California is the poster state for Obamacare (the Patient Protection and Affordable Care Act (“ACA”)). The majority of the California Legislature and Governor also made the decision for California to run its own insurance exchanges. So . . . the implementation and management of the Act will be interesting to watch. For the most part I’m going to avoid political discussions. I’m assuming that the Act will be implemented unless or until it or parts of it are delayed, amended or rescinded. Primarily my discussions will be legal, financial/accounting, risk/uncertainty management, and governance based.

Let’s get this discussion out-of-the-way: is it a tax or not? Justice Roberts opined that the ACA is valid as a tax although Congress stated its intent that it not be a tax – query: as statutes are interpreted in accord with legislative intent, and whereas a law certainly can be found invalid if it fits or falls into a category or purpose that specifically was not intended by the enacting Legislature, can a Court find a law to be valid if the law fits a category or purpose that specifically was not intended by the enacting Legislature?

If the Act is a tax, then there is almost no limitation on the ability of the federal government to tax: simply legislate that people must do something, charge them if they don’t comply, and have the penalty collected through the IRS.

But there is also another follow-up question: if the ACA penalty for not purchasing or being covered by health insurance of the type that is mandated by the ACA is a tax, is it a lawful tax? I used to do taxes, but it has been a while, and I acknowledge that I have not researched the following comments. I do recall that not all taxes are lawful. For example, the Supreme Court determined long ago that a federal income tax is lawful. So generally a tax directly related to and based on income is lawful. And it is my understanding that generally a tax directly related to and based on property value (such as a real property or vehicle property tax) also is lawful. But the ACA penalty is not directly based on your income or property value. It is a penalty (or call it a tax if you like) that arises from your failure to do something, i.e., your failure to have or to purchase the government mandated insurance policy coverage. While the penalty is calculated at the greater of a fixed amount ($95 for 2014 and then increasing) or a percent of your taxable income (1% for 2014 and then increasing to 2% and 2.5% in later years), the fact or event of your failure to have or to purchase the ACA mandated insurance policy coverage is not directly or even indirectly related to the fixed penalty amount or to your taxable income amount or to a percentage of your taxable income amount. The penalty being the greater of the fixed amount or a percent of your taxable income is merely a convenient way to determine the amount of the penalty tax; however, otherwise the fixed amount and the percent of your taxable income have no direct or rational basis or tie to your failure to have or to purchase the ACA mandated insurance policy coverage. And that my friends I am not sure is a legally valid tax or income tax or property tax.

Moving on, the following is the link to the Covered California website (the website for the California ACA insurance exchange), http://www.coveredca.com/. See also, Centers for Medicare and Medicaid Services, Department of Health & Human Services regulations page, healthcare.gov, and the Department of Health & Human Services generally. As the ACA and the insurance exchanges were enacted and mandated or required by Congress and the President, and in California the Legislature and the Governor decided that California would run its own insurance exchanges, I would expect that by clicking on the Covered California website a person in California should be able to obtain ALL, and I mean ALL, of the information that person needs to make his or her health insurance decisions. But you will note that the information on Covered California is significantly general and incomplete. I can only hope that the people to designed the Covered California website realize that it is inadequate. People won’t be happy if they now have to go to the individual insurance companies to obtain the complete information that they need for the mandated health insurance coverage. Covered California should truly be a one stop shop. Unfortunately that will be a big task, but why should each individual consumer now be required to waste their time tracking down and discovering the information? And watch out folks if/when the IRS has to start charging and going after people who don’t comply.

I actually did read the majority of the original legislation several years ago at the time that it was enacted – it was clear then that the legislation lacked its significant detail, but left major decision making such as on coverage for panels of people to decide later – which raises an interesting question: how is it legal or prudent for Congress to pass legislation that doesn’t contain the detail and information that it must contain for Congress to first determine whether to enact the legislation? Boards of public companies certainly cannot operate and satisfy their duties in that manner without risk of possible liability. The original legislation was approximately 2,500 pages and in excess of 15,000 additional pages of regulations have already been passed or proposed, and yet more regulations are in the pipeline. A current test of legislator knowledge about the details of the ACA might be in order going forward.

I recommend that the Covered California website provide complete information about the four “C’s” for each insurer and plan that California has admitted to California’s exchange, with actual copies of the policies posted. That includes: (1) Coverage (in complete detail, what care and procedures are covered); (2) Cost (for all insurers, plans and situations); (3) Care (for all insurers, plans and situations what doctors, hospitals, clinics, etc.); and (4) Complaints (what you can do if you have a coverage, cost or care complaint or dispute).

For example, Covered California broadly states that the following items are covered:

• Ambulatory patient services. You can then also open a box which has the following additional information: Medical care provided without need of admission to a health care facility. This includes a range of medical procedures and treatments such as such as blood tests, X-rays, vaccinations, nebulizing and even monthly well-baby checkups by pediatricians. There are no boxes with additional information for the nine below listed care areas.
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including dental and vision care

Even with the box of additional information for the Ambulatory Patient Services, the information provided does not come close to containing the detail of coverage that someone would need to make an informed determination about which insurer or plan to select.

That’s it for now. This blog post is already way too long, but more to follow. And remember, let’s also encourage governmental entities to book and publicly disclose their unfunded future liabilities based on reasonable assumptions and estimates that are supportable.

Dave Tate, Esq.