NAIFA: Inside build-up will escape tax reform

The 1,500-plus assembled attendees at the National Association of Insurance and Financial Advisors’ annual meeting had reason to applause Monday.

“The word is not yet final, but we are told that inside build-up will not be part of the pending tax reform legislation,” declared Danea Kehoe, an outside counsel for NAIFA at DBK Consulting.

Official or not — Kehoe’s comments, a NAIFA spokesperson later clarified, were based on “conversations” between NAIFA’s government relations team, Congressional members and their staffs — the announcement brought a measure of relief to NAIFA members during Monday’s Legislative Forum. A highlight of the four-day gathering, the forum featured NAIFA’s government relations team, representatives of whom examined the myriad legislative and regulatory issues of concern to NAIFA.

The sentiment of Congress on these questions, said Patrick Raffaniello, an outside counsel at Raffaniello & Associates, will hinge in some measure on the results of the 2014 midterm elections. Democrats, who now hold a 55- to 44-seat majority in the Senate, stand to lose the most seats. Twenty-three of its members stand for reelection next year, as compared to 10 Republican senators. In the House, the GOP holds a solid 234- to 201-seat majority.

How will the elections play out? If history is any guide, the Democrats are “likely to lose seats in both houses of Congress,” said Raffaniello. “In the House, the Republicans should hold onto their majority, mostly because of redistricting.

“The Republican House seats are really safe,” he adds. “But if the GOP doesn’t get control of the budget and the debt ceiling, then their election prospects could change.”

Whatever the make-up of the next Congress, NAIFA remains committed to securing bipartisan support for a host a legislative initiatives. Among these, said Diane Boyle, vice president of Federal Government Relations for NAIFA, the association is committed to reforms that assure private sector choices of affordable health care plans through, among other vehicles, the state exchanges established by the Patient Protection and Affordable Care Act. It’s not evident, however, that the exchanges are ready for prime time.

Scott Sinder, an outside council at Steptoe & Johnson, noted that electronic enrollment for a number of federally run and state-hosted exchanges will be delayed a month or longer due to technical glitches. 

Technology issues aside, questions remain as to Americans’ knowledge about exchanges and the health care law in general. A poll cited by Sinder observes that 42 percent of Americans are “unaware of the status” of the PPACA. Nearly one in five believes the act has been repealed by Congress and is no longer law (12 percent) or that the Supreme Court overturned PPACA (7 percent).

Other stumbling blocks could derail a main objective of the health care law: achieving something close to universal coverage of the American population. Absent action by Congress, the individual mandate will take effect on Jan. 1. But Johnson observed there is no enforcement mechanism at the employer level: Businesses aren’t required to report to the government what health plans their employees have access to. Plus the IRS has no funds to enforce the individual mandate.

A bigger problem, said Sinder, is the so-called Medicaid donut hole: the absence of government-financed coverage for individuals who don’t qualify for:

1. Medicaid (those who earn up to one-third of the federal poverty line for a single person and up to two-thirds of the federal poverty line for families); or
2. Subsidies under the healthcare law.

When passed, PPACA was supposed to resolve this issue by requiring states to expand Medicaid coverage to 133 percent of the federal poverty level. But since the Supreme ruled this provision of PPACA unconstitutional, 21 states — all led by Republican governors — have elected not to expand coverage. The result: Up to 30 million Americans may be not be able to pay for coverage.

“If you live in Texas, and you’re at 80 percent of the federal poverty line, you won’t have access to expanded Medicaid” said Sinder. “And you don’t have access to a federal subsidy to buy insurance. That’s a problem.”

A related problem, he added, is the health care law’s treatment of nonAmericans who are legal residents of the U.S. Because these individuals cannot apply for Medicaid, they’re eligible for a federal subsidy down to zero percent of the federal poverty line — even if, as in the example involving a U.S. citizen, they make 80 percent of the federal poverty line.

That a nonresident is eligible for federal subsidy to buy health insurance whereas a U.S. citizen in the same financial situation cannot is, said Sinder, not only a political problem, but also a constitutional one.

Yet a bigger problem, he added, is the legality of securing subsidies through the 27 federally established state exchanges. The way the health care law now reads, said Sinder, only state-run exchanges can offer such subsidies.