Recent Budget Deal Defunds Two PPACA Programs

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Hidden among recent headlines concerning funding for the 2011 federal budget, an under-publicized but highly significant event happened -- two programs enacted by the 2010 Patient Protection and Affordable Care Act (PPACA) were repealed and defunded. 

Last week, lawmakers agreed on a Continuing Resolution (CR) to fund the federal government through September 30, 2011, the end of fiscal year. This CR authorizes $38 billion in funding cuts from existing and planned federal programs, including the Cooperative Health Insurance Programs (CO-OPs) Program and the Free Choice Vouchers Program. 

The Cooperative Health Insurance Program Repealed

Section 1322 of PPACA[1] mandated states to create CO-OPs, and provided for a “Federal program to assist establishment and operation of nonprofit, member-run health insurance issuers.”

The goal of the program was to spur the creation of qualified nonprofit health insurance issuers that could offer health plans for individuals and small businesses in states where insurance issuers are licensed to offer them. The program also would have provided loans and grants to fund start-up and maintenance costs for these plans.

However, as a result of Section 1857 of the recent Continuing Resolution,[2] funding for the CO-OP program was trimmed by $2.2 billion of the $6 billion set aside for the issuance of loans and grants. This partial defunding is significant for several reasons, not least because of its controversial nature.  Initially, some commentators were very critical of the CO-OP concept, and called it a “stealth government option.” The partial defunding of the CO-OPs Program is a victory for the Republicans. The Obama Administration will now have to carefully pick potential winners instead of setting one up in every state.

Free Choice Voucher Program Takes a Hit

In addition, Section 10108 of PPACA authorized a voucher system that would allow employers to offer “minimum essential coverage” to employees. The program, supported through new state-based public exchanges, would help subsidize health insurance for qualified employees.  Starting in 2014, this provision would have allowed certain employees to withdraw from their employer-sponsored health plan and use an employer contribution to purchase other coverage from a state exchange. 

However, Section 1858 of the recent Continuing Resolution repealed the “Free Choice Vouchers” Program as well.[3] The program also would have provided funding of vouchers for lower income employees to subsidize the employer contribution. Under this provision, plan sponsors of employer-based plans (including self-funded benefit plans) would have been required to offer vouchers to employees who fall below a pre-defined income threshold, while the state-based exchanges would credit the employee the amount of the voucher that exceeded their monthly premium. The immense controversy surrounding and costs associated with this measure led to its repeal.

Future Budget Battles On the Horizon

The focus of fiscal negotiations in Congress now moves to the debt ceiling which, some argue, must be briefly increased to keep the federal government from going into default. This battle will likely be more contentious than the recent struggle over the 2011 fiscal year budget which was recently approved.

Moving forward, Republicans will try to build on the initial success they’ve had in defunding the CO-OPs and Voucher Programs in PPACA, and may use the threat of a government shutdown to negotiate further PPACA cuts. On the other hand, Democrats are not likely to willingly let this happen.  Compromises will be necessary if the government is to avoid another shutdown or default on the federal debt. At this time, specifics on those future compromises are virtually nonexistent. 

Once these issues are resolved, the parties must then turn their attention to the budget for fiscal year 2012. The House passed a Republican budget on April 15th, and referred the bill to the Democrat-controlled Senate.  Unsurprisingly, there are profound differences between the Republican House version and a Democratic budget that President Obama proposed earlier this year.  

While clarity on the future of various budget issues plaguing the government is murky, one thing is certain: the financial debate between Democrats and Republicans is just getting started.

As always, BenefitMall will keep you up-to-date on these issues and more.  Stay tuned to this blog for further developments.




[3]  Idbid. 

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