Industry Insights

U.S. Senate Bill Aims to Remove Broker Commissions from MLR Formula

Mon, 13 Feb 2012 16:47:00 -0600

Love it or hate it, the Affordable Care Act has sparked a great deal of debate within the health care industry. One section of the Patient Protection and Affordable Care Act (PPACA) that has proven to be particularly problematic is a provision establishing Medical Loss Ratio (MLR) benchmarks for health insurance carriers. Several congressional bills have been filed in an attempt to remedy the situation.

PPACA delegates the authority to determine the specific requirements of the MLR to the Secretary of U.S. Health and Human Services (HHS). On December 1st, HHS Secretary Kathleen Sebelius issued rules that designate brokers’ commissions as a “non-claims” cost, which is part of the “administrative” portion of the MLR formula. Depending on the size of the insured group, health insurance plans must spend 80-85% of their premiums on the provision of health care and must manage their overhead out of the remaining balance.

This inclusion in the “administrative” bucket already is having an extremely negative impact on brokers’ commissions, and compromises the ability of brokers to continue providing the services relied upon by many individuals and small groups. While certain PPACA provisions will undoubtedly help millions of Americans to obtain or maintain insurance coverage, the MLR issue remains problematic.

Ever since PPACA was signed into law on March 23, 2010, many organizations have been working to have the brokers’ commissions excluded from the MLR administrative formula. By doing so, health plans would have a greater incentive to continue paying brokers and agents as they help individuals and groups secure the right coverage.

Among others, members of the National Association of Insurance Commissioners (NAIC) have repeatedly expressed concerns to HHS that the current treatment of brokers’ commissions is having a negative effect on the ability of brokers to continue assisting small group employers and individuals in finding the best possible health insurance coverage at the most affordable price. Especially troubling is the impact that MLRs will have on the small group and individual markets in many states. National broker associations such as the National Association of Health Underwriters (NAHU) and the Independent Insurance Agents & Brokers of America (the Big “I”) have echoed NAIC’s concerns on this matter.

Some progress in remediating the effects of the new MLR requirement was made last year when Representatives Mike Rogers (R-MI) and John Barrow (D-GA) proposed H.R.1206 entitled, “Access to Professional Health Insurance Advisors Act of 2011.” To date, the bill has attracted 172 sponsors, but has not been brought forward for a vote.

One explanation why the bill remains in committee has been the lack of a companion bill in the Senate. On February 2, 2012, this concern was addressed with the introduction of S. 2068 entitled, “The Access to Independent Health Insurance Advisors Act.” The new Senate bill addressing the MLR issue was introduced by Senator Mary L. Landrieu (D-LA), chair of the Senate Committee on Small Business and Entrepreneurship, and Senator Johnny Isakson, (R-GA). S. 2068 has been referred to the Committee on Health, Education, Labor, and Pensions.

Senator Landrieu’s office and Senator Isakson’s office issued a joint press release on the submission of S. 2068. Both senators praised the bill as a bipartisan effort to protect brokers’ ability to continue assisting consumers. As Senator Landrieu said, "I am concerned that HHS's interpretation of the health care law threatens the ability of insurance agents and brokers — many of whom are one- or two-person small businesses —to continue providing essential services to consumers who depend on them to assist with coverage or claims problems. Many brokers are being forced to reduce client services or close their doors altogether due to unintended consequences of these regulations.” She elaborated further, “This is about strengthening the Affordable Care Act and ensuring that these small independent firms can stay in business and continue to provide critical services to consumers.”

These bills continue to meet with stiff resistance from groups purporting to represent the consumer’s interests; however, none of these groups have been able to explain how the proposed mechanisms in PPACA will be able to replace the assistance of brokers who alone have the training and experience to assist the small group employer and the individual in choosing optimal health insurance coverage.

Click here to read more about the Medical Loss Ratio.

Stay tuned to find out how the MLR debate plays out in the future inside the Capital Beltway. Please monitor www.benefitmall.com and www.HealthcareExchange.com for further developments.

The views expressed in this Legislative Alert do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

Concierge Medicine: Changing the Future of Primary Care for Better or for Worse?

Thu, 09 Feb 2012 09:36:00 -0600

Visiting the doctor’s office may not top the list of favorite activities for most consumers, but eliminating common stressors such as juggling one’s schedule to squeeze in an appointment, spending too much time in the waiting room, and then maybe seeing the physician for only a few minutes, can make the experience much more pleasant.

What if the majority of this stress could be alleviated? According to the American Academy of Private Physicians (AAPP), use of “concierge” or retainer-based physicians can be part of the solution. In fact, the number of these types of physician services has doubled in the past two years, according to AAPP.

“Concierge medicine is a new style of practice with old roots, in which doctors limit their patient base in order to provide patients with personalized service, high quality care, 24/7 availability, and other amenities. In exchange for this enhanced personal attention, patients pay physicians an annual fee,” says the Concierge Medicine Association. “The annual fees vary widely, from $600 to $5,000 per year for an individual, with the lower annual fees being in addition to the usual fees for each service and the higher annual fees including most services.”

“In a typical practice, a family physician might have 1,000 patients or more. In a concierge practice, 400 is more typical,” says AAPP. “For patients, that translates into longer appointments, less waiting, and more personal attention. For doctors, it means a more satisfying and less stressful work day.”

“Most retainer physicians offer an in‐depth annual physical, lasting an hour or longer, which focuses on preventive care,” says a recently released report. “Retainer practices also emphasize that their patients have increased access to their physicians. This usually includes longer office visits, same‐day visits, and access to physicians’ cell phone numbers.”

While there are many proponents to the niche of this boutique form of medical care, there are also many that worry this could eventually lead to a type of insurance ‘caste system’ where those that are unable to afford to pay the doctors’ retainers for concierge service would be without medical care.

According to a recent article, “Medicare recipients, who account for a big share of patients in doctors' offices, are the most vulnerable. The program's financial troubles are causing doctors to reassess their participation. But the impact could be broader because primary care doctors are in short supply and the health law will bring in more than 30 million newly insured patients.”

Concierge medicine is a relatively new arrangement in the health care industry and the impact this form of practice will have on the American population, especially those on Medicare, is still unknown. “The greatest argument against concierge medicine is that it undermines cross subsidized care because the system attempts to spread Medicare and Medicaid patients, with their lower reimbursement rates, across all physicians,” says a recent Medicare report.

Only time will tell in regard to the impact concierge medicine will have on the health care industry, it will be interesting to see if this niche of medicine will eventually evolve into a paradigm shift in the world of health care.

BenefitMall will continue to bring these issues to your attention as they arise. Please visit www.benefitmall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

Insured Young Adults Rise 2.5 Million Since PPACA Enacted

Fri, 03 Feb 2012 14:17:00 -0600

Whether you are for or against the Patient Protection and Affordable Care Act (PPACA), it is changing the landscape of health care insurance as we know it. The most recent sign of the changing times is an announcement that 2.5 million young adults have picked up insurance coverage over the past year. This is largely due to PPACA’s requirement that young adults can stay on their parents’ health insurance policy until the age of 26. BenefitMall has covered this requirement extensively in a number of blogs that are posted on www.healthcareexchange.com.

Although the increased coverage is good news, some public policy and insurance experts are concerned because this mandate is increasing the cost of coverage for many private health plans. These experts have gone on record stating that it would have been better to study the actuarial impact of this coverage requirement in more detail before full implementation.

Formerly, young adults could get coverage through their parents’ health insurance only while they were students – upon graduation in most cases it was necessary for them to find their own coverage. Since Obama’s health care overhaul took effect, the number of Americans ages 19-25 without health insurance shrank by 2.5 million people.

Among several recent updates, the National Center for Health Statistics at the Centers for Disease Control and Prevention (CDC) released data highlighting the significant increase since April 2010. “Thanks to the Affordable Care Act, 2.5 million more young adults don’t have to live with the fear and uncertainty of going without health insurance,” said Department of Health and Human Services Secretary Kathleen Sebelius in a press statement . “Moms and dads around the country can breathe a little easier knowing their children are covered.”

According to a Time Healthland article, “The health care law’s main push to cover the uninsured doesn’t come until 2014. But the young adults’ provision took effect last fall. Most workplace health plans started carrying it out Jan. 1.”

The fate of President Obama’s health care plan is unknown in light of the constitutional challenges that will be heard by the U.S. Supreme Court this spring, and Republican presidential candidates are unanimous in their decision to repeal PPACA as quickly as possible. However, the young adult coverage requirement appears to have the public’s support.

BenefitMall will continue to keep you apprised of developments on this topic and related PPACA initiatives as they are available. In the meantime, visit www.healthcareexchange.com or www.benefitmall.com for previously posted blogs, legislative alerts and updates.

U.S. Supreme Court Gets Ready to Review Legality of PPACA as Qualifications of Two Justices Questioned: Full Court Likely to Hear Case

Tue, 31 Jan 2012 13:33:00 -0600

Earlier this month, the Supreme Court denied a motion by Freedom Watch arguing that Justice Elena Kagan should recuse herself from hearing the upcoming challenge to the Patient Protection and Affordable Care Act (PPACA). The law, often referred to as the “Affordable Care Act,” will be reviewed by the U.S. Supreme Court later this year.

Members of both the Republican and Democratic parties have been arguing for key justices to recuse themselves from deciding the case. Republicans want Justice Elena Kagan, the Court’s newest appointee, to abstain from hearing arguments because of her former position as President Obama’s solicitor general. Democrats argue that Justice Clarence Thomas should abstain due to his wife’s work with various groups who have opposed the health care reform.

The dispute over the recusal of both justices has called into question the ethical standards by which the nation’s highest court must abide. Chief Justice John Roberts has defended not only his fellow justices, but the ethical standards of the court in his year-end review. Although he did not refer to either justice by name, Roberts said,

“I have complete confidence in the capability of my colleagues to determine when recusal is warranted…They are jurists of exceptional integrity and experience whose character and fitness have been examined through a rigorous appointment and confirmation process.”

Whether either justice actually chooses to abstain from deciding the fate of President Obama’s health care law remains unlikely. But no matter what, the decision due to be issued in the summer will have a major impact on the fall 2012 elections, and ultimately the fate of how the new law gets fully implemented.

Although partisans from both the left and right have called for the recusal of Justices Kagan and Thomas, there is no steadfast requirement that either recuse themselves. A congressionally enacted “Code of Conduct” has been found only to apply to lower courts, and in fact, there is no higher court to which an appeal of the decision to abstain, or not, could be made.

As the health care community lays in wait for the Court’s decision, it remains certain that advocates from both parties will continue to call for the recusal of Justices Kagan and Thomas. Whether either justice actually abstains from deciding the fate of the Act remains to be seen.

We will continue to bring issues of great importance to our Broker community to your attention. Past BenefitMall blogs and Legislative Alerts referencing PPACA and the U.S. Supreme Court can be found here.

Please visit www.benefitmall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

2012 PPACA Implementation Highlights

Tue, 24 Jan 2012 13:01:00 -0600

The implementation train for the Patient Protection and Affordable Care Act (PPACA) continues to pick- up speed with a number of important implementation dates in 2012.

Keeping up with the pace can be challenging. To assist, the U.S. Department of Health and Human Services (HHS) offers a website that helps track the major reform efforts, titled “What’s Changing and When.” Also useful is an online article posted by the White House that gives a year-by-year overview of the PPACA timeline.

Here’s a snapshot of some 2012 milestones:

Accountable Care Organizations

Accountable Care Organizations (ACOs) are going live this month. As quoted on the HHS website:

The new law provides incentives for physicians to join together to form “Accountable Care Organizations.” In these groups, doctors can better coordinate patient care and improve the quality, help prevent disease and illness, and reduce unnecessary hospital admissions. If Accountable Care Organizations provide high quality care and reduce costs to the health care system, they can keep some of the money that they have helped save.

For additional information about ACOs, see BenefitMall’s recent blogs on these integrated systems of care.

External Review

Effective January 1 this year, health plans and insurers issuing new policies and offering “non-grandfathered” coverage must now provide an expanded claims and appeals process that meets government regulations, including the new external review requirements. For background on PPACA’s external review requirements, see BenefitMall’s recent blogs on the subject.

Tracking Population Disparities

Beginning in March, federal health programs will be required to collect and report information on patients’ race, ethnicity, sex, primary language and disability status. The requirement, contained in Section 4302 of PPACA, is aimed at illuminating health disparities among racial and ethnic minorities and finding effective ways to reduce them. Kathleen Sebelius, Secretary of HHS, said in a press statement, “…these new standards…are providing a set of powerful tools to help us achieve our vision of a nation free of disparities in health and health care.”

HHS also will implement its Action Plan to Reduce Racial and Ethnic Health Disparities in conjunction with the National Partnership for Action’s (NPA) National Stakeholder Strategy for Achieving Health Equity. NPA, a subsection of HHS’ Office of Minority Health, will implement the new standards as part of its goal to “increase the effectiveness of programs that target the elimination of health disparities through the coordination of partners, leaders, and stakeholders.”

Summary of Benefits and Coverage

In an August 2011 press release, the federal government announced a new initiative authorized under PPACA to help consumers better understand their health coverage and determine the best health insurance options for themselves and their families. The new rule will require group health plans and health issuers to provide a uniform summary of benefits and coverage to interested parties.

The goal of the requirement, found in Section 2715, is to provide a tool for the public to use in comparing services, costs, and provisions among different health care plans. Secretary of Labor Hilda L. Solis said the summary would, “…help workers quickly and easily compare different coverage options in order to make more informed decisions.” The document would consist not only of a summary of benefits and coverage, but also would include a glossary of pertinent terms and “coverage examples” that would demonstrate the costs paid by the program in the case of pregnancy, diabetes or a diagnosis of breast cancer.

Rumor has it the March 2012 implementation date for uniform summary of benefits and coverage might be delayed.

Reducing Paperwork and Administrative Costs

In October, HHS will attempt to increase the efficiency of health care. The website notes:

Health care remains one of the few industries that relies on paper records. The new law institutes a series of changes to standardize billing and requires health plans to begin adopting and implementing rules for the secure, confidential, electronic exchange of health information. Using electronic health records will reduce paperwork and administrative burdens, cut costs, reduce medical errors and, most importantly, improve the quality of care.Reducing Paperwork and Administrative Costs Reducing Paperwork and Administrative Costs

Linking Payments to Quality Outcomes

In October, PPACA will require the establishment of a hospital Value-Based Purchasing program (VBP). As highlighted in an HHS press release, the Medicare Program will be offering financial incentives to hospitals to improve the quality of care. HHS notes, “This program marks the beginning of an historic change in how Medicare pays health care providers and facilities—for the first time, hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.” Hospital performance will be publicly reported and include with measures relating to heart attacks, heart failure, pneumonia, surgical care, health-care associated infections, and patients’ perception of care.

More to Come

Without a doubt, other PPACA elements will be implemented in 2012. Stay tuned for additional details.

We have covered many of the related issues that involve PPACA and will continue to follow these issues for you. Please visit www.HealthcareExchange.com for those and other blog posts, polls, surveys and numerous resources and visit www.benefitmall.com to view past Legislative Alerts.

Obama Administration Defends Affordable Care Act in Opening Brief Filed with U.S. Supreme Court

Mon, 16 Jan 2012 15:09:00 -0600

On January 6, 2012, the U.S. Department of Justice (DOJ) filed a brief with the U.S. Supreme Court in support of the Patient Protection and Affordable Care Act (PPACA), one of the most talked about pieces of legislation passed in recent memory. In addition, over a half dozen amicus curiae briefs have been filed since then by interested parties wanting to weigh in on the case. Oral arguments on the merits of the new health care reform law are scheduled for late March.

Topping the list of contentious issues is the debate about whether Congress can require American consumers to obtain health care insurance, or else pay a fine. In the 130-page brief backing the Affordable Care Act, the DOJ argued that enactment of the “individual mandate” provision is constitutional. While lower courts are split on this issue, DOJ defends the mandate in the brief as a legitimate solution to the need to improve the U.S. health care system.

Pursuant to the Commerce Clause, the government asserts that “The minimum coverage provision is within Congress’s power to enact not only because it is a necessary component of a broader scheme of interstate economic regulation, but also because, within that scheme, the provision itself regulates economic conduct with a substantial effect on interstate commerce.”

This argument is based upon the notion that when individuals do not purchase health insurance, but then seek care through the health care system, they are shifting the costs of that care to other insured individuals who are forced to pay higher premiums. By requiring individuals to purchase insurance or pay a fine, PPACA shifts the risk back to the individual. As the DOJ asserts in the brief, “This is classic economic regulation of economic conduct.”

DOJ further defends the constitutionality of PPACA as a valid use of congressional taxing power. Specifically, the argument that the consequence of failing to obtain, and maintain insurance, is an increased tax liability.

Clearly, both proponents and opponents of this issue raise powerful arguments in defense of their positions. A system in which everyone has health insurance would be beneficial to all in the form of lower premiums, and perhaps higher quality care, but what price in far higher deficits and taxes are we as Americans willing to pay? The original defense that the “Affordable” Care Act would save money is no longer operative. But that being said, legal precedents exist to support either side of this argument.

Perhaps the strongest argument against PPACA is the “slippery slope” argument – if Congress is allowed to require persons to purchase health insurance or pay a fine, will Congress be assuming the authority to require Americans to do other things as mundane as purchase broccoli or as controversial as purchase a firearm. Rejecting this argument, the DOJ brief highlights the Supreme Court’s practice of finding a substantial effect on interstate commerce to justify Congressional regulation. Solicitor General Donald B. Verrilli, Jr. argues that PPACA is “a policy choice the Constitution entrusts the democratically accountable branches to make, and the court should respect it.”

This DOJ brief is one of several that will be made in the near future on the PPACA constitutional issues under Supreme Court review. Other future court filings will address the applicability of the Anti-Injunction Act which prohibits suits against taxation acts until the tax is effective, the issue of the ability of the U.S. Government to unilaterally require states to increase their Medicaid programs, and the issue of the missing “severability clause” which may or may not render the entire act unconstitutional if any provision of the act is declared unconstitutional.

If you would like to read more on the subject of legal challenges to the PPACA, please go here. We will continue to bring issues of great importance to our Broker community to your attention. Past BenefitMall blogs and Legislative Alerts referencing PPACA and the U.S. Supreme Court can be found here.

Please visit www.benefitmall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

PPACA Establishes New Outcomes Research Institute to Promote Evidence Based Medicine: Some Express Concerns About Funding and Objectives

Thu, 12 Jan 2012 13:37:00 -0600

Buried in the thousands of pages of the Patient Protection and Affordable Care Act (PPACA) is Section 1181, which authorized the establishment of the Patient Center for Outcomes Research Institute (PCORI), an independent, non-profit organization charged with “evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.”

Why do we need this research? Studies show there are significant variations in the practice of medicine. Even with the same diagnosis, some physicians will often address the issue with different treatments. Choice of treatment also varies among regions, a fact documented by a Dartmouth Institute for Health Policy and Clinical Practice study titled, “Reflections on Geographic Variations in U.S. Health Care”. This study created an atlas that depicts variations in the nature and cost of health care.

In particular, the study found:

A more than two-fold variation in per capita Medicare spending in different regions of the country.
Potential cost savings estimates ranging from 20-30%, but these may be an underestimate given the potential savings in low-cost regions.
Three other groups have come to 30% waste estimates -- the New England Healthcare Institute, McKinsey, and Thomson Reuters.
There is enormous scope for improving the efficiency and quality of U.S. health care.

PCORI will seek to find answers to a host of medical questions. According to the PCORI website, it will:

Conduct research to provide information about the best available evidence to help patients and their health care providers make more informed decisions.
Assess the benefits and harms of preventive, diagnostic, therapeutic, or health delivery system interventions to inform decision-making, highlighting comparisons and outcomes that matter to people.

How will this research be funded? Section 6301 of PPACA amended the Internal Revenue Code to authorize the IRS to levy a tax of $1 per person, per year health insurance fee on “specified health insurance policies” and “applicable self-insured health plans” based on the average number of lives covered under the policy or plan. The tax is not levied on government insurance plans, but will be used to fund PCORI. The tax will increase to $2 per person, per year in 2013. The question concerning the applicability of this tax to FSA accounts is subject to further debate and, as such, the Treasury Department has issued Notice 2011-45 to request comment on implementation of the tax.

The decision to keep PCORI as a non-profit, non-governmental agency may be seen as an effort to stem some of the controversy surrounding the organization. While everyone agrees we can’t afford to continue to pay for unnecessary and unproductive health care treatments, this institute is not without controversy.

Like the deliberations on PPACA adoption, it was alleged by PPACA opponents that the federal government was establishing a “death panel” designed to control costs by limiting necessary health care, similar to organizations in Canada and the United Kingdom that limit expensive but life-saving care. Proponents of PPACA strongly denied that was the case. The proponents agreed to create the PCORI as an independent organization with a .com address instead of creating an agency in the government with a .gov address.

The debate over PCORI has only intensified. Kathryn Nix, a policy analyst at the Heritage Foundation, has argued that PCORI may be independent in name only. Nix has said, “The more concerning thing is not the institute itself, but how the findings will be used in other areas…Will they be used to make coverage determinations?’’

The PCORI’s director, Dr. Joe Selby, defended PCORI’s independence, saying, ““We are not a policy-making body; our role is to make the evidence available.’’

As with so much of the PPACA, there are both positive and negative aspects to this issue. Everyone agrees that we need further research on what constitutes the best medical practices. Everyone agrees that we must not pay for ineffective health care or expensive health care that is no better than other care that is more cost effective. On the other hand, could this process ultimately be used to limit expensive, potentially life-saving treatments? We can’t predict that will happen here, but we do note that similar processes have resulted in that being the case in Canada and the United Kingdom. Only time will tell.

Please continue to monitor www.benefitmall.com and www.HealthcareExchange.com for further health insurance reform developments.

Federal Government Taps 32 Organizations to be Pioneer ACOs

Tue, 10 Jan 2012 13:45:00 -0600

On December 19, 2011, the U.S. Department of Health and Human Services (HHS) announced that the federal agency has approved 32 organizations to become Pioneer Accountable Care Organizations.

Through the Patient Protection and Affordable Care Act (PPACA), the federal government has promised to deliver improved health care while attempting to better control future costs. Among other initiatives, the new health care reform law authorizes the creation of Accountable Care Organizations (ACOs).

Pioneer ACO Initiative

The ACO concept is aimed at existing hospital physician organizations that possess sufficient integration to coordinate the health care of a defined Medicare population. The HHS press release elaborates:

The initiative will test the effectiveness of several innovative payment models and how they can help experienced organizations to provide better care for beneficiaries, work in coordination with private payers, and reduce Medicare cost growth. These payment models will allow organizations that are successful in achieving better care and lower cost growth to move away from a payment system based on volume under the fee-for-service model, towards one where the ACO is paid based on the value of care it provides.

The Pioneer ACO model requires ACOs to engage other payers in similar efforts to reward health care providers that deliver high-quality care. The Pioneer ACO model also includes strict beneficiary protections, including the ability for patients to seek care from any Medicare provider they wish.

After a false start earlier this year, the Pioneer ACOs are the first wave of ACOs that have been approved by HHS. The HHS press announcement states, “The Pioneer ACO initiative will encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare and could save up to $1.1 billion over five years.”

ACO Background

BenefitMall has tracked and discussed the ACO concept in several blogs and legislative alerts over the past year.

Despite good intentions, the initial interim rules for ACOs, issued by HHS on April 7, 2011, contained inadequate financial incentives and failed to generate any positive interest in the target hospital physician groups. HHS received feedback on the initial rules and issued revised interim final ACO rules in November that appear to have cured the problem. As a result, ACOs now are garnering significant interest among health care providers.

The Centers for Medicare and Medicaid Services (CMS) offer an informative website that explains its concept of accountable care organizations (ACOs). The goal of each ACO is to create a single, organized entity that will assume the responsibility for a defined population of Medicare enrollees from highly integrated groups of physicians, hospitals, and ancillary providers. By creating a single health information system with consolidated health records and medical claims programs, patients will benefit from increased efficiency of providers and the elimination of duplicate services.

The Pioneer ACOs offer an opportunity to significantly impact the quality and future cost of health care. Brokers should monitor the ACO movement to assess what opportunities exist to improve health insurance options in the future for their clients.

BenefitMall will continue to keep you apprised of the latest developments as health care reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.benefitmall.com.

U.S. Supreme Court Schedules Hearings on PPACA

Tue, 03 Jan 2012 13:16:00 -0600

The United States Supreme Court will hear oral arguments regarding the constitutionality of the Patient Protection and Affordable Care Act (PPACA) from March 26 through 28of 2012, according to the New York Times and several other media services. The amount of time set aside for the hearings, over three days, signals the gravity and importance of the issue, and is without precedent in modern times.

The U.S. Supreme Court docket outlines the three days of arguments to help resolve the legal issues associated with PPACA.

On March 26, attorneys on behalf of the 26 states that have brought legal action will argue whether the Anti-Injunction Act applies to PPACA. The Anti-Injunction Act prohibits lawsuits on taxation bills from being heard until the tax is brought into effect.

It is still questionable whether the penalty for an individual failing to purchase health insurance under the individual mandate is, in fact, a tax. One district court found this to be the case, finding that the penalty is codified in the IRS rules. If the Court rules that the Anti-Injunction Act applies, it will terminate any legal action against the PPACA until the PPACA tax penalty becomes effective on January 1, 2014. This is especially interesting in that none of the parties asked the Court to consider that issue. All parties involved asked the Court to decide on issues outside of the Anti-Injunction Act. The Court has appointed outside counsel to argue for the applicability of the Anti-Injunction Act.

The hearing scheduled for March 27 will focus on the extent that the Commerce Clause of the U.S. Constitution delegates to the federal government the authority to regulate interstate commerce, and specifically whether the federal government can force someone who does not want to engage in interstate commerce to buy something. The specific issue asks if the refusal to participate in interstate commerce by an individual failing to purchase health insurance, generally known as the individual mandate, constitutes engaging in interstate commerce and is thus subject to federal regulation. There are legal precedents to which both sides can appeal. Some cases have found an unlimited authority on the part of the federal government. Other cases have stated that the delegated authority under the Commerce Clause is not without limits.

The final arguments on March 28 will address the issue of the missing severability clause that would have protected the balance of the PPACA in the event that the Supreme Court declares another part of the PPACA to be invalid. Severability clauses are standard boilerplate for legislation. A severability clause was included in all but the final draft of the PPACA that passed the U.S. Senate. The U.S. House of Representatives considered the Senate version for action, and passed the Senate version without a severability clause. The Court will also hear arguments on the last day on the constitutionality of the federal government forcing states to participate in PPACA or be subject to punishment by withholding Medicaid dollars.

The Court’s decision should be released sometime mid-summer, likely in the middle of the 2012 election cycle. A decision pro or con will have immense impact on the U.S. Presidential election.

For additional information about the U.S. Supreme Court and PPACA, click here to read about several previous blogs on the subject.

Please visit www.benefitmall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

Health Insurers Facing New Financial Pressure Points under Emerging Reforms: MLR Restrictions & ICD-10 Conversion Add to Complexity

Fri, 23 Dec 2011 11:10:00 -0600

The Patient Protection and Affordable Care Act (PPACA) is not only forcing health insurers to undergo fundamental changes in the way they do business, but the law is requiring new infrastructure investment while also mandating Medical Loss Ratios (MLR) that limit the amount insurers can spend on administrative costs.

Health plans are spending money upgrading key IT systems and developing risk management compliance programs as they gear up for each new PPACA requirement. Adding to the financial tension is the need for health plans to make significant changes to their respective information technology (IT) systems to enable a seamless enrollment process when state health insurance exchanges become operational in a couple of years.

In addition, another requirement that pre-dates PPACA for health insurers is the need to convert their claims payment systems from the current International Classification of Diseases, version 9 or ICD-9 to the recently released ICD-10 by October 2013. In regards to implementing ICD-10, a white paper issued on behalf of America’s Health Insurance Plans states, “A reasonable preliminary estimate of the total cost to the healthcare system would be $3.2 to $8.3 billion.”

For some short-term relief, the latest MLR rules published earlier this month allow health plans to shift the ICD-10 conversion costs of up to 0.3% of an insurer's earned premium to a quality improvement activity in each respective state market. By moving the conversion expense to a quality improvement category, that expense is no longer considered an administrative expense and is not charged against the 15-20% administrative bucket. However, this waiver does not address all the upgrade costs. Claims adjudication system costs and ICD-10 support expenses will continue to be considered administrative expenses.

While this adjustment is helpful, it does not address the other IT upgrades and associated costs facing health insurance companies. According to IDC Health Insights report, the most prevalent changes include:

Cost management, information, and agility market drivers will compel technology platform updates;
Care management solutions must further integrate health and wellness;
Consumer engagement, health and management tools must be upgraded to 360-degree status;
Clinical analytics must be integrated with health management;
Customer relationship management software must be aligned with health management strategies; and
Health management tools must be integrated with communications technologies, workflows, and analytics.

In addition to these changes, health insurers must build new interfaces so they can interface electronically with their state’s exchange.

The financial burden on health insurers will be hefty; they also are under considerable pressure to control their premium increases. For the first time in history, the federal government has given itself the authority to review health insurance premiums it considers to be excessive. As HHS Secretary Kathleen Sebelius states, “We hope that by publicizing the excessive premium hikes, we will empower consumers. By shining a light on unjustified premium increases, we will hold health insurers accountable like never before, and help keep money in the pockets of Americans.”

Currently, premium increases of 10% or more must be reviewed by state or federal officials. Beginning in September 2012, the 10% threshold will be replaced by state-specific limits that reflect the insurance and health care cost trends in each state. The final rule clarifies that HHS will work with states in developing these thresholds.

By January 2014, assuming that PPACA survives the legal review, millions of Americans will be accessing their health insurance via state health insurance exchanges. Health insurers will be forced to offer standardized benefit plans and will be competing almost solely on cost. In order to compete in the state health insurance exchange environment, health insurance companies will have to undertake these considerable IT projects while trying to control their premium increases. Stay tuned for updates.

Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.

Contract Award Puts Wheels in Motion for Establishing Federal Insurance Exchange Program

Wed, 21 Dec 2011 14:21:00 -0600

In an effort to provide consumers with competitive insurance options as mandated by the Patient Protection and Affordable Care Act (PPACA), the federal government has awarded a $93.7 million, multi-year contract to CGI Federal, Inc. to establish a federal health insurance exchange. The Centers for Medicaid & Medicaid Services (CMS) Center for Consumer Information & Insurance Oversight (CCIIO) has hired CGI Federal, Inc., a U.S. subsidiary of CGI Group, Inc., to build the federally-sponsored health insurance marketplace that will “provide millions of Americans with ‘one-stop shopping’ for affordable coverage,” according to the CCIIO website. The CGI Group, Inc. offers information technology and business process services and is headquartered in Montreal, Canada.

The exchange marketplace, which PPACA mandates to be operational by 2014, will kick-in when a state either refuses to establish a state health insurance exchange on its own, or when the state health insurance exchange established by a state does not meet the requirements of PPACA and the exchange rules issued by the Department of Health and Human Services ( HHS).

The state health insurance exchange concept is a PPACA centerpiece -- designed to give individuals and small group employers an opportunity to compare health insurance offerings for standardized benefits on a cost basis. As of the end of November, 2011, 29 states had taken some action towards establishing their own state health insurance exchanges. Some states are now on the record as refusing to set up their own state exchange. If you would like to read more about your state’s progress, go here for the National Conference of State Legislatures’ excellent state by state summary of state insurance exchange activities.

Setting up a health insurance exchange is a massive undertaking. A successful health insurance exchange will have to create many of the functions that we have in place that make BenefitMall an easy-to-use resource. It also will have to create automatic enrollment interfaces for state Medicaid and federal Medicare programs, and the software to interface with the federal programs that will determine eligibility for the subsidies to be offered through the exchanges.

Please visit www.benefitmall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

U.S. Congressional House Subcommittee Holds Hearing on Medical Loss Ratios – Concerns Expressed about Broker Role

Mon, 19 Dec 2011 11:53:00 -0600

Last Thursday, the U.S. House of Representatives Small Business Subcommittee on Investigations, Oversight and Regulations held a hearing on the issue of the Medical Loss Ratio (MLR) in Washington, D.C. Titled “New Medical Loss Ratios: Increasing Health Care Value or Just Eliminating Jobs?,” the hearing was a forum for views on how the MLRs mandated by the Patient Protection and Affordable Care Act (PPACA) could impact the health care insurance industry. Most individuals testifying expressed concerns about how the MLR formula as currently structured could greatly hinder the ability of brokers and agents to support consumers and business owners when purchasing health insurance.

Background

PPACA requires insurance companies to allocate a percentage of the premiums consumers pay to the payment of claims for health care services and activities that improve the quality of health care. Per the mandate, “Insurers must spend a minimum of 80 percent of the premiums of individual and small group market customers on medical claims and no more than 20 percent on administrative expenses, or pay rebates to their policy holders beginning in 2012.” BenefitMall has published several blogs and legislative alerts about this issue previously.

The MLR requirements were initially included in PPACA to hold insurance companies accountable and improve transparency. Health Affairs, a leading journal in the health policy arena, notes, “The definition of what constitutes a medical cost will determine how much money insurers can spend on other business activities and how much they can keep as profits. The regulations will have a significant impact on medical care costs, consumers' premiums, and the kinds of health care services that insurance companies will cover in the future.”

Opening Statement

In his opening comments, Rep. Mike Coffman (R- CO), Subcommittee Chairperson noted:

Insurance agent commissions are counted as administrative costs under HHS’ rule. The agents – often small business owners themselves – assess the unique health insurance needs of small firms, recommend appropriate coverage and help to process claims. In several letters to the Department of Health and Human Services, the National Association of Insurance Commissioners or NAIC, the organization of state insurance commissioners which HHS entrusted with recommending the MLR formula, expressed concern about the adverse effects of the MLR on insurance producers (agents and brokers)…..

We all want quality health care and affordable insurance premiums. But the MLR is likely to deter small insurers from entering the market and hasten the exit of established ones. Instead of protecting consumers, the MLR may dissuade insurers from making investments in anti-fraud, anti-waste, customer service and transparency tools because they are considered administrative, and those costs must be kept low. The MLR is an incentive for insurers to increase – not reduce – premiums, because they will need to improve their medical ratio and forgo administrative tool that can ultimately save money. And, as NAIC’s resolution said, the MLR requirements “have had profound detrimental marketplace effects for insurance producers [agents and brokers]…”

This is an issue of great concern in the insurance industry because brokers and agents are worried that classifying their commissions as an administrative expense will reduce their fees and make it unprofitable to continue to deliver the current level of services that their clients need to facilitate obtaining the optimal health insurance coverage. Proponents of the MLR believe this will ensure customers are getting the most health benefits out of the money they spend on premiums. MLR detractors believe grouping brokers in with administrative cost bucket will compromise the level of customer service that clients receive.

Testimony

Several persons testifying at the hearing expressed concerns regarding the level of service being provided to consumers, the sustainability of the independent insurance broker and the impact on small business owners across the country.

“A legislative solution is needed immediately before the agent community reaches a point of no return,” said Mitchell West, an independent insurance broker with HealthChoiceOne based in Greenwood Village, Colorado, in reference to the decrease in commissions the industry has seen since the MLR was enacted.

Concurring with West was small business owner Gary Livengood of Mt. Airy, Maryland, who also had significant concerns about the MLR provisions. “The new law weighs heavily on my mind every time I think about hiring new employees or how our business may grow or change over the next few years,” he said. “It has already put regulatory burdens on our company due to the required changes to our benefit plans and the grandfathered plan rules.”

According to Grace-Marie Turner, president of the Galen Institute based in Alexandria, Virginia, “There will continue to be a need for licensed, trained professionals to help individuals, employers and employees with their health insurance needs. Yet in every state, as a direct result of the new law’s MLR provisions, agency owners are reporting that they are reducing services to their clients, cutting benefits, and eliminating jobs to stay in business. In some instance, they are simply closing their doors.”

Timothy Jost, a law professor at Washington and Lee University in Lexington, Virginia and consumer representative for the National Association of Insurance Commissioners, expressed support of the MLR mandates. “The MLR requirement is reducing the cost of health insurance for American small business as we speak,” he asserted, also refuting the claim the MLR was the reason brokers have seen decreased commissions.

NAIC Resolution

As we mentioned recently on www.healthcareexchange.com, “The National Association of Insurance Commissioners (NAIC) has passed a resolution to amend health care reform laws related to Medical Loss Ratio. The resolution called for the Department of Human Health and Services and Congress to work to ensure that the role of professional health insurance agents remains a strong part of the health care process. The NAIC resolution strongly supports the need for agents to continue to serve as consumer advocates in the process of securing health care coverage.”

At this point, Congress may be in the best position to remedy the likely negative impact of the MLR on broker services and commissions. BenefitMall will post updates to this issue as new information becomes available.

Please visit www.benefitmall.com to view past blogs and postings on the MLR. Or, you may visit www.HealthcareExchange.com for other blog posts, polls, surveys and numerous resources.

States Given Responsibility of Defining Essential Benefits

Fri, 16 Dec 2011 15:30:00 -0600

In a press release issued today (December 16, 2011), the U.S. Department of Health and Human Services has announced that state exchanges will now determine their benchmark for essential benefits based upon use of the most popular plans in their region and the ten benefit categories of care that were originally defined in the health care reform regulations. This change to move the responsibility of essential benefits to the state level will give states the flexibility to match their exchange plans to be equal to those offered by a typical employer in the state. Further, those states that have a broader based health care coverage mandate will not be penalized for incorporating their states mandates into their definition of essential benefits. Overall, this announcement will ensure that each state will now be able to properly meet the special needs of the residents of their state through the selections of health care coverage that they offer through their exchange.

Click here to view the full HHS press release and learn more.

New Research Indicates Most Employers Will Continue to Sponsor Health Benefits for Employees Despite PPACA Mandates

Wed, 14 Dec 2011 16:00:00 -0600

Four recent surveys confirm the notion that the majority of employers will continue to offer employer-sponsored health benefits in 2012 and beyond. The national surveys, conducted by Mercer, Towers Watson Health Care, GfK and Kaiser Family Foundation/Health Research & Educational Trust, yielded fairly consistent results that indicate employers overall continue to view their health benefits plans as a key component of the employee benefit offerings. The survey feedback also confirms that few employers plan to terminate their health benefit plans when state health insurance exchanges, mandated by the Patient Protection and Affordable Care Act (PPACA), become operational in the fall of 2013.

Mercer Study

Mercer’s 2011 National Survey of Employer-Sponsored Health Plans involved responses from 2,844 employers in both the public and private sector with 10 or more employees. Despite employers’ concerns about the impact of reform,” Mercer said in a statement, “when asked how likely they are to terminate their health care plans after state-run insurance exchanges become operational, the great majority says ‘not likely.’”

Enrollments in employer health benefits plans increased by 2% over the previous year, according to the study. This increase was attributed to a PPACA provision that requires coverage be extended to dependents up to age 26. Specifically, employers in the survey anticipate an additional 2% increase when PPACA’s rule requiring employers to automatically enroll newly hired, or newly eligible, full-time employees into a health plan becomes effective in 2014. Employers questioned do not support the contention that PPACA would cut the cost of health insurance benefits. Forty-five percent of the respondents think PPACA will increase their costs. Fifteen percent said it would not increase their costs and 29% were uncertain of the ultimate impact.

Towers Watson Study

The 2011 Towers Watson Health Care Trend Survey found “over two-thirds (71%) of the respondent companies indicated that they will continue to offer health care benefit coverage to their active employees through 2014.” The majority of the remaining 29% are unsure about whether they will continue their employer-sponsored health benefit plans. More than 53% of employers believe health care reform will be implemented within the timeline set forth, but 70% of employers do not believe health insurances exchanges will be the new solution to employer-sponsored coverage in 2014 or 2015.

Controlling costs continues to be a constant, according to the Towers Watson research. Between now and 2014, 74% of employers report they will increase the offering of account-based health plans, 58% say they will increase the use of preferred provider networks and 49% say they will use value-based benefit designs. More than three-quarters responding believe health care benefits will remain a key component of their overall employee value proposition beyond 2014.

GfK Study

The results of GfK Custom Research North America’s 2011 survey are quite similar to the above studies. Exactly 502 private-sector companies were surveyed that currently over health insurance. Fifty-two percent of employers surveyed indicate they will definitely continue to offer employer-sponsored health benefits. Only 12% say they will be “very likely” or “somewhat likely” to drop their employer-sponsored health benefits. The remaining 32% are unsure of their future course.

The size of the employer was important to the results of the GfK study – only 4% of employers with 500 or more employees are contemplating terminating their employer-sponsored health benefit plans, according to the survey. Fifty-one percent do not think the cost of health benefits will be higher due to PPACA. Only 11% think their health insurance benefit costs will decrease because of the health insurance reforms. Perhaps most troubling for PPACA proponents is that only 7% of respondents (who claim to be “very familiar” with PPACA) think health insurance reforms will cut their future benefits costs.

Kaiser Study

Finally, the Kaiser Family Foundation’s Employer Health Benefits 2011 Annual Survey, which included 3,184 randomly selected public and private firms with three or more employees, is interesting because it found that “…employers added 2.3 million young adults to their parents’ family health insurance policies as a result of the health reform provision that allows young adults up to age 26 without employer coverage on their own to be covered as dependents on their parents’ plan. Young adults historically are more likely to be uninsured than any other age group.”

Further revealing, the survey found that 56% of covered workers are in "grandfathered" plans as defined under health reform. Grandfathered plans are exempted from some health reform requirements, including covering preventive benefits with no cost sharing and having an external appeals process, according to the survey results. “To obtain this status, employers cannot make significant changes to their plans that reduce benefits or increase employee cost.”

This specific blog really just focused on the issue of employers’ attitudes about continuing to offer health insurance coverage in a post-PPACA environment. Readers are encouraged to review the studies to learn about other trends and concerns that are reported by each study.

HHS Launches Demonstration Project to Improve Care for Medicare Beneficiaries through Federally Qualified Health Centers

Mon, 12 Dec 2011 13:37:00 -0600

The U.S. Department of Health and Human Services (HHS) recently announced a joint initiative between the Centers for Medicare and Medicaid Services (CMS) and the Health Resources Service Administration (HRSA) that allocates $42 million dollars to improve care for Medicare beneficiaries in 500 Federally Qualified Health Centers (FQHC) in 44 states across the country. This initiative is expected to help up to 195,000 beneficiaries.

According to HHS, the Advanced Primary Care Practice demonstration is aimed at showing how the quality of care can be improved and health care costs can be reduced. The new program also is intended to assess the effectiveness of the advanced primary care model, also known as the patient-centered medical home (PCMH). The providers will be paid a monthly care management fee for each beneficiary receiving primary care at their facility. This initiative was authorized by the Patient Protection and Affordable Care Act (PPACA), also referred to by some in short form as the “Affordable Care Act.”

“Health centers are integral parts of our communities,” said CMS Administrator Donald M. Berwick, M.D. in an HHS press statement. “This initiative will give participating health centers the help they need to improve care for many people with Medicare who rely on them as their main source of care.”

The three-year demonstration program began on November 1, 2011, and will end on October 31, 2014. Health care providers will use the funds received under this initiative to increase available hours, which will allow for same-day appointments a well as the ability to better meet urgent care needs.

Primary care practices will be evaluated over the three-year period and clinics that are providing better access to care will be rewarded with additional funding. Each FQHC will have a list of beneficiaries assigned to their location.

“The lessons learned from this demonstration project will help all community health centers improve on their long–standing commitment to providing high quality, patient-centered primary care,” according to Health Resources and Services Administration (HRSA) Administrator Mary K. Wakefield, PhD., R.N. in the statement. “This program will help strengthen the relationship between the more than 8,100 health center sites HRSA helps fund and the communities they serve.”

At the close of the three-year window, the CMS Center for Innovation (Innovation Center) will independently review the data collected over the course of the demonstration and also assess how the program has impacted the number of hospital and emergency room visits, and the quality, availability and cost of care to Medicare beneficiaries.

This initiative is significant because not only is it aimed at improving the overall health of the American public, but it also will provide additional jobs within the health care industry.

We will continue to keep you up-to-date on this issue as it develops. Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view Legislative Alerts.

The views expressed herein do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

Medicare to Cover Preventive Services to Reduce Obesity: Prevention and Wellness Programs Gaining Momentum in Private and Public Sectors

Fri, 09 Dec 2011 15:41:00 -0600

Late last month, the Centers for Medicare and Medicaid Services (CMS) announced that the Medicare program will cover preventive services in an effort to combat obesity. In the past year, the federal government has launched a number of programs and funding initiatives to address the growing waistlines of Americans of all ages. The goal is to help us to live longer and healthier lives – along with reducing the cost associated with treating disease and managing chronic illness. Many of these campaigns have been fueled by the Patient Protection and Affordable Care Act (PPACA). These efforts mirror recent trends by health insurers and employers in the private sector to promote health and wellness.

“Obesity is a challenge faced by Americans of all ages, and prevention is crucial for the management and elimination of obesity in our country,” said former CMS Administrator Donald M. Berwick, MD, in a press statement. “It’s important for Medicare patients to enjoy access to appropriate screening and preventive services.” Other preventive services provided by Medicare include screening for colon cancer, diabetes, breast cancer and flu shots. Berwick recently announced that he is stepping down as the interim head of CMS, but these prevention programs will continue to be implemented under the next administrator.

As BenefitMall stated in a previous blog, “Wellness care is aimed at overall health and fitness, unlike preventive care programs, which are specifically designed to target a specific condition, illness, or disorder. Examples of preventive care programs include immunizations; cancer screenings (mammograms, colonoscopies, etc.); blood pressure; diabetes and cholesterol testing; counseling for smoking cessation; eating healthier; reducing alcohol use; and pregnancy screenings; while wellness care might include membership to a fitness club.”

Although wellness and preventive benefits may have higher immediate costs, studies have shown that participation in plans with these programs actually lowers long-term costs. A study performed by Highmark, Inc., a subsidiary of Blue Cross Blue Shield, demonstrates that health care costs rose at a 15% slower rate among those who participated in wellness plans.

The new Medicare preventive care coverage initiative complements the Million Hearts Campaign, which is a joint effort between CMS, the Centers for Disease Control (CDC) and the Department of Health and Human Services (HHS). Million Hearts is a national initiative to prevent one million heart attacks and strokes over the next five years.

According to a recent report from CDC, obesity has become a national epidemic, with over 30% of the population estimated to be obese. Obese individuals have a tendency to also suffer from heart disease, diabetes, and other chronic conditions. The report further states, “People who were obese had medical costs that were $1,429 higher than the cost for people of normal body weight. Obesity also has been linked with reduced worker productivity and chronic absence from work.” By encouraging obese individuals to participate in wellness plans, which promote personal responsibility for behavioral and lifestyle changes, employers empower individuals to make better choices that will lead to a healthier work force.

According to a recently published article, “Research has shown that 87.5% of health care claim costs and 70% of all chronic health problems are directly linked to an individual's lifestyle. As health and wellness programs work to modify lifestyle, they can have a direct impact on acute and chronic health conditions, and therefore offer an opportunity to reduce medical costs. In fact, studies have shown that these programs can return between $3 and $5 for every $1 spent.” With that being said, by encouraging employees to participate in wellness plans and improve their lifestyles, employers can help lower health care claim costs.

PPACA includes several incentives to encourage employers to adopt wellness plans, including offering wellness grants for small businesses. These grants, available to employers with fewer than 100 employees who work 25 hours or more per week and who did not have a workplace wellness program in place as of March 23, 2010, will provide a strong incentive for small businesses to adopt new wellness plans.

To further back these efforts, HHS allocated $750 million for preventive care in February of this year to “help prevent tobacco use, obesity, heart disease, stroke, and cancer; increase immunizations; and empower individuals and communities with tools and resources for local prevention and health initiatives.”

Final Thoughts

The role of brokers and agents in identifying wellness and prevention coverage can add real value for employers, their employees and other individuals looking for a better policy. A wellness plan can generate returns ranging from $3 to $5 for every $1 spent by a company. However, securing this “ROI” is dependent on creating, implementing and maintaining an effective and efficient wellness program.

It also is nice to know that the federal government has joined in the battle to fight the rising epidemic of obesity in the United States.

Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.

HHS Announces Medical Loss Ratio Rule

Fri, 02 Dec 2011 14:23:00 -0600

The Department of Health and Human Services (HHS) just released its final Medical Loss Ratio rule, and the outcome does not bode well for the broker/agent community. In the ruling HHS has rejected the NAIC recommendation to exclude broker/agent fees from insurance companies’ allowed administrative costs.

Under the rule beginning this year, individual and small group market insurance plans will be required to spend 80% of the premiums on medical care and health care improvement. Only the remaining 20% will be allowed towards administrative costs. Much the same, large group plans will have an 85% of premium requirement.

This final rule with comment period revises the regulations implementing medical loss ratio (MLR) requirements for health insurance issuers under the Public Health Service Act in order to address the treatment of “mini-med” and expatriate policies under these regulations for years after 2011; modify the way the regulations treat ICD-10 conversion costs; change the rules on deducting community benefit expenditures; and revise the rules governing the distribution of rebates by issuers in group markets.

Click here to read the HHS fact sheet, or here to review the complete rule document.

Many of you have commented on our various social media venues with regard to your concerns about the NAIC vote and how many insurance commissioners were not in support of our broker/agent community. With 20 of the 26 “yes” votes coming from the Republican Party and 16 of the 20 “no” votes coming from the Democratic Party, there now appears to be signs that these issues will be supported or rejected by party lines over the actual merits of the proposed amendments. Now more than ever, we should be reaching out to our Insurance Commissioners and elected officials to share our concerns and fears for our industry and health care as a whole.

Click here to see a list of Insurance Commissioners and their vote, or here to access their contact information.

GOP Candidates in Agreement, Down with PPACA - but What’s the Solution?

Fri, 02 Dec 2011 11:27:00 -0600

Without a doubt, health care is going to be a hot button issue in the rapidly approaching 2012 presidential election. While GOP hopefuls agree - President Obama’s Patient Protection and Affordable Care Act (PPACA) needs to be repealed—they have very different opinions regarding the future of health care in our country.

According to a recent survey, “Health care and the national deficit tied as the second-most important issue after job creation in the 2012 U.S. presidential election. Forty-two percent of the 1,000 adults nationwide surveyed by PwC's Health Research Institute said they would prefer lower health care costs over an economic rebound.”

The importance of this topic isn’t in question for the major Republican presidential contenders. All agree that addressing our nation’s health care dilemmas is a key issue, but they each have a different plan in terms of the best road to take.

Here is the latest buzz on what the top GOP candidates are saying about health care reform (in alphabetical order):

Michelle Bachmann

Minnesota representative and Tea Party notable Michelle Bachmann attests that Obamacare will result in millions of jobs lost as well as trillions of dollars in unforeseen costs to the American public. If elected, in addition to repealing PPACA, Bachmann believes, “we need to stabilize Medicare, which faces $25 trillion in unfunded obligations under the most optimistic projections.”

Bachmann thinks by promoting creativity and competition, health care will be reformed and quality of care will improve while the cost will decrease. “As President,” she says, “I will work to unleash the power of medical innovation and personal choices. Because a cure is always better and cheaper than care…”

Herman Cain

Atlanta-born businessman Herman Cain believes “Obamacare still has yet to address the 50 million uninsured Americans, while forcing the rest of the working population to support them.”

However, Cain notes, “Patient-centered free market health care reforms have already been developed and introduced in Congress, but they are stuck in committee and they can’t get out. With the right leadership we can get them out and get them passed.”

Cain’s solution would involve repealing PPACA and replacing it with a patient-centered market that allows for less restrictions on Health Savings Accounts (HSAs) and “help to empower Americans to save and invest their own money to expand their options for health care.”

Newt Gingrich

According to Gingrich, "We must repeal and replace the left's big government health bill with real solutions that will lower costs and improve health outcomes." Gingrich asserts, “Health care can be transformed from an anchor on our economy to an engine..from a broken, fragmented system to a coordinated, innovative system that delivers more choices at lower cost for all Americans.”

The former Speaker of the House has a 13-point “Patient Power” plan that he will attempt to implement if elected. Some key points of the “Patient Power” plan include:

Making health insurance more affordable and portable;
Creating more choices in Medicare;
Reforming Medicaid;
Protecting consumers;
Creating extended HSAs; and
Investing in research for health solutions.

“This comprehensive approach—cost, quality, competition, and coverage—can solve the problem of the uninsured with no individual mandate and no employer mandate. Everyone would be able to obtain essential health care and coverage when needed,” says Gingrich. He does not believe Obamacare addresses the root of America’s health care crisis and that it will actually make matters worse if fully enacted.

Jon Huntsman

The former Governor of Utah and former U.S. Ambassador to China believes that Obama’s health care plan is both unaffordable and unconstitutional. Huntsman has published a 12-page manifest that outlines his stance on several of the key issues in this election, including health care. (See Time to Compete: An American Jobs Plan).

According to Forbes magazine, “The plan contains significant health policy reforms that would dramatically improve the (shrinking) private-sector portion of our health-care system.”

Huntsman’s believes, “The employer tax exclusion is at the heart of everything that is wrong with our system: the overspending on extraneous health benefits; the lack of price- and value-consciousness on the part of patients; and the lack of health insurance portability that makes people afraid to leave, or lose, their jobs. As I’ve written in the past, the number-one market-oriented health reform policy we need is to gradually move away from this system.”

Ron Paul

Texas Representative Ron Paul is no stranger to health care. Paul received his medical degree from Duke University in 1961, and later went on to serve as a flight surgeon in the United States Air Force. If elected, he will seek to repeal Obama’s health care plan and move in the direction of “Freedom Not Force” and the idea of “Do No Harm” when it comes to health reform in the United States.

Paul claims he would “fight to put you back in control of your health care decisions, save you money on medical expenses, and institute reforms that will once again make America’s health care system the standard for other nations to follow.”

He believes “the key to effective and efficient medical care is the doctor-patient relationship. Yet, federal bureaucrats continue to believe that their one-size-fits-all policies will lower costs, increase access, and cure an ailing industry.”

“Excessive regulation, immoral mandates, and short-sighted incentives,” he says, “have created a system where no one is happy, doctors pass quickly from one patient to the next, insurance is expensive to get and difficult to maintain, and politicians place corporate interests ahead of their constituents.”

Rick Perry

Texas Governor Rick Perry hopes to implement his Cut, Balance and Grow Plan, which outlines a means to, “Cut taxes and spending, balance the budget by 2020 and grow jobs in the economy.”

In the plan, Perry refers to PPACA as a job-killing federal law that needs to be repealed.

“The best way for the federal government to improve health care in the near term is to stimulate job creation so more Americans are covered by employer-sponsored health plans,” Perry notes. “Creating jobs will also reduce the strain on public safety net programs like Medicaid, saving taxpayer dollars.”

Mitt Romney

Mitt Romney, former governor of Massachusetts, is no stranger to health care reform. In 2006, he implemented his own version of health care reform. According to Romney’s plan, “The law says people earning under three times the federal poverty level—that's $29,000 a year for an individual—can buy a state-subsidized health plan with no deductibles and rich benefits, including dental care.”

Many elements of PPACA’s reform measures were based up the Massachusetts plan, including the state’s health care exchange. As a result, Romney has been subject to criticism because of his role in previously supporting those reforms.

Today, however, Romney has announced his opposition to PPACA because he believes federal regulation needs to be limited and the power needs to come from the individual states. If elected, Romney’s health care reform would include empowering states to manage their own health care plans, reforming medical malpractice by putting a cap on damages, strengthening health savings accounts (HSA), and reforming taxes to enable individuals to purchase their own insurance.

Romney notes, “Our next president must repeal Obamacare and replace it with market-based reforms that empower states and individuals and reduce health care costs. States and private markets, not the federal government, hold the key to improving our health care system.”

Rick Santorum

Former Pennsylvania Senator Rick Santorum is another advocate for repeal of Obamacare as quickly as possible.

While attending the GOP debate in Ames, Iowa Santorum stated, “President Obama’s health care law is the reason that I’m running for office…I believe Obamacare will rob America of its soul.” It will lead to “freedom in American being forfeited.”

The Pennsylvanian appears to take no hostages when it comes to the issue of health care reform and was quoted as saying something to the effect, “That people who can’t afford health care should stop whining about the high costs of medical treatments and medications and spend less on non-essentials.”

Final Thoughts

If any of the GOP candidates mentioned above make their way into the oval office, many major provisions of PPACA likely will be repealed, especially if the Republicans maintain control of the U.S. House of Representatives and take over control of the U.S. Senate (or narrow the Democratic majority). Each GOP candidate has his or her own idea regarding the country’s health care solution, but only time will tell if any of them have the opportunity and the wherewithal to make their proposed solution a reality.

Additional Details on NAIC MLR Resolution While HHS Continues to Process State Waivers

Tue, 29 Nov 2011 00:00:00 -0600

Last week, BenefitMall reported on a hotly debated resolution adopted by the National Association of Insurance Commissioners (NAIC) to adjust the Medical Loss Ratio (MLR) formula to recognize the role of professional health agents and brokers. (To read the blog, click here).

Just prior to Thanksgiving last year, the U.S. Department of Health and Human Services (HHS) published an interim final rule on the computation of the MLR. That rule resulted in the inclusion of brokers’ commissions in the administrative component of the MLR, which only further fueled the trend towards health insurers cutting broker commissions over the past year. Depending on the size of the insured group, health insurance plans can only spend 15-20% of their premiums on the provision of administrative services including broker fees. As a result, the NAIC has been debating a resolution to remedy this situation.

NAIC Resolution

On November 22, in a telephonic meeting, the NAIC commissioners passed a resolution calling for Congress to pass legislation to remove the brokers’ commissions from the administrative component of the MLR. It also called on the HHS Secretary to adopt regulatory relief on the issue.

The motion directly acknowledged the important role that brokers provide:

“Licensed health insurance producers (agents and brokers) provide a wide range of services for both individual consumers and employers of all sizes. Producers interface with insurers, acquire quotes, analyze plan options, and consult with clients throughout the purchase of health insurance. They also provide ongoing service to help their clients utilize and optimize their coverage effectively…”

In addition, the resolution states:

“Congress should expeditiously consider legislation amending the MLR provisions of the PPACA in order to preserve consumer access to agents and brokers, and;

The Department of Health and Human Services should take whatever immediate actions are available to the Department to mitigate the adverse effects the MLR rule is having on the ability of insurance producers to serve the demands and needs of consumers and to more appropriately classify producer compensation in the final PPACA MLR rule. The potential options available to HHS include: (1) approving state MLR adjustment requests; (2) placing an immediate hold on implementation and enforcement of the MLR requirements relative to agent and broker compensation; and (3) considering the NAIC’s finding that a significant portion of insurance producer activities are dedicated to consumer advocacy and service and therefore classifying an appropriate portion of producer compensation as a health care quality expense for purposes of Section 2718 of the PHSA.”

During the NAIC debate, Commissioners Praeger of Kansas and Lindeen of Montana offered an amendment to soften the language to help brokers and remove the list of proposed HHS regulatory actions. That amendment was defeated by a vote of 23-13, with 15 abstentions. Then, a motion to return the resolution to committee failed by a vote of 26-24, with Commissioner Kitzman of Texas abstaining. After a total of over 90 minutes of debate, the resolution passed 26 to 20 with five states, including Commissioner Kitzman of Texas, again abstaining.

Congressional Action

On the federal front, Rep. Mike Rogers (R-MI) and John Barrow (D-GA) introduced H.R. 1206 earlier this year, which now has 139 co-sponsors. To date, the bill entitled, “Access to Professional Health Insurance Advisors Act of 2011,” remains in committee. As discussed in an earlier blog, the bill would allow states to modify the MLR formula that supports the continued use of brokers if there is a threat of market destabilization. Given the deep division in our federal government and the current position of the HHS Secretary, the bill will probably stay in a holding pattern for the near future.

State Waiver Applications

On the state front, many state regulators have been reluctant to back the MLR proposal out of concern for the impact the MLR would have on their state’s individual and small group health insurance markets. To help prevent major disruptions, PPACA proponents included the option for the HHS Secretary to issue temporary waivers. Many states have, or are, applying for MLR waivers in order to prevent undue disruptions in their respective insurance markets.

Federal officials in the Center for Consumer Information and Insurance Oversight (CCIIO) of the Centers for Medicaid and Medicare have been tasked with evaluating the MLR waiver applications. According to the CCIIO, Florida, Georgia, Indiana, Louisiana, and Michigan have submitted the necessary forms for MLR waiver applications, with a final determination to be made soon. However, even though the applications have been submitted, a date for the decision remains undetermined. Florida recently received a notice that their application review would be extended for an additional 30 days. Applications from Kansas, North Carolina, Oklahoma, Texas and Wisconsin are being evaluated for completeness or have been returned with a request for further information. According to the CCIIO, 18 states total have applied for MLR waivers.

We have written extensively about the MLR, and you can go here to read further on the issue. We will continue to follow these developments. BenefitMall will continue to keep you apprised of the latest developments as health care reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.benefitmall.com.

NAIC Approves Resolution Calling for Changes to MLR

Wed, 23 Nov 2011 00:00:00 -0600

The National Association of Insurance Commissioners (NAIC) has passed a resolution (26-20-5) to change health care reform laws related to Medical Loss Ratio. They are recommending that the Department of Human Health and Services (HHS) and Congress work to ensure that the role of professional health insurance agents remains a strong part of the healthcare process. The NAIC resolution strongly supports the need of agents to serve as consumer advocates in the process of securing health care coverage.

This is a huge step in the right direction for the broker/agent community. After a 90-minute debate, this vote took agents one step closer to overcoming their many obstacles of health care reform. Together, we will now wait to see the response that HHS has to these recommendations. BenefitMall has and will continue play an active role in supporting brokers and their role by lobbying, testifying and calling on officials to educate them about the value broker advisors bring to the health care process.

Click here to view a NAHU press release that further explains NAIC's resolution.

Another Federal Court Weighs In On Health Care Reform: D.C. Federal Circuit Court Finds PPACA Constitutional

Mon, 21 Nov 2011 00:00:00 -0600

In a split opinion, a three-judge panel of the D.C. Federal Circuit Court of Appeals has ruled the mandate to force individuals to purchase health insurance constitutional, rejecting the appeal in the case of Seven-Sky v. Holder. In a 2-to-1 decision, the judges held that Congress acted within its authority to regulate interstate commerce when it enacted the individual mandate. The dissenting judge argued that the challenge was premature.

The opinion surprised some observers since two of the three justices on the panel were appointed by two Republican Presidents.

The swing decision was put into play by Senior Judge Laurence Silberman, who was appointed to the Circuit Court by President Ronald Regan and is regarded by many to be one of the intellectual leaders of the conservatives on the federal bench. His opinion in this case categorically rejected the points challenging the individual mandate. While admitting that the mandate is unprecedented, his majority opinion offers the following comments:

“Broad regulation is an inherent feature of Congress’s constitutional authority in this area; to regulate complex, nationwide economic problems is to necessarily deal in generalities.”
"The right to be free from federal regulation is not absolute and yields to the imperative that Congress be free to forge national solutions to national problems.”
"The health-insurance market is rather a unique one, both because virtually everyone will enter or affect it, and because the uninsured inflict a disproportionate harm on the rest of the market as a result of their later consumption of health-care services.”

In a dissenting opinion, Judge Brett Kavanaugh, an appointee of Republican President George W. Bush, contended that the Anti-Injunction Act applied to the case. The federal Anti-Injunction Act provides that no legal action can be taken against a federal tax until the tax is levied, and the tax provisions of the individual mandate do not take effect until 2014. He held that the court can't review the health care mandate until it and the tax penalty written into the Internal Revenue Code takes effect in 2014.

While the D.C. Federal Circuit Court ruling is notable, it is more symbolic in light of the U.S. Supreme Court’s decision to hear these issues (click here to read more). However, the ruling does bear some significance for individual mandate proponents since this is the second federal court with a Republican-appointed judge to vote to uphold the mandate.

The ruling also softened the impact of the election results in Ohio on November 9th, where the citizens voted nearly 2 to 1 to amend their state Constitution to prohibit enforcement of the individual mandate. That vote is also largely symbolic, but PPACA opponents are using the vote in Ohio -- a swing state in the upcoming presidential election – to reinforce their claim that the individual mandate remains highly unpopular with voters.

Ultimately, each of these legal questions will be addressed by the U.S. Supreme Court next spring.

We will continue to endeavor to keep you up-to-date on these and other developments in our ever- evolving marketplace. Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.

U.S. Supreme Court Agrees to Review Legality of PPACA

Tue, 15 Nov 2011 00:00:00 -0600

On Monday, the U.S. Supreme Court announced it will hear oral arguments on the constitutionality of the Patient Protection and Affordable Care Act (PPACA). In a decision expected by most legal experts, the Supreme Court Justices agreed to hear the case that has grabbed headlines for over a year.

In particular, the Supreme Court will review the legal arguments stemming from an 11th Circuit Appellate Decision in August (which BenefitMall has reported on, click here for details). This case has drawn a fair amount attention because the legal complaint was spearheaded by 26 state attorneys general and the National Federation of Independent Business, which oppose PPACA’s individual mandate.

In addition to hearing the case, another noteworthy announcement is the amount of time that the Court will set aside to hear oral arguments in this case. A full 5½ hours of time has been allotted so the Court can hear several key legal issues that need to be resolved. Although the length of time may not appear to be significant from a layperson’s perspective, it is in fact unprecedented during the past 100 years with maybe one exception.

The announcement granting “Writ of Certiorari” will empower the Court to cover several key legal issues, most likely including:

Legal Standing. Do the 26 states suing the federal government have sufficient legal standing to bring the case to court? Several lower courts have held that states have insufficient standing to bring the case to trial. Other courts have upheld their states’ legal rights to do so.
Timing. Can the courts consider a lawsuit on PPACA now? The 4th Circuit Court of Appeals in Richmond, Va., ruled that the mandate that individuals must purchase health insurance is a tax because it was written into the IRS tax code. The Anti-Injunction Act prohibits federal courts from hearing suits against federal taxes until the tax becomes effective. If the U.S. Supreme Court finds that the PPACA individual mandate is a tax, it can't be challenged in a court of law until after 2014, when the tax penalties become effective for individuals failing to obtain health insurance coverage.
The Individual Mandate Provisions. PPACA requires that effective 2014 all private persons must purchase health insurance, be covered by a government program, or face a tax penalty if they choose not to secure insurance coverage. This mandate was struck down by the 11th Circuit Court of Appeals in Atlanta, whose ruling was appealed to the U.S. Supreme Court by the Obama Administration. The Supreme Court Justices will likely rule on whether the individual mandate requirement exceeds the bounds of the Commerce Clause in the U.S. Constitution that delegates the authority to regulate interstate commerce to the federal government.
The Medicaid Expansion Provisions. The 26 states claim that the new Medicaid expansion in PPACA is an unconstitutional coercion by the federal government since the states must significantly fund and expand their respective Medicaid programs with limited leeway at the state level.
Severability. A severability clause in a new law like PPACA generally provides that if any particular provision in a statute or act is declared unconstitutional, the balance of the law remains in force. It is considered to be standard boilerplate for federal legislation. In the last hours before the U.S. Senate voted on its version of PPACA, a severability clause was dropped from the final version. The U.S. House ultimately approved the Senate version that has no severability clause. Some critics of the PPACA hold that the lack of a severability clause is a fatal flaw, and if the individual mandate to purchase the clause or any other clause is declared unconstitutional, the entire act is void. PPACA proponents hold that the lack of a severability clause is not a critical issue and will have no bearing on PPACA.

A spokesperson for the U.S. Supreme Court says the PPACA legal issues are likely to be argued sometime next March. Decisions for cases argued in the Court's spring term are generally published by June. If that timing holds up, the decision will come in the middle of the 2012 election cycle and will have a definite impact on the outcome of the election. Stay tuned for further developments.

We have covered many of the related court decisions that involve PPACA and will continue to follow these issues for you. Please visit www.HealthcareExchange.com for those and other blog posts, polls, surveys and numerous resources and visit www.benefitmall.com to view past Legislative Alerts.

HHS Publishes Proposed Rule on Exchange-Based Risk Adjustments

Mon, 14 Nov 2011 00:00:00 -0600

With on-going implementation of the Patient Protection and Affordable Care Act (PPACA), actuaries and other experts have expressed concerns about how the new state-based insurance exchanges, which are geared to the small group and individual markets with dedicated subsidizes, could distort the broader health insurance market. For example, what if insurance carriers place the burden of individuals with higher health risks on qualified health plans (QHPs) participating in the insurance exchanges and keep the better risks outside of the exchanges?

The U.S. Department of Health and Human Services (HHS), in an attempt to address some of these concerns, recently published a proposed rule that would create three programs to help safeguard the state health insurance exchanges against market uncertainty and risk selection. The three programs target these issues through reinsurance, risk adjustment, and corridors of risk.

Reinsurance

The proposed HHS regulation entitled, Standards Related to Reinsurance, Risk Corridors and Risk Adjustment, would create a reinsurance program that levies fees on health insurance plans within each state. The provision would use the funds to diminish the impact of adverse selection on health insurance plans within a state that are covering persons who are using more health care services than the average.

According to a recent HHS publication, the reinsurance program will help stabilize the health insurance market, regulate premium increases and lay the groundwork for establishment of the exchanges from 2014 through 2016. For the first three years PPACA is in effect, each state is required to set up a transitional reinsurance program to reimburse insurance issuers, as well as third-party administrators that cover high-risk individuals. Basically, reinsurance will be determined by the claims of high-cost enrollees rather than a list of predetermined medical conditions. The proposed rule also mandates that if a state does not elect to establish a state health insurance exchange, and does not operate its own reinsurance program, HHS will establish the reinsurance program to perform all the reinsurance functions for that state.

Risk Adjustment

Also included in the framework is a program allowing for risk adjustment for all plans that are not grandfathered, both in the small group and individual markets, as well as inside and outside of a state’s exchange. The purpose of this program is to attempt to create a level playing field so insurers are competing based on price, quality and service. This provision will establish a criteria and methodology to be used by states when determining their individual risk plans.

The proposed rule sets forth a robust risk adjustment process requiring data to support the determination of an individual’s risk score and the corresponding plan and state averages. States, or HHS on behalf of one or more states, is responsible for collecting the data for determining individual risk scores. The claims data can be forwarded to the federal government under three different scenarios:

A centralized approach — Issuers submit raw claims data sets to HHS
An intermediate state-level approach — Issuers submit raw claims data sets to the state government, or the entity responsible for administering the risk adjustment process at the state level
A distributed approach — Each issuer must reformat its own data to map correctly to the risk assessment database and then pass on self-determined individual risk scores and plan averages to the entity responsible for assessing risk adjustment charges and payments.

As the rule summary below indicates, those who drafted the proposal doubt all insurers will be able to accurately determine and pass on the information to the federal government:

“In addition, this approach would require issuers to be able to respond to multiple queries to support other functions, such as data to recalibrate the Federally-certified risk adjustment model, reconciling cost sharing reductions payments, verifying risk corridor submissions, or auditing cost-sharing reductions or reinsurance payments. We believe the proposed intermediate approach would result in the most complete, actuarially sound risk adjustment methodology and provides support for other functions that also require encounter level data, while maintaining State flexibility. We recognize this approach may raise concerns related to consumer privacy and standard submission formats.”

Risk Corridors

The risk corridor program is the third strategy to help protect patients through the qualified health insurers in the exchange. A risk corridor creates an avenue for the federal government and qualified health plan issuers to share the risks. The risk corridor program will attempt to protect against rate-setting uncertainty in the state-based exchanges by limiting the extent of issuer losses and gains to plus or minus 3 percent. HHS will be the body responsible for administering PPACA’s risk corridors. A primary purpose of this requirement is to streamline payment policies and data to promote simple and efficient processes.

One point of contention regards the fact that the large group insurance market will be subsidizing the individual market for the first three years. All health insurance issuers contribute to a state health reinsurance pool, while only health insurance issuers in the individual market are eligible to receive payments.[1]

A second and perhaps even more problematic concern is that it places the federal government in the position of creating a repository for all health insurance claims created in this nation. Critics remain highly concerned over the centralization of these health insurance claims and the ability of the federal government to keep that data confidential. As has been the case in other federal programs, laptops with confidential data are lost or stolen on a recurring basis.

An HHS white paper attempts to explain the proposed rule by elaborating:

“Risk corridors act as an after-the-fact adjustment to premiums based on the health insurance issuer’s experience. They are designed to protect QHP issuers in the individual and small group market against inaccurate rate setting. Due to uncertainty about the population during the first years of Exchange operation, plans may not be able to predict accurately their risk, and their premiums may reflect costs that are ultimately much lower or much higher than predicted, as reflected in overall profitability. For these plans, risk corridors are designed to shift cost from plans that overestimate their risk to plans that underestimate their risk.”

While these proposed rules do clarify some adverse selection concerns, many issues remain unresolved. We will continue to keep you up-to-date on these and other developments as HHS and the states continue to move forward with PPACA implementation.

Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.

The views expressed herein do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

[1] http://cciio.cms.gov/resources/files/cms-9989-p2.pdf Page 33

Brokers are Key to Successful Implementation of Health Benefits Tax Credits

Fri, 11 Nov 2011 00:00:00 -0600

One of the more positive aspects of the Patient Protection and Affordable Care Act (PPACA) was the authorization of a federal tax credit for small business owners who offer health insurance benefits to their employees. This tax credit potentially is worth a great deal of money to small business employers. Despite the potential for significant cost savings, efforts to promote the Small Business Health Care Tax Credit to small businesses have missed the mark.

According to a recent report by the Inspector General of the U.S. Department of Treasury, a relatively small number of eligible businesses are taking advantage of the offered tax credit. Although the Treasury Department predicted approximately $2 billion dollars in small business health care tax credits generated by the estimated 4.4 million eligible small employers for 2010,[1] the tax credit has only generated $278 million dollars in tax credits.[2] The report lists the reasons so few small employers have taken advantage of this tax credit, including:

The credit for Small Employer Health Insurance Premiums is based upon very complex legislation and regulations that are hard to understand.
Form 8941 does not contain all of the data and calculations needed to verify each step of tax credit eligibility and calculation.
The calculations to identify the tax credit are complicated.
The penalty for inadvertently claiming a false tax credit is significant.

While the Treasury Department responded to the Inspector General’s report by listing the outreach mechanisms that have been employed to date, it missed the most important reason that so few small businesses are accessing the tax credit – failure to reach out to the health insurance Broker community. When it comes to talking about health insurance credits, no single group of professionals has greater access to small business employers on health insurance issues than the Broker community. The owners of small businesses rely on their Brokers to help them navigate the complex intricacies of providing health insurance to their employees. Despite spending $29 million in outreach efforts, it’s not nearly as effective as a Broker talking with his clients about the opportunities this tax credit presents.

We applaud the recent efforts of the Treasury Department to reach out to the broker community through associations such as NAHU, and urge our Brokers to communicate this important tax credit opportunity to their clients.

We have written about this important tax credit before. For more information on the details of this tax credit, please click here.

BenefitMall will endeavor to keep you up-to-date as this issue develops. In the meantime, visit www.benefitmall.com to view past Legislative Alerts in the “Newsroom” section. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources. If you have any questions, please contact your local BenefitMall sales team and they will be happy to assist you.

The views expressed in this legislative alert do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

[1] http://www.treasury.gov/tigta/auditreports/2011reports/201140103fr.pdf

[2] ibid

HHS Launches New PPACA Initiative to Strengthen Primary Care

Wed, 09 Nov 2011 00:00:00 -0600

The U.S. Department of Health and Human Services (HHS) announced a new initiative under the Patient Protection and Affordable Care Act (PPACA) aimed at helping primary care providers deliver higher quality and patient-centered care. Primary care practices that support this initiative will receive bonuses for coordinating improved care and spending health care dollars more prudently.

“Thanks to the Affordable Care Act, we are helping primary care doctors better coordinate care with patients so they get better care and we use our health care dollars more wisely,” said HHS Secretary, Kathleen Sebelius. This partnership, a joint effort between HHS and the Centers for Medicare and Medicaid Services (CMS), known as the Comprehensive Primary Care Initiative, will be voluntary and start off in five to seven health care markets across the United States.

CMS strongly believes that the health care industry is in need of stronger primary care, and that this initiative will get things moving in the right direction. According to a CMS fact sheet, “A primary care practice is a key point of contact for patients’ health care needs. In recent years, new ways have emerged to strengthen primary care by improving care coordination, making it easier for clinicians to work together, and helping clinicians spend more time with their patients.”

This initiative is included under the umbrella of the Obama Administration’s efforts to lower health care costs to Americans by utilizing concepts set forth by PPACA. The additional support received by primary care practices is meant to help doctors deliver preventive care, help those with serious or chronic illnesses to follow individualized care plans, give patients better access to health information and to get patients and their families to take an active role in their own health care.

This collaboration is being based off of models set forth by large employers and industry leaders in the private health insurance arena. According to the HHS announcement, “Large businesses have been able to make independent investments to promote more comprehensive primary care – improving the health of their employees and lowering their health care costs.”

To enable this more personalized approach to care to go in to effect, participating primary care practices will be paid a monthly fee by CMS in addition to the Medicare fees they already receive. “We know when doctors have time to spend with their patients and can better coordinate care with specialists, people are healthier and we have lower costs in the health care system,” said CMS Administrator Donald Berwick, MD.

Benefit Mall will continue to keep you apprised of the latest developments as healthcare reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com and www.benefitmall.com.

AHIP Roundtable of State Medicaid Directors Addresses Medicaid and Financing Concerns

Mon, 07 Nov 2011 00:00:00 -0600

The resounding cry of three state Medicaid directors at a recent roundtable focused on concerns related to the financing of state Medicaid and welfare programs. The directors participated in panel discussion held during the American Health Insurance Plan’s (AHIP) annual Medicaid Conference in Washington, D.C.

The session was moderated by Matt Salo, Executive Director of the National Association of Medicaid Directors. Co-panelists included: Gary D. Alexander, JD, Secretary, Department of Public Welfare, Commonwealth of Pennsylvania, with a $2.1 billion dollar Medicaid budget; Darin J. Gordon, Director And Deputy Commissioner, Department of Finance and Administration, TennCare Bureau, with a $8.5 billion dollar Medicaid budget; and Jason A. Helgerson, MPP, Medicaid Director, Deputy Commissioner Of the Office of Health Insurance Programs, New York State Department of Health, with a $53 billion dollar Medicaid budget.

Salo kicked-off the session stressing how “enormous” and “challenging” current financial challenges and budget shortfalls are for state governments. With the rapid expansion of Medicaid right around the corner due to the Patient Protection and Affordable Care Act (PPACA), he noted that states are going to have to rethink some of the old ways of doing business, including how to determine program eligibility for individuals. Salo also said it will be interesting to witness the impact of the new congressional Deficit Reduction Committee in terms of whether the panel will help or hurt states.

Alexander, the Pennsylvania Medicaid Director, purported that we need to be realistic in our approach as state leaders. He said Pennsylvania has added one million beneficiaries over the past 10 years, and the pace cannot be sustained since his “state is pretty much broke.” He hopes that we can fix some of the underlying problems in the health care system before we just throw more money into the system. Among other opportunities, Alexander suggested states consider integrating health and social welfare programs into a more seamless system. He also acknowledged that managed care is likely part of the answer going forward.

Gordon, the Tennessee Medicaid Director, echoed the frustration with state budget limitations. He observed that TennCare has been busy making program reductions over the past five years. Furthermore, his state is re-integrating some of the carve-outs that were implemented in the past such as pharmacy and behavioral health benefits. Gordon also said we need to address the “dual eligible” coordination challenge, and program eligibility in general, so individuals are not bounced around from one program to the next. He also is a fan of the benefits his state has derived from managed care.

Helgerson, the New York Medicaid director, observed that New York spends more per recipient than other states, but gets “middle of the road quality.” With so much at stake in terms of the scope of the program covering about five million New Yorkers and the huge dollars, a Medicaid redesign team has been able to come up with about 79 recommendations to improve the system and save about $2.3 billion. Key changes include establishing a global Medicaid funding cap and promoting coordinated care. The state is now moving into phase II of its redesign efforts. About 10 workgroups are now meeting to address such issues as health disparities, the cost of malpractice coverage and other key issues with the hope of reducing costs another $4 billion.

Although these Medicaid directors work in states with different political climates and geographic locations, they appear to agree on most issues and strategies going forward. Core themes include the need to control costs, partner with the private sector, allow the federal government to do its part but not over-step its authority, establish clear Medicaid program eligibility criteria and address transitions of care, rely on innovative and successful managed care strategies, and promote an integrated system of care whenever possible.

Brokers and their clients need to keep apprised of the scope and breadth of the Medicaid programs in their respective states – and possible changes in the works due to PPACA. AHIP’s roundtable discussion highlighted some of the key challenges and opportunities Medicaid directors are facing in today’s climate.

BenefitMall will continue to keep you apprised of the latest developments as healthcare reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.benefitmall.com.

HHS Unveils New Rules that Allow Patients Direct Access to Lab Results

Thu, 03 Nov 2011 00:00:00 -0500

Recently, the U.S. Department of Health and Human Services (HHS) announced a new initiative to give patients better access to their health information through the use of health information technology (IT). The proposed rules, published by HHS Secretary Kathleen Sebelius, expand the rights of patients to access their health information by using IT. Most notably, the new rules will give patients access to their test results directly from labs.

Sebelius made the announcement at the inaugural HHS Consumer Health IT Summit in Washington, D.C. She noted, “When it comes to health care, information is power. When patients have their lab results, they are more likely to ask the right questions, make better decisions and receive better care.”

As noted in an HHS fact sheet, labs today can only release test results to the patient if the provider directly authorizes the laboratory to do so at the time the test is ordered, or if state law expressly allows it. Currently, 26 states lack laws that authorize disclosure of results directly to patients and 13 states prohibit direct disclosure to patients. Under the proposed rule, patients could request and receive their test results directly from laboratories.[1]

The proposed changes to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) were a joint effort between the Centers for Medicare & Medicaid Service (CMS), the HHS office for Civil Rights (OCR), and the Centers for Disease Control and Prevention (CDC) in an attempt to give patients more rights in relation to accessing the results of their own lab tests. Patients will now be able to receive the results of their tests directly from labs that are covered by the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

According to the HHS proposal, “The CMS Online Survey, Certification, and Reporting (OSCAR) database indicates that there are a total of 22,671 laboratories which provide approximately 6.1 billion tests annually in the 39 States and territories impacted by this rule…If the proposals contained in this rule are finalized, the majority of the 22,671 laboratories will need to develop processes and procedures to provide direct patient access to test reports.”[2]

“As technology improves more aspects of our daily lives, it makes sense to marry cutting-edge technology with our medical and personal health records so that we can improve the quality and efficiency of the care that people receive,” said National Coordinator of Health Information Technology, Farzad Mostashari, MD, ScM, in the HHS statement. In regard to health IT, there is now a strategic plan in place that outlines the details of the plan to empower consumers over the next five years.

“Consumers need to know that private and secure access to their health information is a given,” Sebelius said. “The privacy and security of health data will be a top priority for OCR during my tenure.”

The new rules are open for public comment. However, comments must be received no later than 60 days after date of publication in the Federal Register. For more information, visit http://www.regulations.gov.

[1] http://www.cms.gov/apps/media/press/factsheet.asp

[2] http://www.ofr.gov/(X(1)S(cp53mc3sjd3cbdfu4r32fhcj))/OFRUpload/OFRData/2011-23525_PI.pdf

Obama Pulls PPACA's Long-Term Care Insurance Program

Fri, 28 Oct 2011 00:00:00 -0500

Last week, the U.S. Department of Health and Human Services (HHS) announced that the Obama Administration would not be implementing the long-term care insurance plan included in the Patient Protection and Affordable Care Act (PPACA).

The Administration, finally agreed with a growing number of critics, that the Community Living Assistance Services and Supports (CLASS) program was inherently flawed due to its design, and the Obama Administration was unable to come up with a solution that would make the program financially self-sufficient. Rumors have been surfacing for several weeks that the beleaguered program might be cancelled, as evidenced by the Hill’s healthcare blog.

According to a recent article, “By scrapping the CLASS Act, HHS is losing about 40 percent of the savings health care reform was supposed to generate. The Congressional Budget Office’s most recent estimates projected $210 billion in total deficit reduction from the health care law, $86 billion of which would have come from CLASS.”

U.S. Senator Orrin Hatch (R-UT), ranking member of the Senate Finance Committee, stated, “This announcement is a canary in a coal mine. The CLASS Act's budget gimmicks, which secured its inclusion in the $2.6 trillion health law, have finally been exposed as a program that was deeply flawed and unsustainable. Today’s abandonment of the program is just the latest evidence demonstrating ObamaCare's devastating effects and ill-conceived policies.”

HHS Secretary Kathleen Sebelius blogged, “The idea behind CLASS, which was championed by the late Senator Edward M. Kennedy, is simple: workers could sign up and pay a monthly premium, and in return, they would be eligible after a number of years for a daily benefit administered by our department that could help pay for long-term care services should they become necessary.”

While Medicare only covers short-term assisted living stays, to be eligible for Medicaid, a person basically has to use up the majority of their own assets to qualify for long-term care coverage; CLASS was initially incorporated into the PPACA as a solution to long-term care insurance challenge.

In theory, CLASS would have been a solution to a tremendous burden that rests on the shoulders of many Americans. Unfortunately, the program lacked the ability to financially be self-sustaining. In her letter to Congress, Secretary Sebelius noted that HHS did everything it could to find a working solution to the problem of long-term care, but “despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.”

Many public policy and economic experts are now asserting that Congress knew from the “get go” that CLASS was not a financially viable program as highlighted by one recent analysis:

Richard Foster, Medicare’s chief actuary wrote an email to a number of Health and Human Services staffers who were, according to the AP, working with Congress to ensure that CLASS was included in the final health care legislation. He offered a quick take on the program, but the message was clear: “This proposal doesn't look workable," Foster wrote. A few months later, in October 2009, a senior Obama administration official on aging policy ran the numbers and reported to Congressional Democrats that CLASS “seems like a recipe for disaster.”

Apparently, many supporters of PPACA were more interested in showing the “theoretical” savings from CLASS to help justify some of the other costs of PPACA. Clearly, the move by HHS last week demonstrates that this plan backfired.

On a legal note, CLASS has been cancelled by HHS asking Congress to defund the program. However, it is still on the books; and at some point, Congress should address the operational challenges associated with long term care coverage, in part by formally repealing CLASS and then hopefully coming up with one or more new programs that can legitimately address the long-term care coverage needs of U.S. citizens.

It also will be interesting to see the echo effect of CLASS’ downfall on other financially questionable aspects of current and future federal health care reform efforts. I think that is fair to say that more change will be coming in terms of how PPACA is finally implemented. Stay tuned.

Institute of Medicine Releases Report on Essential Health Benefits: Concerns Remain about Establishing Accurate Baseline Premium Assumptions

Wed, 19 Oct 2011 00:00:00 -0500

One of the hallmarks of federal health care reform efforts is to provide standardized insurance coverage to small employer groups and individuals through state-based exchanges when federal subsidizes are warranted. Yet, concerns have grown over the past year about the emerging price tag associated with some of the mandates issued pursuant to the Patient Protection and Affordable Care Act (PPACA).

On October 6, the Institute of Medicine (IOM) released a report advising the U.S. Department of Health and Human Services (HHS) on the process to establish “Essential Health Benefit” (EHB) coverage pursuant to PPACA. Reception to the IOM report has been mostly positive due to the balanced and detailed approach it takes in providing general guidance to HHS on the criteria and methods that should be used in establishing the recommended EHB package.

Establishing Valid Premium Assumptions

A key element to ensure that the EHB package is effective, both at the national and regional levels, is to make sure that the standardized benefit levels are balanced with the need to finance and pay for the new insurance policies. The importance of benefit design and cost is highlighted directly in the IOM report:

“(H)ealth insurance premiums are determined by a number of factors including the population covered by a plan, the expansiveness of coverage, the benefit design, and underlying medical and insurance prices depending on the competitiveness of the local market. Based on available data, small and large employers offering insurance, on average, are paying similar premiums; yet small employers would appear to have more limits on coverage. For example, employees of smaller firms are paying higher deductibles. Thus, benefit design considerations have been an important factor in what coverage is available to small-size firms and at what price.”

Unfortunately, some concerns exist about what actuarial assumptions the federal government will rely on when determining the premium baseline costs for small group and individual coverage that will be offered through the state-based exchanges. The IOM report skirts around what the average national premium amounts are today, mainly because the IOM Committee has just published an initial set of recommendations for HHS to consider.

At one point in the report, the IOM Committee does reference some specific premium averages when discussing the differences in premium rates between nongroup, small group and large group markets:

“Data on 2009 private sector premiums do not show much difference in premiums for individual policies ($4,652 for small firms under 50 versus $4,674 for larger firms), and for a family of four, larger firms pay more ($12,041 for small firms, and $13,210 for large).”

The IOM report also refers to a 2009 Congressional Budget Office (CBO) study which estimates that the average premiums both before and after the implementation of PPACA is about $17,000 annually (based on 2014 dollars) for family-based, small group coverage.[1]

As referenced above, some health insurance experts are raising a yellow flag relating to how the baseline actuarial premium assumptions will be established due the wide variety of premium costs in different markets today. For example when comparing the IOM and CBO premium averages of $12,041 or $17,000 for small group family coverage above with several markets that BenefitMall supports, we see some big differences. Average premium costs sold through BenefitMall’s broker network for small groups (between 10 to 50 lives) ranged from $5,067 to $13,725. In fact, only one of more than dozen states BenefitMall operates in exceeded as outlined by the IOM and COB analysis.

Over-all, BenefitMall’s statistics, generated from its database covering about 2 million Americans, show a much lower cost than the two examples referenced in the IOM report. This clearly highlights how variables such as geographic variations, benefit designs, and underwriting procedures can impact what the “average” premium actually is. If the federal government ends up calculating and then using a bloated “national average premium” assumption to establish the baseline, unexpected market disruptions could incur for the small group and individual insurance markets.

IOM Report Background

These types of potential discrepancies also raise concerns about whether HHS can successfully balance the twin goals of providing both affordable and comprehensive coverage based upon the current recommendations, as touted in the IOM press release headline.

John Ball, who served as the IOM Committee chair, says the IOM report “offers guidance for developing a package of essential health benefits that will achieve two equally important goals: to provide coverage for a range of Americans' health needs and to ensure the affordability of coverage, particularly for small employers and individuals who must buy their own insurance."

IOM notes further that the “essential health benefits package will be available through a variety of health insurance policies with an array of choices in premiums, deductibles, and provider networks. Services or products excluded from the package could still be added to plans at an insurer's discretion -- for example, as a way to make its plans more attractive and competitive - but consumers may have to bear additional costs for these extra benefits just as they do now.” The IOM Committee members also acknowledge that some leeway can be afforded to the states in coming up with EHB alternatives as long as the spirit of PPACA is not compromised.

“With this thoughtful report, the IOM is urging policymakers to strike a balance between the affordability of coverage and the comprehensiveness of coverage,” AHIP President and CEO Karen Ignagni said in a news release. “We agree that this balance is critical to ensuring that individuals, working families and small employers can afford health insurance. The recommendation that the essential EHB package reflect the scope of benefits and design provided under a typical small employer plan is an important step toward maintaining affordability.”

When implementing the standardized EHB coverage options, the IOM Committee recommends that HHS:

Establish a benchmark of seventy percent (70%) of the anticipated national average premium of a typical small employer plan in 2014 to determine which benefits to include in the mandated essential health benefits;
Consider the estimated national average premium of a typical small employer health benefit plan to determine future EHBs;
Complete the list of EHBs by May 2012 in order to give state health insurance exchanges and health insurers sufficient time to be ready for the open enrollments period for the benefit year 2014; and
Establish a National Benefits Advisory Council to evaluate future amendments to the EHB.

Balancing Coverage Levels with Cost

Some consumer advocates are disappointed in the report’s recommendation to link the EHB content to an anticipated cost of seventy percent (70%) of the average small employer benefit plan. They were hoping for a more generous coverage package even though it might cost more.

However, the IOM took a more pragmatic approach to the situation. The conclusion of the IOM report states:

A tradeoff exists between the inclusiveness of benefits, the cost of the insurance product for the consumer, and the sustainability of subsidies for the taxpayer. If the appropriate balance between comprehensiveness and affordability is not attained, there are tangible repercussions:

If the benefits are not affordable, fewer people will get adequate coverage.
If the benefit design puts excessive impediments to access, people will not get the care they need.
If health care spending continues to rise disproportionately to GDP, the EHB could end up being substantially cut.

The IOM Committee suggests that “any determination of scope of the benefit package should be thought about within the context of national, state, and consumer budget constraints and public examination of priorities.”

Additional Information

For additional information about the IOM report:

[1] See IOM Report, Table 5-3 at http://www.nap.edu/catalog.php?record_id=13234

U.S. Supreme Court Likely to Review Legality of PPACA

Fri, 07 Oct 2011 00:00:00 -0500

Sometime next year, it is highly probable the U.S. Supreme Court will decide whether the federal government can force people to buy health insurance or pay a fine.

In addition to the landmark impact this ruling will have on the health care industry specifically, it also could sway the outcome of the 2012 elections -- from the Oval Office to other key legislative positions around the country. No matter what, the stakes are high. Even if the issue escapes scrutiny by the Supreme Court in 2012, it’s possible that when the Justices do address the merits of the case that a Republican administration will be in the White House – along with a Justice Department that no longer will defend the Patient Protection and Affordable Care Act (PPACA).

When Congress passed PPACA last year, it authorized a financial penalty for individuals that do not purchase health insurance starting in 2014. The individual mandate to purchase insurance has created a stir in many camps, both by those who support the mandate (typically Democrats) and those who oppose (typically Republicans).

The pivotal issue banks on whether Congress has authority pursuant to the Commerce Clause in the Constitution to impose the mandate. The Supreme Court historically has given Congress an extensive amount of power to regulate economic activity under this clause. At the heart of the matter is the question of whether the “in-action” of buying health insurance impacts interstate commerce. The previous case law cited in the legal opinions thus far is open to a wide-array of judicial interpretations.

To date, federal appellate courts have been split on this constitutional question. A Sixth Circuit appellate panel held that the mandate was constitutional, the 11th Circuit appellate panel found it unconstitutional, and the Fourth Circuit appellate panel dismissed challenges on procedural grounds.

Competing Precedents

As a general legal principle, the U.S. Supreme Court has ruled that individuals who don't engage in economic activity, but have an effect on interstate commerce, can be regulated pursuant to the Commerce Clause. In Wickard v. Filburn (1942), the Court held that Congress had the authority to regulate a farmer who grew wheat for his family’s consumption and didn't put wheat into the stream of commerce at all. The court determined that the farmer would have purchased wheat if he hadn't grown his own wheat. As such, his actions had an impact on the interstate wheat market. In Gonzales v. Raich (2005), the Supreme Court determined that Congress could prohibit individuals from growing medicinal marijuana for their own personal use because their actions had an impact on the interstate and illicit market for marijuana.

On the other hand, the U.S. Supreme Court ruled in The United States v. Lopez (1995) that the Constitution does not give the federal government unlimited powers. Although the Supreme Court’s New Deal precedents expanded Congress’s commerce power, the Lopez Court recognized that “this power is subject to outer limits.”

While it may seem the Wickard and Gonzales cases are similar in support of mandating the individual purchase of health insurance, opponents of the PPACA mandate maintain that there are two major distinctions between these cases and the PPACA individual mandate. The wheat farmer and the marijuana growers engage in current activity: growing wheat or marijuana. By enforcing individuals to purchase health insurance because ‘the lack of individual health insurance’ can cause a potential future impact on interstate commerce, Congress is attempting to regulate not only inactivity, but future inactivity. Americans would be subject to the individual mandate by their mere existence as a U.S. citizen. Congress wouldn't be regulating commerce; it would be attempting to create future commerce. The implications of this legal precedent would be significant.

Challenges to Predicting the Outcome

It’s hard to predict how the nine members of the U.S. Supreme Court will vote on these issues. This case is more difficult than usual. Conventional wisdom holds that the Supreme Court is split between four liberal justices and four conservative justices with Justice Kennedy holding the deciding vote. However, there are several tangential issues that can impact the vote.

The four democrat-appointed justices would appear to be solid votes to uphold the individual mandate. Justice Thomas appears to be a clear vote in favor of declaring the individual mandate unconstitutional. Each of the remaining four republican justices has supported opinions on the Commerce Clause cited by both the proponents and opponents of the individual mandate. Early on, the conventional wisdom was that the Supreme Court would uphold the individual mandate. As the debates have developed, the opponents have gained some traction. At this point, PPACA proponents are predicting that the Supreme Court will uphold the constitutionality of the individual mandate; and PPACA opponents hold the opposite opinion. At this point, it is difficult to pick a winner.

The issue of the lack of a Severability Clause is even more obtuse. A severability clause is part of the general boilerplate of legislation. It provides that if any clause in an act is declared unconstitutional, the rest of the legislation remains in force. The House version of PPACA had a severability clause. The Senate version that was ultimately passed into law has no severability clause. In the last minute haste to pass PPACA, a severability clause was inadvertently dropped in the drafting process. In a Florida case, Justice Vinson held that the individual mandate provision is unconstitutional and the lack of a severability clause in PPACA rendered the entire PPACA unconstitutional. While the three-judge panel of the 11th Circuit Appellate Court concurred with Judge Vinson’s opinion on the unconstitutionality of the individual mandate, it rejected his opinion on the unconstitutionality of the severability clause.

There is considerable speculation about the timing of these cases. The Supreme Court may decide to hear these cases next year and issue an opinion by its usual June break. This would make the decision a central part of the 2012 election. The Court could defer its decisions until it resumes work in October and not issue an opinion until after the November 2012 elections.

We have written extensively on each of the court findings on the individual mandate. You can go here for further information on those cases.

We will continue to endeavor to keep you up to date on these and other developments in our ever- evolving marketplace. Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.BenefitMall.com to view past Legislative Alerts.

Another Federal District Court Rules Against PPACA: Mandate to Purchase Health Insurance Deemed Unconstitutional

Tue, 04 Oct 2011 00:00:00 -0500

Recently, Judge Christopher Conner of the U.S. Court of the Middle District of Pennsylvania ruled in the case of Goudy-Bachman v. United States Department of Health and Human Services, No. 1:10-CV-763. Connor declared that the mandate in the Patient Protection and Affordable Care Act (PPACA) that requires individuals to purchase health insurance is unconstitutional. For a copy of the court ruling, click here.

"The nation undoubtedly faces a health care crisis,” Judge Connor notes in the 52-page opinion. “Scores of individuals are uninsured and the costs to all citizens are measurable and significant. The federal government, however, is one of limited enumerated powers, and Congress' efforts to remedy the ailing health care and health insurance markets must fit squarely within the boundaries of those powers."

Connor further asserts that although PPACA’s individual mandate requiring Americans to “buy insurance as a condition of lawful citizenship or residency” is an unprecedented use of power in relation to the Commerce Clause, it was not the sole basis for finding the individual mandate unconstitutional.

More specifically, Judge Conner also determined that the individual mandate attempts to regulate those who have yet to, and whom may never participate in the health care market, and therefore does not meet the litmus test of falling on the Commerce Clause. Until an individual obtains health care services and fails to pay for them, according to Judge Conner, that person's status has no effect on interstate commerce. As such, Congress exceeded its constitutional authority in attempting to force those persons to purchase health insurance.

“The power to regulate interstate commerce does not subsume the power to dictate a lifetime financial commitment to health insurance coverage,” he notes.

He rejected the federal government’s positions, who are the defendants in the case that the individual mandate to purchase health insurance should be allowed due to the uniqueness of the health care market. Connor referenced the plaintiff’s assertion that every market is unique in one way or another. He rejected the government’s argument that the individual mandate was necessary to enforce a larger regulatory scheme, and upheld that the purchase of insurance required by the individual mandate did not overly burden or obstruct Congress' ability to enforce regulation of the health insurance industry.

In addition, Judge Connor rejected the plaintiff’s request that the absence of a severability clause should render the entire act unconstitutional. When PPACA was being drafted, a severability clause was dropped from the document just moments prior to the passage. Without a severability provision, an entire bill or law can be struck down if only one section is found to be illegal or unconstitutional. However, he ruled, “Given the breadth of (PPACA) and the numerous provisions unrelated to the minimum coverage provision, and in light of Congress’s overarching intent to mend the ailing health care services market, the court will exercise caution and sever only the problematic portions while leaving the remainder intact”.

Attorneys for the plaintiffs have not stated whether the case will be appealed.

To date, three federal appeals courts have reviewed PPACA. One in Atlanta voted down the individual mandate, one in Cincinnati upheld it, and one in Richmond, VA, let it stand by rejecting challenges on grounds that the plaintiffs had no standing to bring the action to court. If the plaintiff in this case appeals, the case will be heard in Philadelphia by the Third Circuit Court of Appeals.

Judge Connor was appointed to the bench in 2002 by President Bush. Every federal judge appointed by a Republican president who has considered these cases has found the individual mandate clause to be unconstitutional. All of the federal judges appointed by a Democrat president have found the individual mandate to be within the powers enumerated in the Commerce Clause, except one who found it to be unconstitutional. Many judicial experts are wondering if there is some bias that is creeping into these decisions based upon partisan grounds, or more broadly based upon judge’s global views about society and the law.

Since there are now conflicting rulings in different districts, the U.S. Supreme Court will have to consider the issues. This will need to be done prior to the presidential election taking place on November 6^th, 2012.

For background on previous court rulings, check the previous posts by BenefitMall:

Florida Federal Court Rules Against Legality of PPACA (Feb 2, 2011) at http://www.benefitmall.com/News-and-Events/Legislative-Updates/Florida-Federal-Court-Rules-against-Legality-of-PPACA
PPACA Constitutionality Upheld by Third District Court (March 3, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-constitutionality-upheld-third-district-court
Eleventh Circuit Court of Appeals Hear Vinson Case that Declared PPACA Unconstitutional (March 15, 2011) at http://www.benefitmall.com/News-and-Events/Industry-Insights/Eleventh-Circuit-Court-of-Appeals-to-Hear-Vinson-Case-that-Declared-PPACA-Unconstitutional
U.S. Supreme Court Refuses to Expedite Virginia Case Challenging PPACA; Florida Case Heats Up as DOJ Appeals Unconstitutionality Ruling (April 29, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-legal-update District Appellate Court Upholds Mandate to Purchase Health Insurance (July 18, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/district-appellate-court-upholds-mandate-purchase-health-insurance
Eleventh Circuit Court of Appeals Rules PPACA's Mandate to Buy Health Insurance Unconstitutional: Decision Leads to a Split in Federal Appellate Courts (August 24, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/eleventh-circuit-court-appeals-rules-ppacas-mandate-buy-health-insurance-unconsti
Fourth Circuit Appellate Court Dismisses Two Lower Court Cases Challenging PPACA’s Constitutionality: But rulings do not address the merits of the legal challenges including the individual mandate (September 9, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/fourth-circuit-appellate-court-dismisses-two-lower-court-cases-challenging-ppaca%E2%80%99

PPACA Implementation Continues: Experts Assess Impact on Employer-Sponsored Insurance Coverage

Fri, 23 Sep 2011 00:00:00 -0500

In a recent post, we discussed how challenging it can be for consumers to grasp the many changes to health insurance under the Patient Protection and Affordable Care Act (PPACA). Employers also face many of the same challenges, but with the added mandate to comply with new federal and state requirements as an outgrowth of health care reform initiatives being implemented in a struggling U.S. economy.

Some of the key questions public policymakers are asking include:

How will employers react to the new PPACA reforms?
Will employers drop health care for their employees entirely?
Will businesses opt to shift costs back to their employees by increasing co-pays or deductibles?

A number of interesting surveys have been published in recent weeks that might shed some light on these questions. This blog showcases some of the findings.

Towers Watson Survey

Highlights from a recent Towers Watson survey of 386 midsize companies found a number of interesting predictions and trends for next year. Here are several highlights about employer attitudes:[i]

Premium increases predicted to slow just a bit. Employer health care costs will rise at a lower rate during 2012 compared with 2011 (5.9% versus 7.6%, respectively).
Focus on cost control. Eighty-eight percent of employers plan to control costs and avoid the impact of health care reform's excise tax. Next year, nearly 45% indicate they will rethink their long-term health care strategy.
Most Employers will continue to offer coverage. Seventy-one percentage of responding companies say they plan to provide health care coverage to their employees through 2014. Among the remaining 29%, most are unsure about whether they will continue sponsorship or offset the loss of health care benefits (if they exit) with an equivalent salary increase.
Skeptical of exchange success. A majority of employers (53%) are confident health care reform will be implemented within the anticipated timeline, but 70% are skeptical that health insurance exchanges will provide a viable alternative to employer-sponsored coverage for active employees in 2014 or 2015.
Grandfather status to fade. Seven out of 10 employers expect to lose grandfathered status by 2012.
More employee responsibility for health. More than half (57%) of employers are considering rewarding or penalizing their employees based on biometric outcomes (versus 8% today).
Social media on the rise to support wellness. More than four in 10 (44%) of employers are considering using social media tools to impact employee health and well-being (versus 14% today), and 26% are considering supporting employee health management with the use of online games (versus 9% today).

NBGH Survey

According to a National Business Group on Health survey, “…large U.S. employers are planning to have workers share more of the cost next year.” The survey, based on responses from 83 of the nation's largest corporations, was conducted in June 2011. A number of survey highlights include:[ii]

Premium increases will continue. Employers estimate their health care benefit costs will increase an average of 7.2% in 2012, slightly lower than this year's estimated 7.4% average increase. However, the increase in 2012 is based upon a higher basis than past years and will likely outpace any gains from the sluggish economy.
Employees to share more costs. To help control those increases, employers are planning to use a wider variety of cost-sharing strategies. More than half of respondents plan to increase the percentage that employees contribute to the premiums. Further, 39% plan to increase in-network deductibles, nearly one-fourth of employers (23%) plan to increase out-of-network deductibles, and just over one-fifth (22%) plan on increasing out-of-pocket maximums next year.
Consumer-directed health plans becoming more prevalent. Nearly three in four employers (73%) will offer employees at least one consumer-directed health plan (CDHP) in 2012, a sharp increase from 61% that offer a plan this year, according to the research. In addition, 17% of employers will have or move to a total replacement consumer-directed health plan in 2012. The most common type of CDHP plan is a high-deductible health plan with a health savings account (75%).
Grandfather status update. Nearly one fourth (23%) will have at least one benefit option that keeps its grandfather status in 2012, while 19% will drop its grandfather status. About one half (49%) did not have any benefit option in grandfather status this year.

Shifting Risk to Employees

In an August 24 Health Affairs Blog, authors Brennan and Lee assert that “the most striking changes will occur in the locus of risk for poor health. For the past 40 years,” they state, “much of that has been held by the insurers, employer and the government acting as insurer. Every sign today is that risk will begin to move to consumers, and to providers, the latter in the form of what is today called an accountable care organization. Health reform appears to be speeding the migration of risk.”

Although some pundits doubt that one or more sentinel events are on the horizon, Brennan and Lee argue that the current era of reform is different than that of the 1990s for several reasons: The authors note:

“…for the first time in the United States, comprehensive federal reform of the health care system has occurred. PPACA intends to improve health care access for nearly 50 million uninsured people, while introducing a variety of reforms to reduce costs and improve quality — an extraordinary set of goals. It is ambitious in scope and will affect nearly every area of health care, in particular limiting insurer prerogative and pushing providers toward new reimbursement schemes.”

As for cost shifting, Brennan and Lee state, “…PPACA’s endorsement of, and focus on, accountable care organizations is an effort to move half or more of the risk for the quality and costs of health care to providers.” The other potential risk bearer is the individual patient, according to the blog, who would be encouraged to have “more skin in the game” by having higher deductibles, copayments, and co-insurance requirements, and thereby make more cost-effective decisions about health care.

The authors conclude that “substantial change is inevitable in our health care system, given that we just cannot afford our current system of care.” This will include employers, too, in how they view, support, and pay for health insurance. Clearly, employers will be asking employees to step-up to the plate.

[i] Towers Watson, 2011 Towers Watson Health Care Trend Survey, August 24, 2011, http://www.towerswatson.com/united-states/press/5328

[ii] National Business Group on Health Survey, August 18, 2011, http://www.wbgh.org/pressrelease.cfm?ID=179

PPACA’s Public Relations Challenge & Opportunity: Keeping Consumers Informed

Mon, 19 Sep 2011 00:00:00 -0500

When Congress was considering the Patient Protection and Affordable Care Act (PPACA) in the spring of 2010, then House Speaker Nancy Pelosi (D-CA) made this now-famous statement: “But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy."[1] Although many poked fun at Pelosi’s gaffe at the time, the reality is that she was right. We are still finding out what is in PPACA, even 18 months after its passage. Above all, the on-going regulatory process has perpetuated this journey.

A key challenge facing the White House and U.S. Department of Health and Human Services (HHS) is that many people who would potentially benefit from PPACA’s future entitlements do not understand the details of the legislation or the emerging overlay of regulatory guidance. This confusion is documented in a recent August 2011 poll released by the Henry J. Kaiser Family Foundation. The researchers note:

Despite the fact that (PPACA) is expected to expand coverage to 32 million of the uninsured, only half of those currently without coverage report being aware of the key components of the law designed to achieve this goal: the expansion of the Medicaid program and subsidies for low and middle income Americans without insurance. Perhaps tied to this lack of awareness, almost half of the uninsured expect the (PPACA) will have little impact on them personally, and just three in ten believe the new law will help them get health care. Among Americans as a whole, views on the (PPACA) remain roughly divided, as they have for most of the past year.

At first blush, these findings are surprising given the amount of press this issue has generated since Obama first ran for President and announced that health care reform was a major element of his election platform.

One primary driver of the public’s lack of understanding is the massive complexity of PPACA. For example, PPACA is directly or indirectly impacting about 17% of the U.S. economy. It also impacts many, many business and provider systems, which literally are dealing with life and death issues every waking hour with significant financial repercussions. Further, tens of thousands of pages of regulations are being drafted by HHS and other federal agencies to implement PPACA. It is simply overwhelming.

Behind-the-scenes deal making and negotiations on Capitol Hill prior to passage also added layers of detail and complexity to PPACA. For example, several waiver programs were embedded in the legislation to keep the peace and garner key political votes. Additionally, the Obama Administration’s attention has been diverted by the performance of the economy and the concurrent levels of unemployment. Another key factor is that many of the most comprehensive provisions of PPACA will not take effect until 2014 -- so many details still need to be worked out.

With all the ambiguity surrounding PPACA, many Americans support its repeal as documented by a number of polls since the law was first signed by the President. Some consumer advocates also have voiced concerns that some individuals are anticipating certain benefits or financial subsidies that might not crystallize.

The dynamic nature of PPACA precludes the use of simple sound bites by its supporters who need to generate a higher level of acceptance than the current polls reflect. No matter what happens in the coming months and years, re-evaluating the key elements of the new law and setting the right expectations for the different stakeholder groups and individuals will continue to be a priority to ensure an optimal outcome – not matter how much PPACA is modified or enhanced.

[1] From Speaker Pelosi's remarks at the 2010 Legislative Conference for National Association of Counties. See http://www.usnews.com/opinion/blogs/peter-roff/2010/03/09/pelosi-pass-health-reform-so-you-can-find-out-whats-in-it

CMS Head Touts the Need for a Comprehensive Strategy to Support Medicare: Calls for Partnership with the Private Sector

Tue, 13 Sep 2011 00:00:00 -0500

In a keynote address delivered at the American Health Insurance Plan’s (AHIP) annual Medicare Conference on September 12, Donald M. Berwick, MD, administrator for the Centers for Medicare & Medicaid Services (CMS), addressed a number of issues associated with the long-term financial health of the Medicare Program.[1]

His 45-minute speech centered on the need to address the rising costs required to fund the federal program supporting American seniors and a few special populations. In a humorous moment, Dr. Berwick noted that he just celebrated a big birthday last week and is now eligible to become a Medicare beneficiary himself, which has added some urgency to the matter.

On a more serious note, Dr. Berwick observed that there are two ways two deal with the expense side of the equation. First, the “easy way” is to just cut Medicare benefits or payments to providers. He noted that this is fairly straight-forward and can happen quickly. However, from a public policy perspective, he does not recommend it.

Rather, Dr. Berwick suggested that a “better way” is to focus on “improving care” in a comprehensive and systematic manner. He asserted that a primary strategic goal of CMS is to provide better care, improve health, and reduce costs through an integrated approach. He elaborated that this requires leveraging the strengths of both public and private sectors in a collaborative fashion. CMS has the size to implement change and can scale new ideas fairly quickly. Private health plans have maneuverability and the ability to innovate quickly. He hopes that in a “shared learning” environment, better outcomes can be achieved all the way around.

Dr. Berwick said that “waste” also must be removed from the U.S. health care system. This includes eliminating activities that do not add value to the Medicare Program. He cited a number of non-value based activities including: 1) failure to coordinate care; 2) deficiencies in maintaining appropriate care processes which can create unnecessary delays and complications; 3) patterns of overtreatment; 4) excessive administrative costs; 5) problems associated with health care pricing; and 6) those few bad actors that perpetuate fraud and abuse in the system.

In terms of health care reform and response to a question from the audience, he commented that the accountable care organizations (ACOs) are not a cure-all but do hold some promise to improve care for Medicare beneficiaries. He also stressed the need for all stakeholders to become involved in improving the Medicare Program.

Dr. Berwick’s comments were well received by the health plan audience. For someone immersed in a very political position, he appears genuinely open to hearing and discussing new ideas. That being said, the federal government is implementing significant changes to the U.S. health care system in hyper-speed. Therefore, it is important that the industry keep intact strong communication links with key policymakers like Berwick to provide feedback.

Brokers and their clients also need to keep apprised on these developments because of the echo effect that CMS has. Without a doubt, the Medicare Program does influence private sector offerings, and arguably health plans should be influencing CMS policy. Let’s hope that this synergistic relationship is appropriately balanced going forward.

[1] A BenefitMall representative attended the AHIP conference and provided the background for this blog.

CMS Launches Quality Health Care Compare Tool for Consumers

Mon, 12 Sep 2011 00:00:00 -0500

As a follow-up to our previous blog on the Hospital Value-Based Purchasing Program, the Centers for Medicare and Medicaid Services (CMS) has launched a more expansive tool to help consumers compare quality for a number of different provider types.

On August 5, CMS announced a new quality “compare” finder tool embedded in a web portal, so consumers can easily assess information about the quality of care and services of health care providers. The new portal is geared to Medicare beneficiaries, but can be used by anyone, and provides helpful information about providers by specialty or by different types of facilities.

“These tools are new ways CMS is making sure consumers have information about health care quality and important information they need to make the best decisions about where to receive high-quality care,” said Dr. Don Berwick, CMS administrator, in a CMS statement . “These efforts are designed to also encourage providers to deliver safe, patient-centered care that consumers can rely on and will motivate improvement across our health care system.”

CMS also has updated its Hospital Compare website to include surgical infections as well as indicators regarding the extent to which hospitals protect their outpatients from infection. Other highlights include whether hospitals use proven therapies that reduce the risk of death on outpatients treated for suspected heart attacks.

“CMS wants consumers to have online tools available so they can act on information about where to receive high-quality care,” said Dr. Berwick. “These efforts are designed to also encourage providers to deliver safe, patient centered care that consumers can rely on and will motivate improvement across our health care system,” he added.

On the Hospital Compare website, CMS also has updated data for outcomes of inpatient hospital care. Today’s update includes new 30-day mortality rates and 30-day readmissions rates for inpatients admitted with heart attack, heart failure, and pneumonia. These rates encompass three full years of claims data (from July 1, 2007 to June 30, 2010), according to CMS.

For example, the national 30-day mortality rates for heart attack have continued to decline this year. The rate has fallen from 16.2% for the 2006 through 2009 period to 15.9% for the more recent 2007 through 2010 time period. Mortality rates for heart failure and pneumonia increased slightly over the same period, showing an increase from 11.2 to 11.3% for heart failure and 11.6 to 11.9% for pneumonia.

At the same time, the national 30-day readmission rates for heart attack, heart failure, and pneumonia showed small changes. The updated results from 2007 to 2010 for heart attack readmissions were slightly lower at 19.8% from 19.9% in the 2006 through 2009 period. On the flip side, rates for heart failure rose 0.3% to 24.8% and pneumonia readmission showed a 0.2% increase reaching 18.4%.

Hospital Compare also includes 10 measures that capture patient experience with hospital care. After two years of reporting these patient experience measures, hospitals have shown modest but meaningful improvement on most experience measures. The degree of this improvement has been relatively uniform across most measures and hospitals.

The website also contains 25 process-of-care measures and three children’s asthma care measures, as well as information about the volume of certain hospital procedures performed and conditions treated for Medicare patients and what Medicare pays for those services.

To learn more about this new tool:

To log into the portal, click here.
To read the CMS press release, click here.

Several other comparison tools are available, including www.healthgrades.com. Many health plans and states offer similar resources. Some are free to consumers and some charge a fee. Another resource of quality related information is the national accreditation organizations such as the Joint Commission, NCQA and URAC. The new CMS tool is offered on a complimentary basis.

As with any quality-ranking system, there are inherent limitations in how accurate and detailed the information is. Brokers and consumers need to use the new CMS “compare” tool as just one resource when making an important health care decision.

Please stay tuned as we continue to keep you up to date on these and other developments in our ever -evolving marketplace. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

Fourth Circuit Appellate Court Dismisses Two Lower Court Cases Challenging PPACA’s Constitutionality: But Rulings Do Not Address the Merits of the Legal Challenges Including the Individual Mandate

Fri, 09 Sep 2011 00:00:00 -0500

On September 8th, a three-judge panel of the 4th Circuit Court of Appeals dismissed two lower court cases challenging the new federal health care reform law.

In the matter of The State of Virginia v Kathleen Sebelius, the three judge panel unanimously dismissed the challenge on the part of the State of Virginia which sought to have the provision in the Patient Protection and Affordable Care Act (PPACA) mandating the purchase of health insurance declared unconstitutional, and as PPACA lacks a severability clause, to have the entire federal law struck down.

In a 33-page opinion, the 4th Circuit Appellate Court held that the State of Virginia lacks sufficient standing to bring the action, as the mandate applies to individual residents and is not a requirement applying to the State of Virginia per se. Many observers predicted that the Appellate Court would only rule on the issue of standing as most of the oral arguments on the case involved who is potentially and directly harmed by the new federal mandates.

In the matter of Liberty University v. Geithner, the same three judge panel held by a two-to- one majority that Liberty University’s constitutional challenge was filed prematurely. Counsel on behalf of Liberty University and on behalf of two of Liberty’s employees argued that the penalties at issue were not a tax, but rather a financial enforcement mechanism for the insurance-purchase mandate. Their lawsuit contested both the financial penalty to be assessed on individuals who do not obtain health insurance by 2014, and a separate financial penalty levied on some employers whose workers got a federal subsidy in order to obtain health insurance.

In the split decision regarding the Liberty lawsuit, the 4th Circuit Appellate Court held that the PPACA’s insurance mandate, enforced with a financial penalty, is a form of federal tax, and the federal Anti-Injunction Act prohibits lawsuits seeking to block enforcement of a tax measure before it goes into effect. This ruling marked the first time that a federal appeals court has ordered an end to a constitutional challenge to the individual mandate based on the provisions of the Anti-Injunction Act. That theory was ignored by the Obama Administration’s Department of Justice when it appealed the case, but the Circuit Appellate Court majority opinion used this argument as the basis for its140-page opinion.

Both 4th Circuit Appellate Court rulings provide some positive news for the White House, but do not provide the Obama Administration with much political advantage, as the three judge panel did not rule on merits of the constitutional challenges in either case.

Furthermore, all three judges on the panel are democrat appointees. Judge Diana Gribbon Motz was nominated to the bench by President Bill Clinton. Judges Andre M. Davis and James A. Wynn Jr. were nominated to the bench by President Barrack Obama.

The 4th Circuit Appellate Court is the third federal appeals court to rule on the constitutionality of the PPACA’s individual mandate to purchase health insurance provision. The 6th and 11th Circuits were divided on the question of the law’s constitutionality. A three-judge panel of the 6th Circuit Court of Appeals in Cincinnati ruled two-to-one in favor of PPACA’s constitutionality. Then the 11th Circuit Court of Appeals in Atlanta ruled two-to-one against the constitutionality of the individual mandate.

Clearly, the 4th Circuit rulings did not break the tie between the 6th and 11th Circuits. Most legal experts predict that PPACA’s legality will be ultimately settled by the United States Supreme Court.

For recent background on previous court rulings, check the previous posts by BenefitMall:

Florida Federal Court Rules Against Legality of PPACA (Feb 2, 2011) at http://www.benefitmall.com/News-and-Events/Legislative-Updates/Florida-Federal-Court-Rules-against-Legality-of-PPACA
PPACA Constitutionality Upheld by Third District Court (March 3, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-constitutionality-upheld-third-district-court
Eleventh Circuit Court of Appeals Hear Vinson Case that Declared PPACA Unconstitutional (March 15, 2011) at http://www.benefitmall.com/News-and-Events/Industry-Insights/Eleventh-Circuit-Court-of-Appeals-to-Hear-Vinson-Case-that-Declared-PPACA-Unconstitutional
U.S. Supreme Court Refuses to Expedite Virginia Case Challenging PPACA; Florida Case Heats Up as DOJ Appeals Unconstitutionality Ruling (April 29, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-legal-update
District Appellate Court Upholds Mandate to Purchase Health Insurance (July 18, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/district-appellate-court-upholds-mandate-purchase-health-insurance
11^th Circuit Court of Appeals Rules PPACA’s Mandate to Buy Health Insurance Unconstitutional (August 24, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/eleventh-circuit-court-appeals-rules-ppacas-mandate-buy-health-insurance-unconsti

Benefit Mall will continue to keep you apprised of the latest developments as health care reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.BenefitMall.com.

HHS Implementing Value-Based Purchasing Initiative for Hospitals

Fri, 09 Sep 2011 00:00:00 -0500

Last spring, the U.S. Department of Health and Human Services (HHS) announced a new initiative aimed at rewarding hospitals for quality of care, safety and affordability. Authorized by the Patient Protection and Accountable Care Act (PPACA), the Hospital Value-Based Purchasing Program marks a significant change in the way Medicare pays health care providers and facilities. The goal of the program, according to an HHS statement, is to pay hospitals for inpatient acute care services based on care quality, not just the quantity of services. Implementation of this program is taking place now through July 2014.

Like most CMS initiatives of this nature, this program also should have an echo effect in the private sector. Therefore brokers, along with Medicare and non-Medicare beneficiaries alike, should be aware of how this program is promoting hospital quality.

This initiative is intended to support the goals of the Partnership for Patients, a public-private partnership that “has the potential over the next three years to save 60,000 lives and save up to $35 billion in U.S. health care costs, including up to $10 billion for Medicare,” according to Healthcare.gov. Further, the www.healthcare.gov site states that over the next ten years, Partnership for Patients could reduce costs to Medicare by about $50 billion and result in billions more in Medicaid savings. However, these proposed savings should be interpreted with a grain of salt based on some of the Obama Administration’s overly optimistic assumptions regarding health care reform in recent years.

In a statement that launched the program, HHS Secretary Kathleen Sebelius said, “Changing the way we pay hospitals will improve the quality of care for seniors and save money for all of us. Under this initiative, Medicare will reward hospitals that provide high-quality care and keep their patients healthy."

An estimated $850 million will be allocated to hospitals based on their overall performance determined by a set of quality measures that have been shown to improve clinical processes of care and patient satisfaction.

Among other goals, the value-based measurement tools are designed to ensure that hospitals:

Provide patients who may have had a heart attack care within 90 minutes;
Provide care within a 24-hour window to surgery patients to prevent blood clots;
Communicate discharge instructions to heart failure patients; and
Maintain clean and safe facilities.

HHS’ formula appears at the onset quite simple – these measures that determine quality focus on how closely hospitals follow best clinical practices and how well hospitals enhance patients’ experiences of care. When hospitals follow these types of proven best practices, patients receive higher quality care and see better outcomes, according to HHS. The better a hospital does on its quality measures, the greater the reward it will receive from Medicare.

On the flip side, analysts and health care experts worry that if “hospitalists aren’t paying attention, they could put themselves at unnecessary risk or lose out on a major opportunity to demonstrate their value,” states Bryn Nelson, writer for The Hospitalist. According to Dr. Patrick Torcson, MD, chair of the Society of Hospital Medicine’s Performance and Standards Committee, folks need to be aware of the core-measures concept, which has been around since 2003 in what’s now called the Hospital Inpatient Quality Reporting (IQR) Program. “We’re not reinventing the wheel; we’re just transforming the program from pay-for-reporting to actual pay-for-performance,” noted Dr. Torcson, who is quoted on Nelson’s article. This is significant, he said, because it marks the beginning of an era of accountability and true pay-for-performance at the hospital level.

The Society of Hospital Medicine supports the program, stating, “We believe that the Medicare reimbursement system must be changed to promote value, and we strongly support policies that link quality measurement to performance-based payment.”

Nelson points out in his story that “other observers, though, have warned of the potential for unintended consequences. If doctors avoid complicated medical cases in order to increase a hospital’s score, for example, are they really improving care? Will poorly performing hospitals get caught in a vicious circle due to declining financial resources?”

The Center for Medicare & Medicaid Services (CMS) plans to add additional measures that focus on improved patient outcomes and prevention of hospital-acquired conditions. Measures that have reached very high compliance scores would likely be replaced, continuing to raise the quality bar.

Here are some resources, if you would like to read up on this new initiative and/or share them with other interested parties:

To learn more about information comparing hospital performance, see CMS’ August 5 fact sheet and check out CMS’s Hospital Compare website at http://www.hospitalcompare.hhs.gov, which can be used to assist beneficiaries and their caregivers in making better choices about their health care.
For a fact sheet on the Hospital Value-Based Purchasing Program, visit www.HealthCare.gov/news/factsheets/valuebasedpurchasing04292011a.html.
To learn more about Hospital Value-based Purchasing or to view the final rule establishing the program, visit www.cms.gov/HospitalQualityInits.

Please stay tuned as we continue to keep you up-to-date on these and other developments in our ever -evolving marketplace. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

Health Care Reform Targets Women’s Preventive Care: HHS Announces New Coverage Requirements

Tue, 06 Sep 2011 00:00:00 -0500

The Obama Administration, through the Patient Protection and Affordable Care Act (PPACA), has initiated another move in its ongoing efforts to improve the nation’s health care system. On August 1, the U.S. Department of Health and Human Services (HHS) announced in a statement that less than a year from now, insurance companies will have to cover several women’s preventive services without requiring co-pays, co-insurance and deductibles. The rules apply to insurance policies with plan years beginning on or after August 1, 2012.

Services insurance companies must cover without “cost-sharing” include:

well-woman visits;
screening for gestational diabetes;
human papillomavirus (HPV) DNA testing for women 30 years and older;
sexually-transmitted infection counseling;
human immunodeficiency virus (HIV) screening and counseling;
FDA-approved contraception methods and contraceptive counseling;
breastfeeding support, supplies, and counseling; and
domestic violence screening and counseling.

While the rules are one of the most wide-reaching and potentially popular provisions of the health care law adopted last year, according to The Washington Post, the new rules are also drawing some criticism. The federal government predicts insurance premiums will rise as a result of the new guidelines, but an estimate has not been released. CBS’ online newsletter states, “The cost will be spread among other people with health insurance, resulting in slightly higher premiums. That may be offset to some degree with savings from diseases prevented, or pregnancies that are planned to minimize any potential ill effects to the mother and baby.”

A San Francisco Chronicle story says conservatives criticize the plan, claiming “the White House may be engaged in an expensive boondoggle in its attempts to appeal to women voters, while businesses worried that added costs could raise insurance premiums and harm small businesses.”

Whether they are liked or not, the new rules are here…and they are dramatic, hard-hitting, and touted by HHS as a vital tool to expanding health care coverage to more Americans.

HHS’ Viewpoint

“The Affordable Care Act helps stop health problems before they start,” said HHS Secretary Kathleen Sebelius in the HHS statement. “These historic guidelines are based on science and existing literature and will help ensure women get the preventive health benefits they need.”

HHS claims that cost has held back Americans from seeking preventative care to stay healthy, avoid or delay the onset of disease, lead productive lives, and reduce health care costs. Specifically, HHS predicts that prior to health care reform, Americans used preventive services at about half the recommended rate.

This action follows the launch of new insurance market rules under PPACA that require all new private health plans to cover several evidence-based preventive services including mammograms, colonoscopies, blood pressure checks, and childhood immunizations without charging a co-payment, deductible or co-insurance. PPACA also made recommended preventive services free for people on Medicare.

One thing working in favor of the insurance companies is the fact that plans will retain the flexibility to control costs and promote efficient delivery of care, according to HHS. For example, an insurance company may charge a client if they choose a branded drug when a generic is available.

Another caveat is an amendment that allows religious institutions that offer insurance to their employees the choice of contraception coverage. This regulation is modeled on the most common accommodation for churches available in the majority of the 28 states that already require insurance companies to cover contraception. HHS welcomes comment on this policy; concerned parties may send their comments to womensguidelines@hrsa.gov.

The independent Institute of Medicine was charged by HHS to conduct a scientific review of preventative services and provide recommendations on specific measures that meet women’s health needs. HHS’ Health Resources and Services Administration (HRSA) used the IOM report to develop the new guidelines. The IOM’s report relied on independent physicians, nurses, scientists, and other experts to make these determinations based on scientific evidence.

For more information on the HHS guidelines for expanding women’s preventive services, visit http://www.healthcare.gov/news/factsheets/womensprevention08012011a.html. The guidelines can be found at www.hrsa.gov/womensguidelines/.

IOM Final Recommendations for PPACA’s Essential Health Benefits Might Be Delayed

Fri, 02 Sep 2011 00:00:00 -0500

Reuters news service recently reported that the Institute of Medicine (IOM) may not make the October 1 deadline for releasing the list of essential health benefits all insurance plans must offer through the state health insurance exchanges pursuant to the Patient Protection and Affordable Health Care Act (PPACA). According to IOM spokeswoman Christine Stencel, the Institute is striving for the end of September, but that the issue date could slip into October.

Background

Section 1302 of PPACA requires the Secretary of the Department of Health and Human Services (HHS) to regulate the essential health benefits that must be offered by all carrier participants in the state health insurance exchanges. PPACA defines essential health benefits by the following categories:

• Ambulatory patient services;
• 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;
• Chronic disease management; and
• Pediatric services, including oral and vision care.

All health insurance policies must, at a minimum, provide these health benefits to be certified and offered in the proposed state health insurance exchanges. All Medicaid state plans must cover these services by 2014.
PPACA requires that the essential health benefits reflect the same benefits now available to participants in employer-sponsored health benefit plans. This is the very mandate that led HHS Secretary Sebelius to ask the Department of Labor (DOL) to conduct a study on the benefits being offered in employer- sponsored health benefit plans, which was released in April.

At the same time, Sebelius requested IOM to conduct a study on what health care providers considered to be essential health benefits. As a result, IOM established the Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans. The Committee’s report, which defines IOM’s perspective on the elements that constitute essential health benefits, is due on the Secretary’s desk by October 1, 2011.

What are the possible reasons for the delay?

The IOM report must undergo a rigorous peer review process. Plus, there are several contentious benefit plan issues the Committee needs to address, including abortion on demand, hormone therapy for transgendered persons undergoing gender reassignment, and providing maternity benefits for dependents. The issue of covering birth control pills with no copay was taken off the table by an August 1, 2011 order -- issued by HHS -- requiring that birth control pills be provided at no cost to the covered person. Other services, such as infertility treatments and chiropractic care, weren't specifically included in the law, but some argue that they should be. Finally, there is the charge to make the benefits both comprehensive and affordable.

Why is this delay significant?

The original timeframe to establish the state health exchanges was quite aggressive. Most people are focusing on the January 1, 2014, date, but the reality is that the insurance carriers must have their benefit plans approved by state regulators as well as by the proposed state health insurance exchanges, and be ready to enroll individuals and employees covered under small employer group plans by the open enrollment period that begins October 1, 2013. If the IOM committee fails to meet its deadline, that only shortens an already tight deadline for fulfilling this PPACA requirement.

While PPACA gives the HHS Secretary sole authority to determine what the essential health benefits are, she must square the IOM report with the DOL report while juggling intense lobbying efforts by parties who will be most impacted by which benefits are ultimately included in the list of essentials.

This process is far from over, and there isn’t a lot of time to make all of this happen. Please stay tuned as we continue to provide you updates on the issue and others as PPACA continues to be implemented. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

Eleventh Circuit Court of Appeals Rules PPACA's Mandate to Buy Health Insurance Unconstitutional: Decision Leads to a Split in Federal Appellate Courts

Wed, 24 Aug 2011 00:00:00 -0500

A recent ruling by the U.S. Court of Appeals for the Eleventh Circuit has declared the ‘individual mandate’ to purchase health insurance unconstitutional, which is a core element of the Patient Protection and Affordable Health Care Act (PPACA). Two out of three judges found the mandate that forces individuals to purchase health insurance represents an unprecedented and unconstitutional expansion of the power of Congress to regulate interstate commerce.

In the majority opinion, Judges Dubina and Hull wrote that, “The federal government’s assertion of power, under the Commerce Clause, to issue an economic mandate for Americans to purchase insurance from a private company for the entire duration of their lives is unprecedented, lacks cognizable limits, and imperils our federalist structure.”

This decision conflicts with a Sixth Circuit Appellate ruling made in late June that upheld the constitutionality of PPACA. Click here to read more about that decision. With both the Sixth and Eleventh Circuits weighing in, court watchers are now looking to the Richmond-based Fourth Circuit for its ruling.

No matter how the Fourth Circuit Appellate Court rules, the existing split decisions at both the federal district and appellate levels all but guarantees that President Obama’s health care reform law will be heard by the U.S. Supreme Court later this year or in 2012.

It is customary for the more complicated laws that pass through Congress to include what is called a “severability clause.” According to a June 8 LA Times article, a severability clause allows a law to stand even if a portion of it is struck down. In regards to Obama’s health care bill, the version that went through the U.S. House of Representatives included this clause, but the version that went through the U.S. Senate did not. In the rush to get everything in and completed at the last minute, the House adopted the Senate’s version that lacked this provision.

Any doubts that the Obama administration may have had about the health care law facing opposition in court was wiped away in the opening statement by Chief Judge Dubina, who said, “If we uphold this, are there any limits,” referring to the power of the federal government.

This case drew more attention than other cases regarding the legality of PPACA because it involved 26 state attorney generals, who are said to be seeking relief by declaring the act of forcing individuals to purchase health care unconstitutional.

The administration defends the mandate. “We strongly disagree with this decision and we are confident that it will not stand,” said Stephanie Cutter, a Deputy Senior Advisor to President Obama in an internet posting statement. “The individual responsibility provision – the main part of the law at issue in these cases – is constitutional. Those who claim this provision exceeds Congress’ power to regulate interstate commerce are incorrect.”

This decision is significant for several reasons:

This decision represents the first time a federal appellate court has found the individual mandate clause unconstitutional.
It is the first bi-partisan decision to overturn the individual mandate clause. Judge Dubina was appointed by President George W. Bush and Judge Hull was appointed by President Clinton. The argument that the supporters of the PPACA that the attacks are purely partisan no longer apply.
It short-circuits the ability of the U.S. Justice Department to continue to delay these issues from appearing before the U.S. Supreme Court. Many observers considered it to be in President Obama’s best interests to have this case heard by the Supreme Court after the November 2012 presidential election. The Justice Department could further delay the process and ask the Eleventh Circuit Court to hear the entire case, but that entails some risk as the Justice Department has already been criticized for its delaying tactics.

For background on previous court rulings, check the previous posts by BenefitMall:

Legal Challenges to PPACA Gaining Steam (Nov 30, 2010) at http://www.healthcareexchange.com/blog/bernard-difiore/legal-challenges-ppaca-gaining-steam
Florida Federal Court Rules Against Legality of PPACA (Feb 2, 2011) at http://www.benefitmall.com/News-and-Events/Legislative-Updates/Florida-Federal-Court-Rules-against-Legality-of-PPACA
PPACA Constitutionality Upheld by Third District Court (March 3, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-constitutionality-upheld-third-district-court
Eleventh Circuit Court of Appeals Hear Vinson Case that Declared PPACA Unconstitutional (March 15, 2011) at http://www.benefitmall.com/News-and-Events/Industry-Insights/Eleventh-Circuit-Court-of-Appeals-to-Hear-Vinson-Case-that-Declared-PPACA-Unconstitutional
U.S. Supreme Court Refuses to Expedite Virginia Case Challenging PPACA; Florida Case Heats Up as DOJ Appeals Unconstitutionality Ruling (April 29, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-legal-update
District Appellate Court Upholds Mandate to Purchase Health Insurance (July 18, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/district-appellate-court-upholds-mandate-purchase-health-insurance

Benefit Mall will continue to keep you apprised of the latest developments as health care reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.benefitmall.com.

Insurance Regulators Tout Strength of State-Based Insurance and Financial Regulation on Capitol Hill

Wed, 17 Aug 2011 00:00:00 -0500

With all the focus at the federal level on health care reform and budget spending shortfalls, a recent congressional hearing reminds us of the importance of state-based insurance regulation.[1] The hearing focused on several financial technical provisions that don’t always impact brokers directly. However, an indirect relationship exists between the stability of health insurance offerings and the financial systems used to support and underwrite those offerings.

On July 28, two veteran state insurance regulators testified before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity. The hearing opened with Rep. Judy Biggert (R-IL), who chairs the subcommittee, praising the general approach to current regulation because the system has worked and endured in spite of roiling financial markets and other challenges over the years. However, she stressed the importance of ensuring consistent regulation in order to properly support insurance and financial sectors, which includes maintaining the proper equilibrium between consumer and business interests. She also remarked that the current state-based regulatory schema should be continued with targeted oversight at the federal level.

Rep. Biggert added, “Our goal is to ensure that any financial regulatory measures do not: 1) lead to fewer choices and higher costs for consumers; 2) hamstring business so they cannot expand; and 3) most importantly, prevent businesses from creating desperately needed jobs. Regulation at any level, federal or state, that is duplicative, burdensome or costly should be strongly reconsidered.”

In his opening remarks, Rep. Luis V. Gutierrez (D-IL), the democrat ranking member, noted that business and consumer interests sometime “collide.” He commented further that “one size does not fit all, not all financial institutions that are 50 billion dollars or greater…create the same level of risk.” He also advocated the role of a federal insurance office to work with the states to improve the data reporting requirements and other critical functions.

Rep. Robert J. Dold (D-IL) noted that “the insurance industry is a large and critical component of our financial services industry, and of our economy generally. The insurance industry employs directly over two million Americans with stable, well-paying private sector jobs. Our insurance industry also is the source of billions of dollars of private sector capital that is invested each and every year.”

He also reminded the hearing attendees that “our insurance industry provides many millions of American policyholders with peace of mind, security, and compensation in difficult and unfortunate and sometimes tragic circumstances.” He said Congress needs to address certain insurance issues, including how to modernize the regulatory framework with an accent on promoting business and job growth.

According to John M. Huff, director, State of Missouri Insurance Department, the first panelist to testify, “Both the nature and regulation of insurance products are fundamentally different from the nature and regulation of banking and securities instruments.[2] We remain hopeful that these differences will be adequately acknowledged and accommodated by the (Financial Stability Oversight Council[3]) and by our international counterparts,” he said. “This (FSOC) report confirms that most insurance sectors generally weathered the financial crisis well. While state regulators are continuing to closely monitor some specific aspects, the insurance industry, overall, remains healthy and vibrant.”

At the hearing, National Association of Insurance Commissioners (NAIC) president and Iowa Insurance Commissioner Susan E. Voss explained how state insurance regulators are collaborating with their federal lawmakers to assess the activities undertaken in response to the financial crisis and, specifically, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.[4]

“Insurance oversight in the U.S. remains strong and continues to improve,” said Voss. “We have taken steps to address an evolving landscape and ensure continued protection of the American consumer. Regulators have made great strides in developing tools that ensure a competitive environment, while preserving states’ front-line strength of solvency, regulation and consumer protection.” [5]

It is interesting to observe the continued expansion of federal regulatory oversight into areas that have been traditionally regulated by the states. The hearing clearly showcased that ebb and flow. To view the Committee hearing, click here.

[1] For details about the hearing, see http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=252895

[2] http://www.naic.org/documents/testimony_110728_ihco_huff.pdf

[3] http://www.treasury.gov/connect/blog/Pages/Financial-Stability-Oversight-Council-Releases-First-Annual-Report.aspx

[4] http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf

[5] http://naic.org/documents/testimony_110728_ihco_voss.pdf

State Medicaid Departments Trying to Make Ends Meet

Wed, 10 Aug 2011 00:00:00 -0500

It’s indisputable that the role of the state-federal Medicaid program in the U.S. health care system is important. Medicaid programs country-wide assist over 53 million Americans annually, who otherwise might not be able to afford health care.

Under the Patient Protection and Affordable Care Act (PPACA), Medicaid coverage would be expanded to include individuals with income levels at or below 133 percent of the federal poverty level by 2014. After PPACA is fully implemented, experts estimate this would add another 16 to 18 million persons to the Medicaid roster.

At the same time, Medicaid costs are expected to double over the next 8 to 9 years. Expenditures are projected to reach $404.9 billion in 2010 and $840.4 billion by 2019. [1]

In some respects, an analysis of the Medicaid program is like a “tale of two cities.” While many are eager to see the U.S. begin to cover the uninsured through the new, public state exchanges, the Medicaid programs and other initiatives, funding these programs will be a significant challenge.

The ongoing debt debates on Capitol Hill remind us that the federal government likely does not have the cash in its coffers to pay its share of the matching grants to the states. Borrowing will be more of a challenge in the future with the debt ceiling pressures leading to an era of likely deficit reduction. Further, state Medicaid directors are grappling not only with PPACA’s future expansion of the Medicaid roles, but how to maintain the current enrollment levels. In fact, many states in recent years have had to restrict coverage.[2]

A report by the Center for Medicare and Medicaid Services (CMS) – 2010 Actuarial Report on the Financial Outlook for Medicaid -- helps put things in perspective:

From program inception, the cost of Medicaid has generally increased at a significantly faster pace than the U.S. economy. In 1970, combined Federal and State expenditures for Medicaid represented 0.4 percent of gross domestic product (GDP), but this percentage grew to 0.9 percent in 1980, 1.2 percent in 1990, 2.0 percent in 2000, and 2.7 percent in 2009. As illustrated by the actuarial projections in this report, Medicaid costs will almost certainly continue to increase as a share of GDP in the future under current law. Although much of Medicaid’s expenditure growth (both past and future) is due to expansions of eligibility criteria, the per enrollee costs for Medicaid have also increased significantly faster than per capita GDP.[3]

Due to these trends, both federal and state governments are feeling the heat. In July the U.S. Department of Health and Human Services (HHS) announced three new initiatives to help states improve the quality and lower the cost of care for the approximately nine million Americans who are eligible for both Medicare and Medicaid (Medicare-Medicaid enrollees).

A demonstration program to test two new financial models that would help states improve quality and share in the lower costs that result from better coordinating care for individuals enrolled in Medicare and Medicaid.
A demonstration program to help states improve the quality of care for people in nursing homes by providing these individuals with the treatment they need without having to unnecessarily go to a hospital.
A technical resource center available to all states to help them improve care for high-need high-cost beneficiaries.[4]

In addition, states are ramping up other strategies to address budget shortfalls. Many states are reviving efforts to implement more robust managed care strategies for Medicaid populations, including medical management systems that more effectively manage individuals with multiple co-morbidities through case management.

However, all of these efforts are just a start. As a whole state officials are still frustrated over the federal government mandates on how state-federal Medicaid programs are run, especially mandated eligibility requirements. Many Medicaid directors are asking for more state flexibility to customize their programs for their respective jurisdictions. This is particularly an acute need in those states that have balance budget requirements – unlike the federal government. Even the CMS report acknowledges the financial pressure points that states are feeling:

The economic recession has added a considerable amount of financial stress to the States’ Medicaid programs, and its effects are expected to continue to increase Medicaid caseloads while at the same time putting pressure on government revenues. Although the Federal government is able to borrow to help finance its current expenditures and maintain its share of Medicaid costs, most States are not able to spend if doing so would create a budget deficit. Additional Federal funding provided by the American Recovery and Reinvestment Act of 2009 and the Education, Jobs, and Medicaid Assistance Act of 2010 has alleviated some pressure on the States, but it is apparent that the Medicaid program is large enough to place serious strain on many States’ budgets.[5]

The overall health of the public insurance system in the U.S. will have an echo effect on the private sector as well. It is well known that private insurance and provider systems subsidize public programs both directly and indirectly. Brokers should carefully monitor these developments to anticipate any potential impact on their respective clientele. In addition, brokers should become familiar with the eligibility requirements of programs such as Medicaid and Medicare to be in a position to best counsel individuals in terms of their best healthcare options over time.

Stay tuned as BenefitMall continues to highlight the progress of the Medicaid programs and deficit reduction plans. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

[1] See http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf at page 35.

[2] For example in July, Arizona will reduce future enrollment in its Medicaid program of an estimated 100,000 residents for childless adults. The measure is anticipated to save the state $190 million the first year. See http://www.tucsonsentinel.com/local/report/070711_medicaid_cuts/arizona-medicaid-cuts-take-effect-friday/

[3] See https://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf (see introduction).

[4] See https://www.cms.gov/apps/media/press/release.asp?Counter=4024

[5] See http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf at pages 35 and 36.

Life Outside the PPACA's Public Health Insurance Exchanges

Thu, 04 Aug 2011 00:00:00 -0500

As healthcare reform efforts continue to unfold, much discussion revolves around the role of public health insurance exchanges (“public exchanges”) in achieving the primary goal of the Patient Protection and Affordable Care Act (PPACA) – to provide U.S. citizens with affordable, quality health insurance. By 2014, PPACA requires each state to offer public exchanges to residents, or in the alternative, a federally-run exchange system.[1] A recent blog post by Larry Levitt and Gary Claxton for Kaiser Family Foundation examines how insurance options outside the public exchange markets will change under PPACA, as well as the importance of maintaining a level playing field for health plan offerings both inside and outside the public exchanges (see Levitt/Claxton blog post).

Clearly PPACA intends to make the public exchanges a key offering for consumers, who need more accessible and affordable healthcare options at their disposal (see Insurance Broadcasting story). However, as Levitt and Claxton point out, options outside of the public exchange domain will remain an important part of America’s healthcare system:

(A)s central as exchanges will likely be, it’s important to remember that there are other key provisions that help shape the reformed marketplace. Insurers will still be able to sell insurance to individuals and small businesses outside of the exchanges, and the health reform law applies new consumer protections to plans sold in that outside market, too.[2]

The Congressional Budget Office (CBO) estimates that 22 million people will buy coverage through the public exchange system by 2016.[3] As a result, “This leaves a substantial market for non-group and small-group coverage outside of the exchanges,” according to Levitt and Claxton.

Levitt and Claxton assert that if you look “at the non-group and small-group markets combined and extrapolating the CBO projections, more people will likely be getting coverage outside of the exchanges (about 31 million) than inside (about 25 million).” [4] They further stress that it will be important to keep a level playing field between the public exchanges and the outside insurance marketplace:

If plans offered outside of the exchange are subject to fewer standards or less scrutiny, they may have a price advantage or, perhaps more worrisome, attract healthier enrollees, which would increase exchange premiums and potentially federal subsidy costs as well. Risk adjustment could compensate for this “adverse selection,” but it’s not likely to do so perfectly.[5]

Private Exchanges Can Co-Exist with Public Options

BenefitMall has promoted the advantages of recognizing the value of a health insurance system comprised of both private and public exchanges. PPACA’s public policy goals will not be achieved unless private health insurance exchanges are allowed to co-exist with PPACA’s public exchanges (see Benefit Mall blog).

The good news is that PPACA does promote state flexibility; the bad news is that some states are leaning toward the more restrictive public exchange models like Massachusetts, which could damage the private insurance market, cost more money than expected and ultimately undermine PPACA’s goal of expanding meaningful coverage to millions of Americans.

Over 100 private exchanges are in existence today and cumulatively represent more than one-third of most insurance carriers’ distribution efforts. BenefitMall is one example of a private exchange that is the largest distributor of small group coverage in the U.S.

The Mid-Atlantic region also offers an illustrative example of a public/private exchange model that works very well, which was a by-product of Maryland’s small group reforms adopted over a decade ago. In Maryland and the surrounding states, multiple private exchanges serve as intermediaries working with brokers to help underwrite 625,000 policies in the state. BenefitMall proudly serves as one of these intermediaries offering a comprehensive sales and administrative services to dozens of carriers with over 500 health plans through a brokerage network of 20,000-plus agents.

Through its private exchange model, BenefitMall does more than support the sales and enrollment process. It also provides on-going eligibility determinations, payment coordination, renewal support, tracking of local purchasing trends, among other services through its best-in-class technology and Broker networks.

Private exchanges such as those in Maryland need to co-exist with public exchanges to ensure a “healthy” and effective health insurance system. In terms of meeting PPACA’s goals, private exchanges will help public exchanges to:

Extend coverage to more Americans
Promote a stable and vibrant insurance marketplace
Reduce unnecessary government expenditures
Help maintain the right equilibrium of insurance risk pools between insurance markets
Empower real choice of quality-based health insurance coverage options

Unfortunately, several states and national experts have expressed interest in positioning public exchanges as the only insurance source for individuals and small businesses. Moving in such a direction will not work and could create a health insurance marketplace meltdown. Only by offering private exchanges alongside federal or state-funded exchanges can we maintain a viable, dynamic marketplace that allows consumers access to the most cost-effective options that meet their individual needs.

To read more about these principles, read the BenefitMall Issue Brief. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com.

[1] A hybrid approach with a shared state/federal governance model for exchanges might be an optional as well.

[2] http://healthreform.kff.org/notes-on-health-insurance-and-reform/2011/july/remember-the-people-outside-of-exchanges.aspx

[3] http://www.cbo.gov/budget/factsheets/2011b/HealthInsuranceProvisions.pdf

[4] See footnote no. 2.

[5] Ibid.

New HHS CO-OP Rules Promise More Choices for Consumers, Small Businesses

Fri, 29 Jul 2011 00:00:00 -0500

More proposed reforms to the nation’s healthcare system were released last week as part of the Patient Protection and Affordable Care Act (PPACA). This time a proposed rule authorizes the creation and funding of Consumer Operated and Oriented Plans (CO-OPs). These new private, non-profit, consumer-governed health insurance plans are designed to help increase competition and give consumers and small business additional affordable health insurance choices. On July 18, the 56-page proposed regulation was released for public comment by the Center for Medicare and Medicaid Services of the U.S. Department of Health and Human Services.

The CO-OP concept was a late addition to PPACA, crafted when the government single-payer concept was removed as a federal healthcare reform option in Congress. It was designed to respond to consumer advocates and liberal policymaker concerns, who were pushing for a single-payer federal program (see The Heritage Foundation).

As a result, PPACA now envisions a CO-OP in each state that is run by a not-for-profit corporation and will provide an additional option for state health insurance exchanges to offer to the public (CMS release). The proposed rule provides guidance on the role of CO-OPs to promote integrated models of healthcare and enhance competition in the respective state health insurance exchanges established by PPACA.

The draft regulations would authorize $3.8 billion to fund start-up costs and initial operating funds, as opposed to the original $6 billion allocated under PPACA. The funding amount was cut during recent budget negotiations that raised the debt ceiling. Currently, the U.S. Department of Health and Human Services (HHS) is proposing two types of loans to help CO-OPs get off the ground. First, $600 million in loans will go to help CO-OP organizers develop business models; and secondly, $3.2 billion will fund currently operating CO-OPs with enough capital on hand to cover unexpected claims (see The Hill).

These grants would only be available to organizations that appear stable enough to repay the loans, but concerns have been expressed about the potential default rate – 40 percent for planning loans and 35 percent for operating/solvency loans. As reported in The Hill, Steve Larsen, director, Office of Oversight, HHS’s Office of Consumer Information and Insurance Oversight, said he doesn’t expect the default rate to ultimately be that high. “There is that back-end estimate, for conservatism’s sake,” Larsen said on a conference call with reporters.

Skeptics say the proposed regulations will make it more difficult for the CO-OPS to succeed. For example, the rule bans existing insurers from owning a CO-OP or getting a cut of the grant money. In an attempt to counter claims that CO-OPs may be a back-door entry into a single-payer government option, the proposed rule also precludes any state or local government entities from accessing the money to launch CO-OPs.

The CMS press release adds, “CO-OPs will sell coverage through the State’s Affordable Insurance Exchange as well as have the opportunity to sell coverage to small businesses through the State’s Small Business Health Option Programs (SHOP Exchanges). Several successful health insurance cooperatives currently exist around the country, covering nearly 2 million individuals. A number of diverse groups are organizing to take advantage of this new opportunity.”

Stay tuned as BenefitMall and others report on the progress of the CO-OP platform as it gets operationalized in the states. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

NGA Hearing on State Exchanges: Governors Continue to Focus on Budget Shortfalls

Tue, 26 Jul 2011 00:00:00 -0500

A variety of pressing economic and health issues were addressed at the National Association of Governors (NGA) annual 2011 meeting held in Salt Lake City, including elements of the Patient Protection and Affordable Care Act (PPACA) as well as state budgets.

Hearing on Exchanges

Among other issues, NGA hosted a panel session on July 16 entitled, “Health Insurance Exchange Implementation.”[1] “The Affordable Care Act requires the establishment of one or two health insurance exchanges in each state and territory that are ready to enroll individuals in health plans by October 2013 for coverage effective January 1, 2014,” said Wisconsin Gov. Scott Walker, chair of NGA’s Health and Human Services Committee. “The release of new federal regulations this week makes this a very timely topic. Governors need more information so they can make the best decisions for their states.”[2]

Among other speakers, Steven Larsen, director, Office of Oversight, Office of Consumer Information and Insurance Oversight, Department of Health and Human Services (HHS), provided an overview of the Proposed Exchange Rule issued by the U.S. Department of Health and Human Services earlier this month.

Emphasizing that PPACA gives the states the authority to implement exchanges and flexibility on many particulars, Mr. Larsen outlined three different options to make exchanges operational and/or get federally certified:

Fully-integrated state-based exchanged in operation by January 1, 2014;
Hybrid model where a state and the federal government share exchange functions (e.g., a state could certify health plans; federal government oversee eligibility).
Federally facilitated exchange.[3]

State Budgets, State Rights

However, state budgets and economic growth appear to be top priorities for many governors. This sentiment was expressed by the Honorable Michael O. Leavitt during the exchange hearing when he noted in his opening remarks that “health reform is now economic reform…there is great connection between the debt reduction strategy, the ceiling and health reform.” Currently chairman at Leavitt Partners, Hon. Leavitt is a past HHS secretary and former governor of Utah. While he acknowledges that “exchanges” are a legitimate solution, he also purports the Proposed Exchange Rule could in fact seriously constrain state flexibility. He encourages states to take the lead where they can and not just passively follow HHS. Furthermore, Mr. Leavitt stressed the importance of allowing states to create “private” exchanges as well as those outlined in the Proposed Exchange Rule.

For a recent analysis of the new Proposed Exchange Rule, see BenefitMall’s Legislative Alert at http://www.benefitmall.com/News-and-Events/Legislative-Updates/HHS-Issues-Interim-Rules-for-State-Health-Insurance-Exchanges.

States Thinking About Fundamental Redesigns

NGA released a statement earlier this year underscoring the pressure facing governors. Government redesign efforts are part of virtually every aspect of state policy in 2011 as governors adjust to the “new normal in the wake of the great recession," said John Thomasian, director of the NGA Center. "Governors are focusing on consolidation, streamlining bureaucratic processes and controlling employee and pension costs, while at the same time doing as much as they can to spur job growth."[4]

Most, if not all, governors are feeling the heat as states grapple with PPACA’s mandate to expand Medicaid eligibility in an environment where the states are struggling to maintain current coverage thresholds. During the NGA hearing, Mr. Leavitt noted that tinkering around the edges of Medicaid by cutting provider rates or other incremental adjustments will not be enough. He encouraged policymakers to think about fundamental redesigns to ensure the ongoing financial viability of Medicaid programs around the country.

“Over the last two years, states have made significant changes, cutting spending by more than 10.7 percent – $75 billion – tapping rainy day funds, shrinking the size of government and streamlining state services,” said Washington Gov. Chris Gregoire in a recent NGA press release. “Unfortunately, more difficult decisions will have to be made over the next few years.”[5]

“Governors encourage the federal government to follow the lead of states and make the tough decisions to ensure the long-term strength of states and the country,” said Nebraska Gov. Dave Heineman.[6]

Governors have called upon the Administration and Congress to adhere to the following principles for state-federal deficit reduction:

Federal reforms should be designed to produce savings for both the federal government and states;
Deficit reduction should not be accomplished by merely shifting costs to states or imposing unfunded mandates;
States should be given increased flexibility to create efficiencies and achieve results; and
Congress should not impose maintenance of effort (MOE) provisions on states as a condition of funding.[7]

As a result of the 2010 election, over half of the states elected new governors, the largest freshman class in history. Unlike the federal government, most states have to balance their budgets according to the NGA, so the deficit discussion takes on a different perspective than within their federal counterparts.

Stay tuned for more details as BenefitMall continues to track health care reform initiatives and other federal public policy activities that might directly or indirectly impact brokers and their clients. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

[1] To watch video of this session, go to http://www.nga.org/cms/render/live/AMVideos.

[2] See NGA press release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/health-insurance-exchanges-focus.html;jsessionid=BBBF8B7A770E31E5B9B18F547D3514EF.

[3] See footnote one.

[4] See NGA Press Release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/tough-budget-choices-smaller-gov.html

[5][5] See NGA Press Release at http://www.nga.org/cms/home/news-room/news-releases/page_2011/col2-content/main-content-list/states-call-on-federal-governmen.html

[6] Ibid.

[7] Ibid.

NAIC Produces Short Educational Video for Consumers Explaining PPACA

Wed, 20 Jul 2011 00:00:00 -0500

Last month, the NAIC published a brief video to help answer questions posed by consumers regarding the Patient Protection and Affordable Care Act (PPACA).[1] Brokers and agents may want to use this video as a reference tool for their clients. Subjects covered by the video include:

Individual and employer mandates
Pre-existing conditions
Healthcare exchanges
Preventive care measures
Medicare. [2]

Click HERE to view the video.

“We hope consumers and organizations will find this educational video useful as we outline the realities of the health care law,” said Sandy Praeger, chair of the Health Insurance and Managed Care Committee and Kansas Insurance Commissioner. “Our goal is to provide unbiased and factual information to convey the real impact on individuals, families and business owners.”[3]

The NAIC Press Release about the video also reference several other resources that the NAIC has made available to the public, including:

The health care implementation chart; and
A comprehensive FAQ section

The NAIC continues to work closely with the U.S. Department of Health and Human Services (HHS) and other federal agencies on PPACA implementation issues. Stay tuned for more details as BenefitMall continues to track healthcare reform initiatives and other federal public policy activities that might directly or indirectly impact brokers and their clients. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

[1] See http://www.naic.org/Releases/2011_docs/naic_launches_educational_health_video.htm

[2] Ibid.

[3] Ibid.

District Appellate Court Upholds Mandate to Purchase Health Insurance

Mon, 18 Jul 2011 00:00:00 -0500

On June 29, a three judge panel of the Sixth Circuit U.S. Court of Appeals located in Cincinnati, Ohio published an opinion on the case entitled, Thomas More Law Center et. al. vs. Barrack Hussein Obama et. al. [1]

On a vote of 2 to 1, the Appeals Court upheld the constitutionality of the “individual mandate” embedded in the Patient Protection and Affordable Care Act (PPACA) that requires all individuals to purchase health insurance by the year 2014 or pay a penalty. In addition, the appellate decision sent minor shock waves through many conservative camps since this is the first time a republican appointed judge sided with the Obama administration.

In the case, the plaintiffs argued that the Commerce Clause of the U.S. Constitution does not provide Congress with the authority to require individuals to purchase health insurance or otherwise to pay a special levy. They asserted that an individual’s decision not to purchase health insurance was not an “economic activity” per se and that such “inactivity” could not be regulated under the Commerce Clause. However, the lower court ruled against the plaintiffs when it held that the minimum coverage provision falls within Congress’s authority under the Commerce Clause for two principal reasons:

(1) the provision regulates economic decisions regarding how to pay for health care that have substantial effects on the interstate health care market; and

(2) the provision is essential to the Act’s larger regulation of the interstate market for health insurance.[2]

In its 64-page written opinion, the Sixth Circuit Appellate Court affirmed the district court’s ruling. A copy of the court decision can be downloaded here.[GC1]

The ruling is especially interesting in that previous decisions on the constitutionality of the respective sections of the PPACA have fallen within defined partisan lines. The previous five district court decisions all followed the pre-established political lines, with Democratic-appointed judges supporting the administration and Republican appointees opposing it. Specifically, three U.S. district judges have ruled in favor of the White House on the constitutionality of the individual mandate, while two district court judges have said that PPACA’s individual mandate is unconstitutional.

In the new appellate decision, Judge Boyce F. Martin Jr., a democrat appointee, voted in the affirmative, but Judge Sutton, appointed by republican President George HW Bush, concurred with him. The third Judge James Graham, a Regan appointee, wrote the dissenting opinion.

In upholding the constitutionality of the individual mandate, Judge Martin concluded:

“Congress had a rational basis for concluding that, in the aggregate, the practice of self-insuring for the cost of health care substantially affects interstate commerce. Furthermore, Congress had a rational basis for concluding that the minimum coverage provision is essential to the Affordable Care Act’s larger reforms to the national markets in health care delivery and health insurance. Finally, the provision regulates active participation in the health care market, and in any case, the Constitution imposes no categorical bar on regulating inactivity. Thus, the minimum coverage provision is a valid exercise of Congress’s authority under the Commerce Clause, and the decision of the district court is affirmed”[3]

The heart of Judge Graham‘s dissent can be found in his concluding remarks:

“If the exercise of power is allowed and the mandate upheld, it is difficult to see what the limits on Congress’s Commerce Clause authority would be. What aspect of human activity would escape federal power? The ultimate issue in this case is this: Does the notion of federalism still have vitality? To approve the exercise of power would arm Congress with the authority to force individuals to do whatever it sees fit (within boundaries like the First Amendment and Due Process Clause), as long as the regulation concerns an activity or decision that, when aggregated, can be said to have some loose, but-for type of economic connection, which nearly all human activity does.... Such a power feels very much like the general police power that the Tenth Amendment reserves to the States and the people. A structural shift of that magnitude can be accomplished legitimately only through constitutional amendment.”[4]

The Washington Post reports that the attorneys for the plaintiffs said they will appeal directly to the Supreme Court but acknowledged that the Court probably will not take the case right away. In addition, two other cases are pending before the federal court of appeals in the Richmond-based Fourth Circuit and the Atlanta-based11th Circuit. Those courts heard oral arguments earlier this spring and rulings are expected in the near future.

Most legal experts are predicting that the U.S. Supreme will eventually adjudicate the “individual mandate” and several other issues related to PPACA’s constitutionality in a consolidated case but it could take a year or two before a final decision is made.

For background on the previous court rulings, check the previous posts by BenefitMall:

Legal Challenges to PPACA Gaining Steam (Nov 30, 2010) at http://www.healthcareexchange.com/blog/bernard-difiore/legal-challenges-ppaca-gaining-steam
Florida Federal Court Rules Against Legality of PPACA (Feb 2, 2011) at http://www.benefitmall.com/News-and-Events/Legislative-Updates/Florida-Federal-Court-Rules-against-Legality-of-PPACA
PPACA Constitutionality Upheld by Third District Court (March 3, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-constitutionality-upheld-third-district-court
Eleventh Circuit Court of Appeals to Hear Vinson Case that Declared PPACA Unconstitutional (March 15, 2011) at http://www.benefitmall.com/News-and-Events/Industry-Insights/Eleventh-Circuit-Court-of-Appeals-to-Hear-Vinson-Case-that-Declared-PPACA-Unconstitutional
U.S. Supreme Court Refuses to Expedite Virginia Case Challenging PPACA; Florida Case Heats Up as DOJ Appeals Unconstitutionality Ruling (April 29, 2011) at http://www.healthcareexchange.com/blog/michael-gomes/ppaca-legal-update

Stay tuned for more details as BenefitMall continues to track healthcare reform initiatives, the related court cases, and other federal public policy activities that might directly or indirectly impact brokers and their clients. Please monitor www.BenefitMall.com and www.HealthcareExchange.com for further developments.

[1] See Thomas More Law Center et al. vs. Barrack Hussein Obama et al. (Sixth Circuit, Case No. 10-2388, (June 29^th, 2011) at http://www.ca6.uscourts.gov/opinions.pdf/11a0168p-06.pdf.

[2] Idbid at page 3.

[3] See footnote 1 at page 26.

[4] See footnote 1 at page 64.

[GC1]Link to document attached with the email. This is a public document, so BM can post it. You also can use this link: http://www.ca6.uscourts.gov/opinions.pdf/11a0168p-06.pdf

Waiver Program Ending for Employers Providing Mini-Med Coverage

Wed, 13 Jul 2011 00:00:00 -0500

In a statement on June 16, the Obama Administration announced the end to a program that gives waivers to some employers and unions who provide lower levels of health insurance coverage for their employees.[1] This program was instituted as a result of new annual coverage minimums that are in effect today pursuant to the Patient Protection and Affordable Care Act (PPACA).[2]

Essentially, PPACA requires employers to provide at least $750,000 of annual health insurance coverage for each employee in their health insurance plan.[3] However, many smaller employers, restaurants and retailers fall well below this limit, with some providing “mini-med” coverage that includes as little as $10,000 annual coverage per employee.[4] Waivers previously granted to employers had provided relief for those that could not comply with the $750,000 limit without raising premiums, but the waiver program itself is coming to an end.

Waivers that have previously been issued will be in effect until 2013, but no new waivers applications will be accepted after September 22 of this year, according to Steven B. Larsen, director of the federal Center for Consumer Information and Insurance Oversight. In addition, employers and labor unions may still seek an extension of waivers already granted through September 22.[5] “Mini-med plans do not provide comprehensive health coverage, but they are the only insurance options many consumers have today,” said Mr. Larsen, adding “the good news is that these plans will be a thing of the past in 2014.”[6]

Coverage Limit Ceiling Gets Higher, Then Disappears

Currently employers, who do not have a waiver in place, must offer coverage that is capped annually at the $750,000 mark for each covered life. Plan sponsors then will have to increase the coverage thresholds to higher levels in the future: in September 2011, the minimum coverage limit increases to $1.25 million; in 2012 to $2 million; and in 2014, the annual benefit limits will be phased out entirely to coincide with the deadline for states to create state-run health insurance exchanges.

Waiver Program

The waiver program was an attempt by the Administration and others to create ability for a smooth transition to the new PPACA requirements. Some Republicans and other, who opposed this and other PPACA provisions, note that the waiver program was a sign that PPACA’s new coverage requirements are flawed. Senator John Barrasso (R-WY) said “If the law is so good, why are more and more employers begging for a waiver to get relief from its burdensome mandates? Americans need waivers from the President’s law because it causes health premiums to go up.”[7] However, others disagree saying that over-all impact of PPACA will not have a substantial impact on premiums.

Ultimately, only time will tell to assess how well the Mini-Med Waiver Program provided a successful bridge to implement PPACA’s coverage requirements.

BenefitMall pledges to keep you abreast of the latest developments pertaining to the health insurance and health care fields. Stay tuned to www.BenefitMall.com and www.HealthcareExchange.com for continuing updates.

[1] http://www.huffingtonpost.com/2011/06/17/health-care-waiver-program-obama_n_879515.html

[2] http://healthbenefitupdate.wordpress.com/2011/06/20/cms-sets-92211-deadline-for-plans-to-apply-for-affordable-care-act-annual-limit-waiver-relief/

[3] http://www.healthcare.gov/news/factsheets/annuallimit06172011a.html

[4] http://www.nytimes.com/2011/06/18/health/policy/18health.html?_r=3\

[5] http://www.businessinsurance.com/article/20110617/BENEFITS03/110619922

[6] http://www.nationaljournal.com/healthcare/mini-meds-get-two-more-years-of-waivers-but-they-have-to-act-fast-20110617?mrefid=site_search.

[7] http://www.politico.com/news/stories/0611/57242.html#ixzz1PmelmBmf

Summer Heats Up but Congress Cools to Major PPACA Amendments

Mon, 11 Jul 2011 00:00:00 -0500

Over the summer, Congress will likely take a more incremental approach to addressing any amendments to the Patient Protection and Affordable Care Act (PPACA).[1] After the House sent a shock wave of “repeal” earlier in the year, things appear to be cooling down a little with the new mantra of “repair.”

Some changes to PPACA original requirements already have been made both at the legislative and regulatory levels. For example, the Republicans succeeded in repealing the infamous 1099 filing requirement earlier this spring -- albeit through a bipartisan vote and which was signed into law by President Obama.[2]

Further, some Republicans are now sending mixed messages as to what their next steps will be. Here is one example:

"Our focus right now is on repealing all of ‘Obamacare’ and pieces of it where we can,” said Rep. John Kline (R-MN), chairman of the Education and Workforce Committee, one of several U.S. House committees with jurisdiction over the health policy.[3] “The replacement pieces for health care are still on the table, but we're not pushing them right now because we've got a full plate with other stuff."[4]

BenefitMall has written several Congressional updates in recent months exploring a myriad of issues associated with PPACA, including:

Congressional Outlook (June 3) See http://www.health careexchange.com/taxonomy/term/42/0.
Recent Budget Deal Defunds Two PPACA Program (April 21) See http://www.health careexchange.com/blog/michael-gomes/recent-budget-deal-defunds-two-ppaca-programs.
Capitol Hill Legislative Update (March 3) See http://www.health careexchange.com/blog/michael-gomes/capitol-hill-legislative-update.

This blog provides a quick update on several new bills that have been introduced in Congress that are more incremental in nature.

Efforts to Expand Health Savings Accounts[5]

Sen. Orin Hatch (R-UT) and Rep. Erik Paulson (R-MN) have offered companion bills entitled, “The Family and Retirement Health Investment Act of 2011” (H.R. 2010, S. 1098), which would protect and even expand opportunities to purchase Health Savings Accounts (HSAs).[6] PPACA currently restricts the use of health care savings plans that offer low premiums but carry high deductibles. Small business employers will not be able to offer health care savings plans with deductibles of more than $2,000 to individual employees. For families, the upper limit is $4,000. These bills would repeal those restrictions, allowing small business employers to keep offering high-deductible plans. The PPACA prohibition against paying for over the counter non-prescription drugs would also be repealed. Several powerful groups including the American Medical Association (AMA) have gone on record supporting this legislation.[7] The House version has 34 co-sponsors and has been referred to the House Subcommittee on Health, and the Senate version has 3 co-sponsors and has been referred to the Senate Committee on Finance.

Medical Liability Reform

Earlier this year the House Republicans introduced the “Help Efficient, Accessible, Low Cost, Timely Health care (HEALTH) Act of 2011” (H.R .5). The goal is to get medical malpractice costs under control. The official summary of the bill states that it would establish “conditions for lawsuits arising from health care liability claims regarding health care goods or services or any medical product affecting interstate commerce.”[8] Some of the specifics include:

Sets a statute of limitations of three years after the date of manifestation of injury or one year after the claimant discovers the injury, with certain exceptions.
Limits noneconomic damages to $250,000. Makes each party liable only for the amount of damages directly proportional to such party's percentage of responsibility.
Allows the court to restrict the payment of attorney contingency fees. Limits the fees to a decreasing percentage based on the increasing value of the amount awarded.
Allows the introduction of collateral source benefits and the amount paid to secure such benefits as evidence. Prohibits a provider of such benefits from recovering any amount from an award in a health care lawsuit involving injury or wrongful death.
Authorizes the award of punitive damages only where: (1) it is proven by clear and convincing evidence that a person acted with malicious intent to injure the claimant or deliberately failed to avoid unnecessary injury the claimant was substantially certain to suffer; and (2) compensatory damages are awarded. Limits punitive damages to the greater of two times the amount of economic damages or $250,000.
Denies punitive damages in the case of products approved, cleared, or licensed by the Food and Drug Administration (FDA), or otherwise considered in compliance with FDA standards.
Provides for periodic payments of future damages.[9]

Several weeks ago, the House Committee on Energy and Commerce reviewed and marked up the bill. Currently H.R. 5 has 134 co-sponsors – most of whom are Republicans.

Addressing the National Debt Issue

The major focus in Congress for rest of this month certainly will be the debate of whether or not to raise the U.S. debt ceiling and the need to implement tax reform. This debate also will impact several health care programs. For example, Republicans are still hoping to reform Medicare and Medicaid while Democrats are opposed to drastic changes. During a televised news briefing last week, House Minority Leader Nancy Pelosi asserted she opposes cuts to entitlement programs as part of a debt deal. Although she sent a signal that there may be some room for compromise on changes to key programs, Pelosi also stressed the need to continue investing in these public sector programs.[10] Additional bi-partisan meetings are scheduled at the White House and Congress in the near future to see if a deal can by hammered out before the August 2, 2011 deadline (i.e., where the U.S. would have to suspend investments in federal retirement funds).

[2] For background, see http://www.benefitmall.com/RSS/~/media/Files/Legislative%20Updates/20101029LegislativeAlert.ashx and http://www.health careexchange.com/blog/michael-gomes/president-signs-law-repeal-ppaca%E2%80%99s-1099-filing-requirement

[3] http://thehill.com/blogs/healthwatch/health-reform-implementation/164777-months-after-health care-repeal-vote-gop-still-working-on-replace.

[4] Ibid.

[5] http://www.govtrack.us/congress/bill.xpd?bill=s112-1098.

[6] http://thehill.com/images/stories/blogs/healthwatch/hatchfsas.pdf.

[7] http://www.ama-assn.org/resources/doc/washington/hsa-bill-s-1098-letter.pdf.

[8] http://thomas.loc.gov/cgi-bin/bdquery/z?d112:HR00005:@@@D&summ2=m&.

[9] As reported in Library of Congress, Thomas reporting service. Ibid.

[10] See http://www.politico.com/news/stories/0711/58585.html

IRS Grants Nonprofit Plans More Time to Comply with PPACA's MLR Requirement

Fri, 01 Jul 2011 00:00:00 -0500

Some health plans concerned about the impending deadline for reaching an 85% medical loss ratio (MLR) can breathe a sigh of relief – a limited waiver has been granted for nonprofit health plans by the U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) for tax year 2011. This action was the result of petitioning HHS and IRS by nonprofit health plans and other in opposition to the new MLR requirement in general, and for the 2011 tax year implementation date in particular. The new MLR requirements are authorized by the Patient Protection and Affordable Care Act (PPACA). Blue Cross and Blue Shield Plans and others argued that it would be difficult to reach the 85% MLR so quickly.

On June 10, the IRS issued Notice 2011-51, which grants a waiver to nonprofit plans. [1] The waiver delays the implementation of the applicability of the MLR for this year. BenefitMall has addressed the MLR issue in several blogs and legislative alerts over the past 12 months. [2]

The IRS also gave nonprofit hospitals an extra year before they must comply with PPACA’s new social responsibility requirements in IRS Announcement 2011-37.[3]

MLR Extension for Nonprofit Health Plans

PPACA potentially placed nonprofit health plans at the risk of losing their federal tax status if they failed to comply with the 85% MLR for large group plans and 80% for small group plans and individual coverage for 2011.[4] Currently, a nonprofit health plan with this special tax status can deduct 25% of claims and expenses and 100% of unearned premium reserves from federal taxable income.[5] Nonprofit plans concerned about the loss of this status said it would result in a significant financial loss and, thus, the need to increase significantly the cost of health insurance to their covered lives.

Furthermore, the health plans would have to issue a rebate – at additional cost – to the covered individuals equal to the difference between their incurred MLR and the target MLR. Many nonprofit plans such as the Blues and Kaiser are the largest health insurance carriers in their respective service areas or for the entire state. The cumulative effects of the loss of their preferred tax treatments via their nonprofit status and the expense of the rebates could have caused significant market disruption for the health plans, providers and patients.

Analysis

This waiver not only will help protect the bottom lines of the nonprofit insurance plans, it also gives them an important advantage for this year. At the same time, it protects the markets in the states where these plans reign. However, what impact will this advantage have on the for-profit health plans that compete against them? Will this action further disrupt some state markets? Will the nonprofits having difficulty achieving the MLR milestones next year?

Many questions still need to be addressed. However, the IRS notice providing a one year extension for nonprofits to meet the new MLR requirements is a small bit of good news.

[1] http://www.irs.gov/pub/irs-drop/n-11-51.pdf and http://www.us.kpmg.com/microsite/taxnewsflash/2011/Jun/11282.html

[2] See

Understanding the new MLR Requirements (November/December 2010) at http://www.benefitmall.com/~/media/Files/Legislative%20Updates/Archives/2010/Understanding%20MLR%20Requirements.ashx

NAIC Committee Adopts MLR Report Addressing Brokers' Commissions: Study Provides Mix Findings, see NAIC Committee Adopts MLR Report Addressing Brokers' Commissions: Study Provides Mix Findings (June 2011) at http://www.healthcareexchange.com/blog/michael-gomes/naic-committee-adopts-mlr-report-addressing-brokers-commissions-study-provides-mi

Broker/Agent Commissions at Center of MLR Regulation Debate (May 2011) at http://www.benefitmall.com/News-and-Events/Industry-Insights/Broker-Agent-Commissions-at-Center-of-MLR-Regulation-Debate

June 2010: Medical Loss Ratio at http://www.healthcareexchange.com/blog/bernard-difiore/medical-loss-ratio

[3] http://www.lifeandhealthinsurancenews.com/News/2011/6/Pages/IRS-Gives-Nonprofit-Plans-Hospitals-More-Time-to-Comply-with-PPACA.aspx

[4] http://democrats.senate.gov/pdfs/reform/patient-protection-affordable-care-act-as-passed.pdf

[5] Ibid, footnote 3.