By N.C. Aizenman
Washington Post Staff Writer
Friday, December 17, 2010; 12:25 AM
PENSACOLA, FLA. – Three days after a federal judge granted Virginia’s request to void a key provision of the U.S. health-care overhaul law, a federal judge in this coastal city signaled that he is likely to follow suit in a case brought by Florida and 19 other states.

Judge Roger Vinson of the U.S. District Court for the Northern District of Florida never explicitly stated how – or even when – he will rule, other than to say that it will be “as quickly as possible.” But his questioning Thursday gave further ammunition to political opponents of the law and foreshadowed legal arguments likely to embroil courts across the country.

During a nearly three-hour hearing on the merits of the case, Vinson frequently appeared to side with the states on the same question at the heart of the Virginia suit: Whether the law’s requirement that virtually all Americans obtain health insurance or pay a fine exceeds Congress’s constitutional authority.

By contrast, Vinson expressed skepticism over a second part of the law challenged in the multistate suit – that the statute violates state sovereignty by substantially expanding Medicaid, the health insurance program for the poor that is jointly paid for by the federal government and states.

The case, originally filed by Florida Attorney General Bill McCollum and many of the other states minutes after President Obama signed the controversial law in March, is one of two dozen constitutional challenges moving through federal courts. Most experts think that the law’s fate will ultimately be decided by the Supreme Court.

Still, if Vinson rules in the states’ favor, it would even the scorecard thus far: Two federal district court judges have upheld the law, and the judge in Virginia was the first to invalidate part of it.

Vinson, a Republican appointee, rejected all but one of the Obama administration’s constitutional justifications for the insurance requirement in an October ruling. Thursday’s hearing was limited to the remaining question of whether Congress’s constitutional authority to regulate activities affecting interstate commerce and enact laws “necessary and proper” for carrying out that power applies.

The states – joined in the suit by two individuals and the National Federation of Independent Business, which represents small companies – claimed that a refusal to buy health insurance is not an economic activity, and thus lies outside the Constitution’s commerce clause.

The administration countered that this claim of inactivity is an illusion. Because virtually everyone will need health care at some point, deciding whether to obtain insurance amounts to making an economic decision about how to pay for care and has a substantial aggregate effect on the health insurance market that Congress has the constitutional power to regulate.

During Thursday’s hearing, Vinson repeatedly pushed back on this point.

“In the broadest sense every decision we make is economic. The decision to marry. The decision to keep a job or not has an economic effect,” he said. “If [the federal government] decided everybody needs to eat broccoli because broccoli makes us healthy, they could mandate that everybody has to eat broccoli each week?”

Vinson also questioned the notion that a person who chooses not to buy insurance will necessarily be unable to pay for his or her health care. He himself was uninsured, Vinson said, when one of his children was born, and he paid the entire bill.

“I think it worked out to be $100 a pound,” he said.

“Not everyone who is uninsured fails to pay,” conceded Deputy Assistant Attorney General Ian Heath Gershengorn, representing the administration. “But what Congress found is that, as a class, the uninsured consume care they cannot meet the costs for, and they impose those costs on the rest of us.”

Vinson appeared unconvinced, remarking soon after that, “it would be a great leap for the Supreme Court to say that a decision to buy or not to buy is an activity. That would be a giant expansion of the commerce clause.”

On the case’s second issue, the constitutionality of expanding Medicaid, the judge sounded less sympathetic to the plaintiffs. The law says that, starting in 2014, Americans with incomes up to 133 percent of the poverty level will qualify for the program, a higher eligibility level than most states use now. For the first few years, federal money will cover all of that expansion, but eventually states will have to pay 10 percent of the cost.

Lawyers for the states and the administration sparred over whether this would impose a crushing burden on state budgets. But as a legal matter, Vinson primarily focused on the states’ argument that though Medicaid is a voluntary program the downside of pulling out is so large that the states can’t afford to do so. Therefore expanding the program’s costs to them amounts to a violation of state sovereignty.

Noting that officials in Texas have considered pulling out of Medicaid, Vinson pressed Blaine H. Winship, an assistant Florida attorney general representing the states on whether they really are bound to participate.

“Isn’t it still voluntary?” the judge asked several times.

In addition to Florida, the states party to the suit are South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Michigan, Colorado, Pennsylvania, Washington, Idaho, South Dakota, Indiana, North Dakota, Mississippi, Arizona, Nevada, Georgia and Alaska.

Come Jan. 1, most over-the-counter drugs will no longer be eligible for pre-tax payment. Here’s an important article for anyone who presently has a Flexible Spending Account or who is thinking of participating in one for the first time in 2011.  Contact us if you have any questions as to how these changes may affect you.

By Jenifer Goodwin
HealthDay Reporter

WEDNESDAY, Dec. 8 (HealthDay News) — It’s the time of year for holiday parties, gift shopping and open enrollment, when many employees have to make decisions about their employer-sponsored health-care plans.

Last year’s landmark health care reform legislation means changes are in store for 2011. One of the most significant: starting Jan. 1, you’ll no longer be able to pay for most over-the-counter medications using a flexible spending account (FSA).

That means if you’re used to paying for your allergy or heartburn medication using pre-tax dollars, you’re out of luck unless your doctor writes you a prescription. (The exception is insulin, which you can still pay for using an FSA even without a prescription).
Flexible spending accounts, which are offered by some employers, enable employees to set aside money each month to pay for out-of-pocket medical costs such as co-pays and deductibles using pre-tax dollars.

“This is basically reverting back to the way FSAs were used a few years ago,” said Paul Fronstin, a senior research associate at the Employee Benefit Research Institute in Washington, D.C. “It wasn’t that long ago that you couldn’t use FSAs for over-the-counter medicine.”

Popular uses for FSAs include eyeglasses, dental and orthodontic work, as well as co-pays for prescription drugs, doctor visits and other procedures, explained Richard Jensen, lead research scientist in the department of health policy at George Washington University in Washington, D.C. Over-the-counter drugs became FSA “qualified medical expenses” in 2003, according to the Internal Revenue Service.

The way an FSA works is an employee decides before Jan. 1 (usually during the company’s open enrollment period) how much money to contribute in the year ahead. The employer deducts equal installments from each paycheck throughout the year, although the total amount must be available at all times during the year.

Typically, FSAs operate under the “use it or lose it” rule. You have to spend all of the money placed in an FSA by the end of the calendar year or the money is forfeited, Jensen explained.

Since generally speaking, the cost of over-the-counter medications pales in comparison to the cost of co-pays and deductibles, the 2011 change shouldn’t be too onerous for consumers, Jensen said. An analysis by Aon Hewitt, a human resources consultancy firm, found that only about 7 percent of all FSA claims in 2009 were for over-the-counter drugs, and just 3 percent of FSA expenditures went to buying these products.

The reason for doing away with the tax break is to help pay for other goals of the health-care reform legislation, including making sure that more Americans are able to get health insurance, and that the insurance they get has more comprehensive coverage, Jensen said.

“If you take as a given that the point of health care reform is to cover as many people as possible, it’s an equitable approach,” Jensen said. “The tax break is regressive, meaning mainly middle- and upper-income people were benefiting from it.”
One criticism, however, is there’s the potential for people to head to the doctor asking for prescriptions for drugs they used to buy without one, a costly move, he added.

And an even bigger change is coming in 2013, when health reform law will cap the amount that can be set aside in an FSA at $2,500 a year. Beyond 2013, the limit will be indexed to changes in the consumer price index.

While the law currently sets no limit on how much an individual can put in an FSA each year, many employers already set their own cap at $5,000.

The people who will feel the pinch then are those with chronic health conditions who have lots of out-of-pocket costs, Jensen said.

The Hewitt Associates report, which looked at 220 U.S. employers covering more than 6 million employees, found that only 20 percent of eligible employees contributed to an FSA in 2010.

Of employees who contribute to an FSA, the average annual contribution is $1,441 and the annual savings is between $250 and $640 each year in federal taxes.

Only 18 percent of workers contributed more than $2,500 a year, the maximum in 2013, and they tended to be high-income people earning more than $150,000 a year.

The employee portion of insurance premiums are not payable through FSAs. Some employers, however, set up plans in a way that enables employees to pay premiums as well in pre-tax dollars, Fronstin said.

More information
The IRS has more on the new rule.

SOURCES: Richard Jensen, M.P.H., lead research scientist, department of health policy, George Washington University, Washington, D.C.; Paul Fronstin, Ph.D., senior research associate, Employee Benefit Research Institute, Washington, D.C.

Copyright © 2010 HealthDay. All rights reserved.