

One need not peer intently into a crystal ball to foretell a future significant development that can be expected in the health reform arena: attempted Republican payback for the Party's rough handling in the enactment of the recent legislation. A price has already been paid by the Democratic party and, more importantly, by the Nation as a whole, in the bitterness of the health reform debate that blossomed into full-tilt dysfunction of the federal legislative process in the ensuing months, such that, notwithstanding the deepening recession, even essential legislation to deal with the financial meltdown and extension of unemployment relief was stymied. The leadership of the White House was blunted; and gone was the comity that once prevailed among the powerful Congressional leaders of the two major parties on previous occasions of overarching national importance, who invariably came together in the Nation's interest to do the people's business. Now partisan politics prevails over patriotism. The fast approaching November midterm elections have only exacerbated the sharp political divisions. Buoyed by polls showing the sinking approval ratings of the President and, even more so, the much lower ratings of Congress under the present Democratic control, Republican congressional intransigence has grown precipitously.

There is no denying a shift in the public attitude toward its government on many fronts. How could it be otherwise? The continuing recession — the stubbornly unabating unemployment — the rising home foreclosures — the stalled housing market — the tentative Administration responses to the oil well blowout in the Gulf of Mexico and its attendant effects on the ecology — stimulus packages that seem not to stimulate the stubbornly sluggish economy, but to clearly raise the scary deficits — the escalating casualties of our troops in Afghanistan and the costs of maintaining them in an increasingly unpopular war in a country mired in corruption and unable to govern itself — and all of this compounded by our own dysfunctional Congress that has so far lacked the will or the ability to cope.

The resultant general malaise is evident among voting blocks throughout the Nation, on the right, the left, the "independents", the fringe groups. Rightly or wrongly, the party in power gets the blame. Obama's campaign promise to change the way Washington works, that played such a large part in his winning the presidency, makes the cheese all the more binding as Washington is seen to now work even less than ever. The public optimism that prevailed just two years ago has given way to a dystopian gloom, that even Democratic pollsters acknowledge does not bode well for their clients going into the Fall elections.

But this piece is intended neither as political prognostication nor as a jeremiad bemoaning a calamitous future for our democratic (small-d) system. Its purpose is far less ambitious: could health care reform actually be repealed after the November elections? One may remember that, after passage of the health care acts in March, Republicans in Congress trumpeted their discontent with the legislation and, presumably, their failure to derail it, by promising to repeal it after the voting in November. Not waiting for that, a repealer was actually introduced by Senator De Mint with an imposing cast of co-sponsors. That was even before many believed there was a credible likelihood the Republicans might achieve success at the polls in November. Since that time much has changed, and Republican control of at least one of the Houses, possibly both, seems not too much for them to hope for as these lines are written.

In New York the upcoming campaign for election of a Senator is certain to feature a lively debate on the issue of health reform repeal. The Republican nominee will doubtless take the fight to the Democratic incumbent, Senator Schumer, who is again running for reelection and is certain to oppose repeal. The Republican candidate strongly advocated repeal in his primary battle, citing, among other things, distrust of projections that the new law will reign in soaring health costs or lower insurance premiums. There is no question repeal will also be an issue in many other states.

Repeal will resonate especially for business owners, large and small, who are now becoming increasingly aware of the impact of the new law, with its enormously costly rules, mandated coverage requirements for employees, increased premiums, labor-intensive compliance procedures, and associated professional fees and administrative costs necessitated by revision of health plans and monitoring of compliance. Senator Hatch recently introduced the American Job Protection Act to repeal the so-called "play or pay" rules requiring employers to provide minimum "essential health benefits" or pay penalties of $2000 for every full-time employee. His bill has been endorsed by the major employer organizations, including the U.S. Chamber of Commerce.

It is not expected to be acted upon before the coming elections, but will most certainly be reintroduced in the next Congress.

Actually the business community does not have to wait for repeal to realize relief from the new law's burdens. Individual companies can effectuate their own de facto repeal by dropping employee group health care plans at any time before 2014. At that time the employer coverage mandates will kick in, imposing penalties on employers not providing the designated "essential" benefits in their plans; but the sanction under the statute is payment of a penalty amount for each employee who purchases health coverage under one of the so-called "exchanges" provided for in the new law. It has been widely reported that many employers already are considering dropping their group health plans and paying the penalties, as the cheaper alternative, leaving their employees only with resort to the exchanges.

A more immediate threat to loss of employer-provided health benefits is posed by a provision in the law that becomes operative in 2011, imposing on health insurance carriers the requirement to satisfy a "medical loss ratio" mandating the expenditure of at least 80% (85% for large group plans) of their premium revenues on actual medical care, as distinguished from administrative expenses, executive salaries, marketing, etc. A news story in the September 30 Wall Street Journal reported that McDonald's Corp., which maintains a mini-med (i.e., very basic), fully insured plan, has advised federal regulators that it may drop its plan entirely because it will be economically prohibitive for its carrier to continue offering the plan, due largely to the steep administrative costs attributable to high worker turnover of its low-wage workforce. The possibility of an administrative agency exemption to the carrier for McDonald's and to insurers of similarly situated employers is apparently under consideration (as these lines are written), since, as a spokesman for the Health and Human Services agency is reported as having said, the Department doesn't want employers dropping coverage over the new law. The Journal news account, in a model of understated reportage, calls the impending McDonald's move "one of the clearest indications that the new rules may disrupt worker's health plans as the law ripples through the real world." [Editor's note: waivers recently were issued; see an October 7 USA Today article, "McDonald's, 29 Other Firms Get Health Care Coverage Waivers."]

A stealth burden imposed by the new law, that is not even related to health care but rather to increasing income tax compliance generally, will soon require all businesses receiving goods and services costing in excess of $600 per annum from any vendor or service provider to issue Form 1099s to every such provider. The ostensible connection with health care is that the resultant increased tax revenues thereby flushed out of the underground cash economy and other underreporting stratagems will help to offset the greatly increased costs to the government of the bureaucracy necessary to implement the new law; and that has translated into lowered projections of the effects of the new health care legislation on the federal deficits over the next ten years. An attempt to graft repeal of this particular provision of the law onto the Small Business Lending Funding Act (H.R. 5297) that recently passed the Senate failed, despite strenuous efforts by major business organizations; but it too will doubtless surface again in the next Congress.

It is not only private business groups that are arrayed against some of the new law. A surprisingly ardent group has already gone into federal court to mount litigation against PPACA, the attorneys generals of numerous states, to halt the imposition on the states of mandates to establish policy purchasing "exchanges" for the acquisition of insurance policies. In the initial skirmish in a court in Florida, with the states charging constitutional violations of the limits on the authority of the federal government over the sovereignty of the states and the lawyers in the U.S. Attorney General's Office waiving the banner of the Commerce Clause, the judge refused the U.S. motion to dismiss the suit; so that case will certainly be proceeding even before the new Congress is sworn in. Other similar suits are in preparation, pitting the States against the U.S. This litigation will not only have a judicial outcome, but most certainly will impact legislative actions for and against repeal in the Congress.

Finally, it is not foregone that all the legislative activity will be confined to preserving or dismantling the status quo of the existing legislation. Some Democratic congressmen who presumably still retain their fervor for the "public plan option" and who have previously spoken of their determination to resurrect it in future legislation, may even campaign this Fall for more than just retaining the law as is. One such congressman, Dennis Kucinich, was prepared to oppose final passage of the bill this past March when the reconciliation bill maneuver was put to a vote, for the very reason that it did not include the public plan option. But he was then hurriedly "invited" by the President to take a short ride in Air Force One, that apparently lasted long enough for the President to win his point, stressing the importance to the political success of the party (and — presumably unstated — of the President) of passing this key legislation. One may assume that Kucinich was not sworn to abandon his commitment to the public plan approach once this particular bill was signed into law. So that course remains open to him and other like-minded congressmen and women in the coming elections.

It has recently been reported in the public press that some Republican strategists are even considering a tactic apart from outright repeal, if that proves impossible of accomplishment in the near term, namely, to starve the beast: that is, deny to the IRS the necessary appropriations to implement its increased revenue-collecting duties under the health care laws. That is only one of many measures that the party out of power has utilized in the past to work its will when all else has failed. It should surprise no one if even now October surprises are being hatched in political workshops of both parties (or even of a third one, if the Tea Party can be counted separately).

How all this Sturm und Drang will play out in the midterm elections — and after — is obviously unknowable at this writing. A poll in the Rasmussen Report in July showed nearly 60 percent of those contacted throughout the Country to favor repeal, 40 percent strongly so. A lot more will be known after November about whether the repeal trifecta, or at least piecemeal efforts, will be accomplished.

Copyright 2010 Alvin D. Lurie

Alvin D. Lurie is a practicing pension attorney. He was appointed as the first person to administer the ERISA program in the IRS National Office in Washington. He is general editor of Bender's Federal Income Taxation of Retirement Plans (LexisNexis), a 2-volume treatise. Mr. Lurie is the first recipient of the Lifetime Employee Benefits Achievement Award sponsored by the Employee Benefits Committee of the American Bar Association Tax Section. He can be contacted at Alvin D. Lurie, P.C. in Larchmont, New York, at (914) 834-6725 or via email: allurie@verizon.net.

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