The Affordable Care Act (ACA) refers to two controversial laws enacted in March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act, which restructure the fundamental relationship among government, health care providers and health care recipients and profoundly impact persons with disabilities.
Although some Republicans in Congress still threaten to repeal the ACA, the Supreme Court upheld almost all of the ACA's provisions in 2012, including the individual mandate and elimination of pre-existing condition restrictions, which will become effective nationally on January 1, 2014.
How will the ACA impact personal injury damage awards, settlement planning and structured settlements?
Professional associations whose members engage in settlement planning have already begun to address these issues:
- Speakers at recent Academy of Special Needs Planners (ASNP) annual educational conferences (Cynthia Barrett in 2011, David Lillesand in 2012 and Scott Solkoff in 2013) explored these issues in the context of special needs planning.
- The National Academy of Elder Law Attorneys (NAELA) devoted the Spring 2011 issue of its NAELA Journal to the impact of the ACA on Elder and Special Needs Law attorneys and their clients.
- The Society of Settlement Planners (SSP) will feature a presentation by Thomas Begley titled "The Impact of the ACA on Personal Injury Settlements, Structured Settlements and Special Needs Trusts", plus a related panel discussion, during its 2013 Annual Meeting.
Recent research papers and law review articles have further expanded analysis of these strategic ACA issues. One such research paper, titled "Potential Effects of the Affordable Care Act on the Award of Life Care Expenses" and written by Joshua Congdon-Hohman and Victor A. Matheson, was published September 2012 as part of the College of the Holy Cross, Department of Economics, Faculty Research Series (Paper No. 12-01).
Their paper argues: "the ACA may well have indirectly resulted in a great deal of tort reform" and, as a result, "awards in personal injury cases could be dramatically impacted" because:
- Future medical expenses represent a significant element of damages in many personal injury cases.
- When the ACA is fully implemented in 2014, all individuals will be required to purchase health insurance or pay a penalty.
- The ACA provides insurance premium subsidies for low income individuals who do not receive health insurance through the government or from a family member’s employer.
- The ACA prevents price discrimination based on health status and bans annual and lifetime expenditure limits.
- Most individuals will pay the same cost for health insurance before and after an accident.
- The legal maximum out-of-pocket expenses allowable under the ACA is $5,950 per year.
- The goal of tort law is to make the plaintiff "whole".
- Funding of health care through private insurance is a valid methodology for accomplishing this goal now that the ACA makes those markets available to injury victims.
- Therefore, the ACA:
- Should simplify and reduce calculations of future medical damages;
- By limiting those costs to "[health insurance] premiums and out-of-pocket limits less any pre-injury expected medical costs and penalties if uninsured."
What about the "collateral source rule"?
Congdon-Hohman and Matheson, who are economics professors, acknowledge a collateral source issue is "at play" and "remains of significant importance". They argue, however, "there is reason to believe the ACA changes the underlying reason of excluding collateral source compensation from inclusion in tort cases."
More specifically, the authors maintain: "removing existing health insurance coverage from exclusion under the collateral source rule would not significantly affect health insurance coverage rates reducing the economic rationale for having a collateral source rule in place for health insurance."
In their paper, Congdon-Hohman and Matheson highlight additional provisions of the ACA which they believe will impact many life care plans:
- ACA provisions limiting growth of premiums and medical costs:
- Limits on insurers' non-care based expenses.
- Formal requirements to justify rate increases.
- New standards to lower administrative costs.
- Funding for new wellness and prevention strategies.
- ACA provisions reducing the tax deductibility of medical costs:
- Reductions in eligible expenditures and nominal limits for flexible spending accounts.
- An increase in the deductible medical expense threshold from 7.5 percent of adjusted gross income to ten percent.
- An an excise tax on “taxable medical devices.”
As a related result of the ACA, Congdon-Hohman and Matheson believe life care planners will play an increasingly important role in personal injury damage analysis. Prior to the ACA, life care planners were tasked with identifying medical and living expenses not otherwise required "but for" the accident.
Under the ACA, the authors maintain life care planners must also identify which health care and living expenses will, and will not, be covered by the ACA's minimum insurance requirements. And, despite certain minimum federal standards, these requirements may differ by state.
Cogdon-Hohman and Matheson's research paper provides a valuable educational resource for all personal injury stakeholders. For settlement planning professionals who are attempting to understand how the ACA impacts personal injury damage analysis, negotiation strategy, work product, and funding options, this paper should encourage expanded industry discussion and analysis.For S2KM's complete reporting and continuing commentary about the ACA, see the structured settlement wiki. For a comprehensive analysis about structured settlements and government benefits, see Chapter 15 of "Structured Settlements and Periodic Payment Judgments"(S2P2J).