THE IMPACT OF THE AFFORDABLE CARE ACT ON PERSONAL INJURY SETTLEMENTS
by: Thomas D. Begley, Jr.
Purposes of the Act
On March 30, 2010, President Obama signed The Patient Protection and Affordable Care Act as amended by The Health Care and Education Reconciliation Act of 2010. These two statutes are commonly referred to as the Affordable Care Act (ACA). The two most important legislative purposes are:
- To increase the number of Americans with health insurance, and
- To ensure that health insurance satisfies certain minimum thresholds of coverage.
While some provisions of the Act are already in effect, the main impact will be felt beginning January 1, 2014. In fact, enrollment for plans beginning on January 1, 2014, will begin October 1, 2013.
The Congressional Budget Office estimates that Health Care Reform will cover an additional 32 million people. About half of those will be enrolled in Medicaid and CHIP. Twenty-four million people will obtain coverage through Exchanges, and 19 million of those will receive some form of subsidy. The discussion of this paper is directed primarily to changes becoming effective on or before January 1, 2014.
Mechanism for Expansion
The expansion of coverage will come about due to an individual mandate requiring individuals to purchase insurance and providing certain financial incentives for those who enroll and penalties for those who refuse to do so. Small employers will be encouraged to provide coverage for their employees. There will be a tax credit for 2014 and 2015 for certain small employers who comply, but there are no penalties for failure to participate. Large employers of 50 or more employees will be required to offer coverage to employees. There will be financial penalties for non-compliance.
Expansion of health care coverage is to be achieved largely by expansion of the Medicaid program to families having income up to 138% of the FPL (133% plus a 5% income disregard), and by providing premium subsidies to make insurance more affordable for people with income up to 400% of the FPL, and by building on employer-based coverage. The United States Supreme Court has stated that states cannot be required to expand Medicaid coverage to individuals. Many states will likely elect not to do so.
Insurance Exchanges are designed to assist low and moderate income individuals and families and small businesses. Exchanges can be established by states, by state/federal partnerships, or operated through the federal government.
Exchanges must offer qualified health plans, which provide Essential Health Benefits. Essential health benefits are defined in the Act.
Provisions Applying to All Plans
There are certain provisions that will apply to all plans. These include the following:
- No lifetime or annual limits;
- Prohibition of rescission of coverage;
- Extension of dependent coverage;
- Prohibition on preexisting conditions exclusions;
- No excessive waiting periods for eligibility to become covered by a plan; and
- Providing a summary of benefits and coverage to participants.
Perhaps the most significant feature from the standpoint of the Personal Injury attorney is the preexisting condition mandate. Under the ACA an individual with preexisting conditions must be covered without regard to medical history. A preexisting condition is a condition that existed prior to the effective date of health coverage, whether or not any medical advice, diagnosis, care or treatment was recommended or received prior to that date. This provision is effective January 1, 2014.
Lifetime and Annual Limits
The ban on caps for lifetime or annual limits is somewhat deceiving. The statute bans dollar caps. Beginning January 1, 2014, annual limits on the dollar value of essential health benefits for any participant cannot be established. However, while limits based on dollar value are specifically excluded, there appears to be nothing to prevent limits being placed on a benefit (e.g., number of visits or treatments per plan year).
The combined annual deductible of annual out-of-pocket expenses (not including premiums) is $6,250 in 2013 and $12,500 in 2013 for family coverage.
The Impact of the ACA on Personal Injury Attorneys
It would appear that the Affordable Care Act may have some impact on personal injury settlements.
A large component of most personal injury settlements is the amount paid by the defendant to the plaintiff for future medical care. Going forward, after the implementation of the ACA, the effect of the Collateral Source Rule must be considered. The common law version of the Collateral Source Rule prohibits the introduction of evidence regarding collateral payments received by the claimant in his suit for damages. The rule prevents the reduction of an award by any amount owed by third parties already paid to or on behalf of the plaintiff. In states strictly observing the Collateral Source Rule, the ACA is likely to have little effect on the payment of monies from a defendant to a plaintiff for future medical care.
However, many states have modified versions of the Collateral Source Rule and other states permit subrogation rights for the collateral source to collect either against the defendant or by placement of a lien on the personal injury settlement. The effect of the ACA on personal injury settlements in these jurisdictions will depend on the form of the Collateral Source Rule in effect in any given state.
Other states have completely abrogated the Collateral Source Rule. In those states defendants may argue that they no longer need to pay large sums of money to the injured plaintiff for future medical care. Instead, they should only be responsible for the defendant’s out-of-pocket expense. Therefore, an argument can be made in those states without a Collateral Source Rule that damage awards for health expenditures should be capped at a maximum of $6,250 for an individual in 2013. However, this cap would apply only to future health care expenditures covered by the ACA. The ACA provides coverage for acute care, rather than chronic care. Therefore, home and community-based services, such as attendant care, home care, assisted living facilities, and nursing homes, would not be covered. At this writing, it is too early to determine what else will not be covered.
There is also an argument being made that once the ACA is fully implemented, there is little reason to continue the Collateral Source Rule. If the rule is discontinued, this would be significant tort reform. The argument against the Collateral Source Rule is that it results in double recovery for some claimants and inflated insurance costs.
Whether or not personal injury awards are reduced because defendants are not required to pay for future medical expenses covered by the ACA remains to be seen. Unless and until the Collateral Source Rule is repealed, it is likely that personal injury settlements will include a component for future medical care.
j:\articles & books\the barrister\barrister – the impact of the ACA on PI settlements
 HR 3590, PUB. L. NO. 111-148.
 HR 4872, PUB. L. NO. 111-152.
 The Affordable Care Act at 2 ½–What Employers Should Expect Now, Jones Day (August 2012).
 National Fed’n of Indep. Buss. v. Sebelius, 132 S.C. 2566 (June 28, 2012) available online at http://www.supremecourt.gov/opinion/11pdf/11-393c3a2.pdf.
 The Affordable Care Act, PUB. L. NO. 111-148 §1303(b).
 Temp. Reg. 54-9801-2; 42 U.S.C. §300GG-3(b)(1)(a).
 Temp. Reg. 54.9815-2704T(b)(1).
 Rev. Proc. 2012-26.