Legislative Updates

HHS Issues Interim Final Rules for State Health Benefits Exchanges

Thu, 26 Apr 2012 17:13:00 -0500

The Department of Health and Human Services (HHS) recently issued a final rule that provides states with considerable flexibility in the organization and operation of PPACA-mandated state health benefit Exchanges. The March 27, 2012 interim final rule supersedes prior rules issued on July 15, 2011 (Establishment of Exchanges and Qualified Health Plans) and on August 17, 2011 (Exchange Functions in the Individual Market: Eligibility Determinations and Exchange Standards for Employers). The new rule combines many provisions of prior interim rules and includes additional options for states.

The regulations are detailed in 166 pages of guidance on ways a state can organize an Exchange, including how to create a SHOP exchange for small business employees. The rule also reviews eligibility and enrollment processes, as well as the way in which HHS will certify state health insurance exchanges.

The rule highlights include:

We will continue 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.

Sincerely,

Michael Gomes
Executive Vice President

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.

Waiting for the U.S. Supreme Court Decision

Wed, 11 Apr 2012 16:01:00 -0500

Last month, the United States’ highest court heard oral arguments on what has become the most controversial piece of legislation in recent history, the Patient Protection and Affordable Care Act (PPACA). Many of us wait eagerly for a final decision, which is expected to be published in June. This Alert highlights some key background information to help put things in perspective.

This article, in its entirety, can be found at www.healthcareexchange.com. The following provides a brief synopsis of what is detailed in the blog, which is both very educational and intriguing, so please be sure to review it and let us know what you think.

Summaries of the following:

The Justices
The Oral Arguments
Judicial Outcomes

Various Outcomes:

Will the Tax Issue Delay the Decision?
Will the Individual Mandate be Overturned?
Will the Medicaid Expansion be Upheld?
Will the Court Uphold PPACA as is?
Will the Court Overturn PPACA Completely?

Stay tuned as all of us wait to hear the Supreme Court’s decision in a few months. When the ruling is published, BenefitMall will offer timely analysis of what that decision means for Brokers, consumers and other key stakeholders.

We have covered many PPACA-related issues since its inception, 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 or www.benefitmall.com to view past Legislative Alerts.

Recent Developments on State Exchanges

Wed, 14 Mar 2012 09:23:00 -0500

As states work to implement various portions of the Patient Protection and Affordable Care Act (PPACA), establishing and maintaining state health insurance exchanges continues to top the priority list. Under PPACA, states may elect to create and maintain their own state-run health insurance exchange or operate a federally run exchange. States are in varying stages of the exchange implementation process. According to the Urban Institute, which has tracked state progress in health insurance exchange implementation, “14 states have made significant progress, 16 have made little or no progress and 20 are somewhere in between.”

In March 2011, the U.S. Department of Health and Human Services (HHS) provided an initial series of planning grants in the approximate amounts of $1 million each to 49 states and the District of Columbia to help with the creation of health insurance exchanges.

HHS recently announced it was distributing an additional $230 million to 10 states to facilitate the development of their state health benefit exchanges. The following states were recognized by HHS as making significant progress or have already adopted an implementation plan: Arkansas, Colorado, Kentucky, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, and Tennessee. Some of these states are receiving a second round of development grants, whereas others are receiving development grants for the first time, making the total allotted by the federal government more than $600 million .

See below to view the status of exchange development in your own state:

Summary

The implementation of state health insurance exchanges will continue to vary as some states are making significant progress and others are still in the early phases of planning. Some states await the Supreme Court decision on the constitutionality of PPACA. HHS Secretary Kathleen Sebelius explains the differences by saying, “States continue to go at their own pace as they set up their exchanges. This is a natural result of a process that gives states maximum flexibility.” Undoubtedly this variation among states will continue until PPACA is either repealed, or the implementation deadline of January 1, 2014, occurs.

Tracking On-Going Activities

Here are some helpful resources:

To read more about state health benefit exchanges, please click here .
If you would like to learn more about the state exchange grant process, please click here .
To see where your state is in the process of establishing a state health benefit exchange, go here and here for helpful charts on the status of state health benefits exchanges.

As always, BenefitMall pledges to keep you up-to-date on these issues and more. Stay tuned to www.benefitmall.com and www.HealthcareExchange.com.

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.

Essential Benefits - Balancing Flexibility and Affordability

Wed, 01 Feb 2012 09:14:00 -0600

On Tuesday, January 24, BenefitMall’s CEO Bernard DiFiore participated in a panel discussion during a general session of the National Association of Health Underwriters Annual Capitol Conference focusing on several pivotal issues associated with how best to define and implement the “essential benefits” requirement pursuant to the Patient Protection and Affordable Care Act (PPACA). This Legislative Alert addresses several of those key issues.

Keeping Health Insurance Affordable
Many can agree, “Affordability is crucial. Rising health care costs are the most significant barrier to obtaining and providing health care coverage.” Although PPACA is designed to provide health care to all, individuals both within and outside the health care community worry about the Act’s impacts on the costs of health care.

Defining Essential Benefits
The question of essential benefits is one that remains largely up in the air, primarily because PPACA doesn’t give an exact definition of what constitutes an essential benefit. An added source of confusion stems from the fact that states are given the ability to set the benchmark as to what services to include in the essential health benefits package. The Department of Health and Human Services (HHS) has not provided a more specific definition, even in a fifteen page document designed to provide more information to the public.

Essential health benefits are included in section 1302(b) of PPACA, and must be implemented by non-grandfathered plans in individual and small group markets both in- and out-of-state health insurance exchanges beginning in 2014.

States will be given the opportunity to select one of the following types of plans:

one of the three largest small group plans in the state
one of the three largest state employee health plans
one of the three largest federal employee health plan options
the largest HMO plan offered in the state’s commercial market.

HHS Secretary Kathleen Sebelius stated in a press release that allowing states to select a plan, “would give states the flexibility to select a plan that would be equal in scope to the services covered by a typical employer plan in their state.”

Although states are given some flexibility, the essential health benefits package must include items and services from the following ten categories:

ambulatory patient services
emergency services
hospitalization
maternity and newborn care
mental health and substance abuse disorder services including behavioral health treatment
prescription drugs
rehabilitative and habilitative services and devices
lab services
preventive and wellness services and chronic disease management
pediatric services including oral and vision care.

Requiring health care plans to include essential benefits under each of these categories has led some to argue that the cost of health insurance premiums will increase drastically and some existing insurance markets may be disrupted.

Given the difference among states, and even within a state, one might expect a huge variety of services offered among a plethora of different plans. BenefitMall has reviewed plans sold in various markets and found that this is not necessarily the case. As Mr. DiFiore pointed out, the difference between markets lies primarily in the design details of each broad benefit category. As examples, Mr. DiFiore elaborates that prescription drugs may often only provide for generics, and rehabilitation is consistently offered but does not include habilitative or service devices.

Assessing Consumer Expectations
So what does this mean for the consumer? When examining the cost differences among the most popular plans in three large markets (e.g., California, Florida and Texas), BenefitMall data shows large discrepancies in almost every area of costs associated with health insurance plans. In particular, the data shows that in some areas, consumers are willing to pay higher premiums for an increased number of benefits and services. In fact, consumers most often choose deductibles that exceed the maximum that is $2,000 as outlined by PPACA’s definition of qualified health plans. The question of what benefit consumers are most likely to be willing to pay for also varies, as there is no clear preference as to a particular benefit.

Balancing a National Standard with State Flexibility
This means that states may find it increasingly difficult to lay out essential benefits for their citizens and creating a national standard will be further complicated. The call for a national standard has been echoed by many, including the Institute of Medicine (IOM). In a report titled “Essential Health Benefits: Balancing Coverage and Cost,” the IOM recommended establishing essential benefit packages guided by a national premium target and developing a process for updating benefits that accounts for new evidence about effective interventions and changes in provider and consumer benefits.

The flexibility afforded to states in determining what services to include as essential benefits is viewed by some as a convenient method to allow HHS to avoid making difficult decisions in implementing PPACA. Ron Pollack, the Executive Director of Families USA, argues “…flexibility must yield to reliable, comprehensive coverage of benefits for consumers…It is essential that HHS provide strong oversight and enforcement of Essential Health Benefits standards as they are implemented in the states.” Judy Waxman, vice president at the National Women’s Law Center, echoes this sentiment, “The disappointing part is that we still had hoped there would be some federal standard on what is medical necessity and how do you determine actuarial value.”

Finding a Solution
The cost of health care has been the topic of debate for months, and as Mr. DiFiore points out, there’s no apparent end in sight. Surveys have shown that 77% of consumers blamed insurance companies for high costs, and 70% believe insurers overcharge for products and services. What can be done to change this thought process while continuing to deliver high quality care?

Mr. DiFiore proposes that states narrowly define essential benefits within an exchange but also encourage multiple expanded benefit plans outside an exchange to provide consumers with the ability to purchase exactly what they want or need. By encouraging this plan of action, industry professionals must continue to educate customers as to the costs of health care and remain dedicated to an open dialogue of how best to achieve cost containment.

Click here to read more about the essential benefit issue.

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.

Federal Health Care Reform Overview: 2011 Wrap-Up and 2012 Outlook

Fri, 13 Jan 2012 15:08:00 -0600

In terms of federal health care reform, many social, economic and political forces are shaping how the Patient Protection and Affordable Care Act (PPACA) is being implemented. This Legislative Alert highlights some of the 2011 milestones and makes some key 2012 predictions.

Last year, the nation’s financial condition dominated public policy discussions, with members of the U.S. House of Representatives and U.S. Senate debating taxation rates, spending authorizations and proposals to jump-start a still weak economy. Although many key PPACA-enabled regulatory guidelines were finalized, many key health care reform activities also led to polarization and frustration.

Looking to the new year, it’s apparent the House, Senate and White House remain on different pages with varying agendas for the U.S. economy and health care system. Without a doubt, a key decision point in 2012 will be the U.S. Supreme Court ruling on PPACA’s constitutionality.

Looking Back: A Year in Review
Many key PPACA provisions were debated, revised and finalized in 2011 – with at least one notable requirement being repealed.

House Actions in 2011
The Republican Party held a clear majority in the House in 2011. Much of the year was spent in an attempt to repeal PPACA. On January 5, Rep. Eric Cantor (R-VA) introduced H.R. 2, the Repealing the Job-Killing Health Care Law Act , to repeal PPACA. The bill passed shortly after it was introduced, only to be voted down in the Senate.

The Republicans next turned their attention to the repeal of certain PPACA provisions that even the Democratic minority agreed were proving problematic. A provision requiring businesses to file IRS forms on transactions of $600 or more was struck down by both the House and Senate, and then signed into law by President Obama. Another PPACA fix was a revision to the eligibility standards for federal assistance that would have provided health insurance coverage for a family of four, with an income less than $60,000, seeking coverage through a state health insurance exchange.

In addition, several unsuccessful attempts were made to strip funding from the 2011 spending authorizations included in PPACA.

GOP members also challenged provisions of PPACA-inspired Title XXVII, the Public Health Service Act, in 2011. Rep. Michael Rogers (R-MI) was the principal sponsor of H.R. 1206: Access to Professional Health Insurance Advisors Act of 2011 , which would amend Title XXVII that protects Brokers’ commissions by moving commissions out of the administrative bucket of the Medical Loss Ratio (MLR). This legislation gathered some bi-partisan support, but still languishes in committee.

The Senate in 2011
The health care reform agenda in the Senate was nearly diametrically opposed to that of the House. Even with a slim majority of 51-47 (with two Independents caucusing with the Democrats), Democrats used Senate rules requiring that bills pass with a 60-vote majority to hinder the Republican minority. The goal of Senate Democrats was to forestall any attempts by the Republican House or the minority Senate Republicans to repeal or weaken PPACA. As expected, the vote to repeal PPACA was defeated on party lines. The Senate did repeal the $600 IRS filing provision and passed the amendment addressing the provision allowing families of four with incomes of $60,000 to receive full premium assistance for health insurance coverage obtained via the state health exchanges. All other attempts on the part of the Senate Republicans to amend PPACA, including revising the MLR provisions, failed.

The White House in 2011
The White House stayed above the legislative fray in 2011, other than occasional statements in support of PPACA. Most of the heavy lifting in the Executive Branch came from the U.S. Department of Health and Human Services (HHS), which was given broad rulemaking authority to implement PPACA legislative mandates. Under HHS, rules concerning the creation of state health insurance exchanges, state health information technology exchanges, accountable care organizations, consumer co-ops, essential benefits, health insurance premium rate review mechanisms and a host of other programs have been implemented.

2012 Outlook
Looking forward, we can expect to see more of the same type of activities from Congress and the Executive Branch. As with 2011, the nation’s leaders will partake in recurring votes to extend the borrowing authority of the federal government, promote the economy and address health care reform.

The House in 2012
The Republicans currently hold a 241-191 majority, and they will use that strength to pass bills that support a “smaller government” mentality. Efforts to repeal PPACA will continue with legislation similar to H.R. 2 , or by defunding PPACA’s spending authorizations. However, any bill that passes the House will face stiff resistance from the White House and Senate Democrats.

The Republican agenda also includes a more aggressive use of the House’s investigative powers. Some political experts are predicting an increase in House investigative panels seeking political advantage by raising sticky issues for the White House. Republicans may find considerable political gain by placing administration officials under oath and forcing them to defend the spending levels of their departments.

Late last year, Congress passed a 60-day patch in 2012 to prevent a significant increase in the payroll tax rate. A major order of business early this year for the Republican House will be to find an acceptable compromise to extend the current tax rate. Another primary issue the House must address is the Sustainable Growth Rate (SGR), which will forestall a 27% decrease in physician payments for Medicare services.

Failing to pass extensions on the payroll tax will result in higher payroll taxes for all, and failure to pass the SGR fix will culminate in a potential significant exodus of physicians who will find the new reimbursement rates to be below their cost of providing care to Medicare beneficiaries. At some point, the House will have to take action on increasing the government’s borrowing authority as well. Once again, compromises will have to be found, and there will be extensive political posturing right up to the deadline.

The Senate in 2012
The Democratic Senate majority need only maintain the status quo in 2012 to be perceived by many as winning the battle for their constituents. Democrats will likely use their majority to prevent almost all of the Republican agenda from becoming law. The Senate will focus on the payroll tax extension and the SGR fix. The Senate has not passed a budget in more than two years, and perhaps they will not pass one in 2012. At times, the Democrat leadership has appeared to be to the left of the President, and it will press for more aggressive spending on job creation and unemployment benefits.

The White House in 2012
The Obama Administration will gear-up for the election by pushing for more job creation legislation and extension of the payroll tax. Due to a legislative gridlock on Capitol Hill, the President will likely use his executive powers and rulemaking authorities to enact as much of his domestic agenda as possible.

The President is on record as favoring a re-election strategy similar to that of Harry Truman, which means running against a “do nothing” Congress. Theoretically, he could prevail in the upcoming election regardless of congressional action. Specifically, the passage of his agenda would strengthen his policy record, whereas congressional inaction would provide a convenient scapegoat for the current state of the union.

Assessing Future Variables
Perhaps the most significant variable to watch in 2012 will be the economy. If the U.S. economy rebounds, a greater percentage of Americans will likely approve of the President’s performance which in turn will improve his re-election prospects. However, if the economy continues to limp along, the President’s re-election prospects will dwindle, leaving Republicans empowered to pursue their agenda.

The future of health care reform could change dramatically depending on a number of different confounding variables in addition to the performance of the economy and President Obama’s staying power. For example, if the U.S. Supreme Court overturns the individual mandate provision, the remaining provisions in PPACA could saddle the insurance industry with the unsustainable obligation to cover anyone who applies with no pre-existing exclusion authority, unless other remedial action is taken by public policymakers.

Another game-changer could be a default on the part of Greece, Spain or Portugal, or the collapse of the Euro, which would create financial chaos in the world’s banking sector. Conflict in the Middle East could also cause a major disruption to the nation’s energy supply.

Under most scenarios, the balance of power between the House, the Senate and the White House will likely remain the same for the entire year. A power shift could occur due to the November 2012 election results. If the Republicans take a majority position in the Senate or win the White House, the current pattern of gridlock may come to an end by the end of the calendar year. Currently, given that the Republican House, the Democratic Senate and the President will view every action through an election-year filter, it is hard to see how the three stakeholder groups will be able to work together.

Throughout the year, BenefitMall will continue to publish Legislative Alerts and blogs to keep you update on important information impacting Brokers, consumers and other interested parties.

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.

Essential Benefits More Flexible for States

Fri, 16 Dec 2011 16:32:00 -0600

Today the U.S. Department of Health and Human Services (HHS) announced through a press release that state exchanges will now determine their benchmark for essential benefits based upon use of the most popular plans in their region and the 10 benefit categories of care that were originally defined in the health care reform regulations. With this new approach, a state exchange will select an existing plan to serve as the standard for the items and services that will be included in the essential benefits.

The existing plan selected would be:

One of the three largest small group plans in the state
One of the three largest state employee health plans
One of the three largest federal employee health plan options
Or, the largest HMO plan offered in the state’s commercial market.

This change to move the responsibility of essential benefits to the state level will give states the flexibility to match their exchange plans to those offered by a typical employer in the state. Further, states that have a more broad 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 needs of the residents of their state through the selections of health care coverage that they offer through their exchange.

HHS indicated that additional announcements will follow in the coming days to address exchange topics such as; cost share, deductibles, coinsurance and copayments. BenefitMall will continue to follow this story as more information is released on these topics. Click here to view today’s full HHS press release.

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.

State Exchanges Remain Unclear: A Dozen States Move Forward to Set Up PPACA Exchange Infrastructure

Wed, 07 Dec 2011 00:00:00 -0600

Under the Patient Protection and Affordable Care Act (PPACA), each state has been given the option to either create a state-run health insurance exchange or have a local exchange implemented and run for them by the federal government. The concept of an exchange is one of PPACA’s central vehicles through which individuals and small employers would be able to obtain health care coverage at rates similar to those enjoyed by large groups that have the ability to negotiate favorable discounts. It also will be used as a mechanism to provide subsidized insurance coverage to specific targeted populations.

States continue to deploy different strategies when addressing this opportunity. While some states have taken definitive action to either set up a state health insurance exchange or defer action; others are either in a holding pattern or dealing with the fact that legislation to establish a state health insurance exchange failed to get the nod from state lawmakers.

State Round-Up
As of November 28, 2011, 10 states had taken the necessary legislative steps to create their own state health insurance exchanges that meet PPACA’s guidelines. Those states are California , Colorado , Connecticut , Hawaii , Maryland , Nevada , Oregon , Vermont , Washington , and West Virginia .

Two states already have functioning state health insurance exchanges – Massachusetts and Utah – but will have to modify their current operations to comply with several key PPACA provisions.

Illinois and Virginia have stated their intent to create a health insurance exchange, but have not passed legislation to make it happen.

Several states have legislation pending including Michigan, New Jersey, New York, North Carolina, Pennsylvania and Wisconsin. In addition, the District of Columbia also is considering a bill.

The following 18 states failed to pass exchange enabling legislation: Alabama, Alaska, Arizona, Arkansas, Georgia, Indiana, Iowa, Maine, Minnesota, Missouri, Montana, New Hampshire, New Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina and Texas.

Government officials from South Carolina recently informed the U.S. Department of Health and Human Services (HHS) that the Palmetto State will not be establishing a state health insurance exchange. As a result, HHS will have to set one up.

States Face Challenges
States face several real challenges when attempting to create and operationalize state health insurance exchanges. Issues include addressing the moving target of supplemental regulations, the logistics and timing of creating a complex organization, and funding for ongoing operations.

Not only must a PPACA-authorized exchange recreate most of the infrastructure that BenefitMall has spent years perfecting, but each exchange also must develop an electronic process that automatically determines if an applicant is eligible for federal subsidies or qualifies for various public programs such as Medicaid or Medicare. Each state also needs to develop a process to determine which health plans are eligible for participation in the exchange. Not surprisingly, the wide range of governance requirements, workflow processes and infrastructure needs will take time and resources as states set up each exchange.

To help the states, HHS acknowledges that cost could easily create a chilling effect in moving forward and therefore has offered to support state-sanctioned exchanges by providing grants to help pay for the start-up expenses. The federal funds will empower states to continue to scope out and implement the exchange operations. Most states did agree to apply for and received the initial federal grants.

However, it is not clear how long this financial pipeline will last. For example, no federal funds have been earmarked to subsidize the state-run exchanges down the road. In addition, Congress did not authorize funding for the federal government to create and operate a local exchange in those states that refuse to establish their own, like South Carolina. The immediate prospects of Congress amending PPACA to provide additional funding are unlikely.

Another issue that will impact the success of exchanges is the unsettled definition of what constitutes an “Essential Health Benefit” (EHB) plan that state exchanges will offer. In October, the Institute of Medicine (IOM) released a report advising HHS on key processes and requirements to establish EHB coverage pursuant to PPACA. Most agree that a key policy goal is to ensure that the ESB standardized benefit levels are balanced both in terms of the cost and benefit design levels. If done correctly, exchanges will be in a better position to enroll and support individuals and small groups that need insurance.

Certainly, the political whirlwinds both at the state and federal levels will impact how exchanges are finally operationalized. Interestingly, all of the states that have legislation on the books to create a state health insurance exchange have Democratic legislatures and governors who are ideologically in favor of PPACA. Every state that has not passed legislation to create a state health insurance exchange has at least one legislative house controlled by Republicans who are ideologically opposed – in whole or in part – to PPACA.

The partisan lineup of the states will probably change after the 2012 elections – with some movement toward the Republican Party - unless the economy improves dramatically over the next 11 months. On a national level, all Republican presidential candidates have stated that seeking the repeal of PPACA will be among their first official acts as the newly-elected U.S. President. While there is still a lot of time between now and November 2012, the polls for many incumbents are not favorable. If the Senate or the White House changes parties, the survivability of PPACA in its current form is not likely. This would include PPACA’s enabling legislation for exchanges that would likely be modified or repealed as well. If the Republicans do not make gains, much of the status quo will continue until a new political dynamic emerges in Washington.

Another confounding variable that might impact how the exchange system is finalized is the judicial system through several ongoing legal challenges. For example, the exchange concept in many states would have to be revisited if the individual mandate to purchase health insurance is overturned. The U.S. Supreme Court has agreed to hear arguments on several issues related to PPACA’s constitutionality. States are understandably hesitant to expend the resources to establish one or more local exchanges if the Supreme Court is going to declare the individual mandate unconstitutional or overturn other key elements of PPACA. Without minimum numbers of individuals or small employer groups participating in an exchange, the entire “pooling” process would be actuarially unsustainable in most jurisdictions.

The future of state-based health insurance exchanges under PPACA will become clearer after the 2012 election, but in the meantime nobody has a crystal ball that can make an accurate prediction. PPACA may survive intact, or it may be declared all or in part unconstitutional. If the individual mandate is declared unconstitutional in part, will the surviving parts be actuarially sustainable? Will the 2012 elections significantly change the players? Even if none of the above changes, will the states be able to pull together state health insurance exchanges in the limited time left?

States will continue to take different directions in their respective approaches about how to set up and operate the exchanges. The state health insurance exchanges must be established and approved by HHS in time to receive the open enrollment activities of potential enrollees by October of 2013.

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.

HHS Issues MLR Rule Today

Fri, 02 Dec 2011 16:31:00 -0600

With probably little to no surprise to any of us, Health and Human Services (HHS) has released the Medical Loss Ratio (MLR) rule today supporting all of the regulations the National Association of Insurance Commissioners (NAIC) recommended more than a month ago. With this ruling comes the rejection of the most recent NAIC recommendation to exclude broker/agent fees from insurance companies’ allowed administrative costs.

Under the rule beginning in 2011, 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 allocated for 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 MLR requirements for health insurance issuers under the Public Health Service Act 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.

It is yet to be seen if the recent NAIC recommendation to support brokers/agents will gain additional momentum or acceptance as we proceed with elections and “a changing of the guard”. With the recent NAIC vote being 20 of the 26 “yes” votes from the Republican Party and 16 of the 20 “no” votes 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. BenefitMall has and will continue to diligently work to support the broker/agent community. We do not feel that today’s ruling will be the last chapter of this story, and we plan to proceed with the same aggressive lobbying, testifying and speaking on behalf of our broker partners and the need for their inclusion in the future of health care distribution.

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

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.

NAIC Approves Resolution Calling for MLR Changes

Mon, 28 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 (MLR). The NAIC recommends that the Department of Health and Human Services (HHS) and Congress 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 serve as consumer advocates in the process of securing health care coverage.

The resolution was heavily debated and passed over objections from many commissioners. The resolution recommends exempting insurance agents’ commissions from the MLR. It also suggests that HHS should take action to preserve agent participation in the health care process, even if such actions include making immediate changes to the implementation and enforcement of the MLR.

This debate has been in process for more than a year now, and BenefitMall has actively supported efforts to persuade the NAIC of the crucial role the broker/agent community play in the health care process. With lobbyists on the ground in several of our local markets, BenefitMall has seized opportunities to attend, participate and testify in several meetings associated with the NAIC’s review of the MLR. With our robust database of information and broad agent customer base, BenefitMall has provided insight through commission data and broker feedback as this debate has unfolded.

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 the many obstacles of health care reform. Together, we will now wait to see HHS’ response 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 the NAIC's resolution.

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.

HHS Releases Final ACO Rules

Thu, 17 Nov 2011 00:00:00 -0600

Recently, the U.S. Department of Health and Human Services (HHS) unveiled the final rules to establish and govern Accountable Care Organizations (ACO) under the Patient Protection and Affordable Care Act (PPACA). The ACO concept is an integral part of PPACA’s health reforms and the federal government intends for ACOs to be a primary driver in controlling the cost of future Medicare benefits, among other benefits. The ACO concept has generated massive amounts of public commentary during the rulemaking process.

What is an ACO?
An ACO is a mechanism that would allow physicians, hospitals and other health care providers to come together under an umbrella organization making them accountable for both the health of their patients and the cost of delivering care. The legislation creates a series of financial incentives to eliminate unnecessary health care procedures.

Under the existing Medicare payment system, health care providers are paid for their services. The more services they provide, the more they are paid. The ACO concept allows for health care providers to jointly share in the savings created by delivering the right care in the right setting at the right time, without the perverse incentive of providing unnecessary tests or procedures.

The ACO concept is designed to allow for a higher level of coordination of care and more efficiency in the back office functions of health care providers through the implementation of a single electronic health record for each patient. HHS estimates that as many as 150 ACOs could be formed by health care providers and approved by HHS.

When the interim final rules were released this past March, HHS Secretary Sebelius remarked, "We need to bring the days of fragmented care to an end. For way too long the federal government has been a bystander and in some cases a barrier, while others work to improve a health care delivery system that frustrates providers and fails patients." The 429 pages of interim final rules on the ACOs was met with considerable commentary and criticism. The general consensus was that the interim final rules were too difficult for most ACOs to comply with and thereby would create a chilling effect. HHS considered the public input and went back to the drawing board. To read BenefitMall’s earlier legislative alert about the interim ACO rules, click here .

The Final ACO Rules
The final rules for ACOs were released by HHS and published in the Federal Register on November 8, 2011.The preamble takes up most of the 649 total pages. The preamble describes in considerable detail the original intent of the legislation and the interim final rules, the public commentary on the interim final rules, and alternatives that were considered.

The final rules are a significant improvement over the prior interim guidelines. Improvements include :

List of Beneficiaries. The new rules provide that Centers for Medicare and Medicaid Services (CMS) will give ACOs a list of “probable beneficiaries” eligible for care, with quarterly updates. Beneficiaries cannot “sign up” voluntarily but will be assigned according to whether ACO members are their primary care physicians or have provided other professional care.
Shared Savings. Setting up ACOs will be expensive, but the rules offer a new “Advance Payments” option to ACOs lacking capital reserves or needing to cover short-term losses. ACOs will be allowed to share in every dollar of savings once minimum savings are achieved. The minimum savings will be based on the number of beneficiaries served without losing money.
Quality Metrics. The number of quality measures that ACOs will have to meet to qualify for bonuses was reduced from 65 to 33 with a longer phase-in, which appeals to most providers. ACOs will receive pay for reporting in year one, and pay for reporting and performance in years two to three.
Financial Commitment. Health care organizations creating ACOs must commit to handling the costs and managing them appropriately.
Physician-Hospital Alignment. The success of an ACO will, in large part, be measured by how physicians are engaged in the process as they align with hospitals since physicians are actively managing patient outcomes.
Rural Health Centers. Community health centers and rural health clinics, which were left out of the prior proposed ACO rule, will be allowed to lead ACOs, bringing the benefits of accountable care to smaller areas.
Timeline. CMS has relaxed the timeline, allowing health care organizations to apply for the launch of ACOs throughout 2012.

Waiver of Physician Self-Referral Provisions
Concurrent with the release of the final rule on ACOs, HHS and the Office of Inspector General (OIG) released interim final rules that waive the federal physician self-referral law and the anti-kickback statute. For a synopsis of this complex process, please go here .

Challenges Remain for ACOs
Initial comments from provider organizations were reserved, but positive. However, there are two major challenges that remain in place.

The first challenge is the cost of creating the infrastructure necessary for the creation of an ACO. CMS estimates that it would cost $580,000 in startup costs and $1.2 million in working capital to operate an ACO. These estimates have proven to be optimistic. After having incurred the cost of establishing an ACO and raising the working capital, the ACO may not break even or make money if the organization does not generate savings and/or qualify for a bonus from CMS.

The greater challenge for those deciding whether or not to invest the time, effort and financial resources to form an ACO is that the promised “savings bonus” may not be worth the effort. As elaborated in the Remington Report :

“One basic problem remains – a problem that is built into the core of the Shared Savings Model: at best, the model permits an ACO to receive 60 percent of the savings that it created, with CMS taking the other 40 percent.

“To create a dollar in savings, the hospital or medical group must give up a dollar of Medicare revenue. This dollar of gross revenue would make a contribution to both the fixed costs of keeping the hospital or medical group operating and to the marginal cost of providing the service that, if provided, would gain the dollar of Medicare revenue for the organization. Each organization will have to decide whether the sixty cents in shared savings that it can, at most, receive is worth more than the dollar in gross revenue that it is giving up...Additionally, an ACO that chooses the second track (the track that permits it to receive 60 percent, rather than 50 percent, of savings generated), risks having to pay CMS a share of any costs that exceed the predicted costs for the ACO’s population of patients……

“In other words, the shared savings ‘bonus’ is not really a bonus. Under the program as designed even an efficient, high-quality ACO will gain less money from sharing in savings than it would have earned if it had simply continued with business as usual. And there is no real bonus for quality – at best, an ACO can receive the maximum amount of shared savings possible – i.e., at most 60 percent of the savings it created for CMS – but no additional funds for quality. This is a fundamental flaw in the design of the program – a flaw created by Congress, and which only Congress, not CMS, could remedy.”

Summary
The process of overhauling the nation’s health care delivery system is a massive undertaking. The extent of that effort is reflected in the thousands of pages of legislation and rules created by PPACA. The ACO concept is a critical component of the Administration’s efforts to contain the annual cost increases for health care. The final ACO rules represent a significant improvement over the interim final rules released last spring, but there is still work to be done before the ACO concept will deliver the cost containment promised by the authors of PPACA. It also will be interesting to see what, if any, role brokers will have in adding ACOs to their health offerings in the future.

Here are some helpful resources:

The Shared Savings Program final rule (See Final Rule on Shared Savings Program: Accountable Care Organizations).
The Advanced Payment solicitation
Fact sheets are posted here and here .
The joint CMS and Department of Health and Human Services Office of Inspector General (OIG) Interim Final Rule with Comment Period addressing waivers of certain fraud and abuse laws in connection with the Shared Savings Program can be found here . (See Request for Public Comment on Final Waivers in Connection with the Shared Savings Program).
The Antitrust Policy Statement is posted here and here .
The Internal Revenue Service (IRS) Fact Sheet, Tax-Exempt Organizations Participating in the Medicare Shared Savings Program through Accountable Care (FS-2001-11), is posted 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.

Bernard DiFiore Addresses Essential Benefits to HHS

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

BenefitMall’s President and Chief Executive Officer, Bernard DiFiore, met with the Department of Health and Human Services (HHS) today in Dallas to address the topic of essential health benefits. HHS has set up a series of meetings across the United States to hear from invited healthcare stakeholders to learn about the different needs and expectations for establishing specific criteria for essential health benefits before final recommendations are written.

Essential health benefits are the required categories of coverage health plans must provide beginning in 2014. The Affordable Care Act defines essential health benefits to “include at least the following general categories and the items and services covered within the 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 and chronic disease management; and pediatric services, including oral and vision care.''

Based on BenefitMall's extensive database of sold coverages across the United States, DiFiore reported to HHS that the actual scope and cost of benefits offered by small businesses today is significantly less than what is expected to be mandated in 2014. Benefits and costs vary significantly by geographical region, thus further complicating a national standard.

Representatives from HHS are aware of many of the issues presented by the attendees at the meeting and appreciate their input. The process of defining essential benefits is extremely difficult given the expansive availability of care and the limits of cost.

DiFiore also noted that "It is important to find a successful balance between providing affordable coverage while establishing a reasonable level of benefit protection. If we continue to increase the cost by mandating a comprehensive set of essential benefits, we place further unwanted burdens on the business owner and their employees."

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 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.

Capitol Hill Fall Highlights

Wed, 26 Oct 2011 00:00:00 -0500

As the Presidential primaries continue to heat up, Congressional lawmakers face an extensive list of legislative priorities requiring attention before the holiday recess. While many of the pressing issues revolve around the sluggish economy, health care is still on the radar.

Continuing Budget Challenges and the Super Committee

Due to the failure of Congress to pass a budget for both fiscal year 2011 and 2012, the federal government has had to operate on a series of continuing budget resolutions. At the time of this update, the U.S. House of Representatives has only passed six of the 12 appropriations bills and the U.S. Senate has only passed one of the 12 appropriations bills necessary to keep the wheels of government turning. This budgetary impasse is having a negative effect on the nation’s economy. In order to attempt to bridge this gap, both houses approved legislation called The Budget Control Act of 2011 (the Act) that created a temporary joint committee, called the Joint Select Committee on Deficit Reduction, to hammer out a grand budget compromise.

The legislation authorized the ranking majority member of each house respectively to appoint six members each to what has come to be called, the “Super Committee.” The members of the Committee can be found here . As you might expect, the Republican House appointees are not interested in many defense cuts or new taxes, and the Democrat Senate members of the Committee are generally opposed to any cuts to the welfare/entitlement programs and are actively seeking new tax revenues. Each side appears to represent a microcosm of the two houses they represent.

The Act amends the 2012 budget resolution. The House and Senate Appropriations Committees are tasked with finding an additional $24 billion in cuts to the existing 2012 continuing budget resolution. In order to attempt to protect the current fragile economy, the compromise will seek limited reductions in FY 2012 and 2013, and will significantly increase the reductions in the latter years.

The total federal budget amount that will have to be cut is $1.5 trillion over the next 10 fiscal years. The Super Committee must vote on an initial recommendation to cut spending no later than November 23. To see a more detailed listing of the deficit reduction timelines, click here .

If by January 2, 2012, both houses of Congress have not adopted the Super Committee’s report to reduce the deficit by at least $1.5 trillion, the Act implements automatic spending cuts to both defense and non-exempt domestic programs. If spending levels remain as projected, the anticipated cuts to defense spending will be around 8.4% and the cut to non-exempt, domestic programs (other than Medicare) will be around 6.7%.

By the end of this calendar year, the Act also requires that both houses vote on a Balanced Budget Amendment to the U.S. Constitution.

Members of the Republican leadership have gone on record as saying that the recommendations of the Super Committee may be the best possible outcome they will find in 2012. Majority Whip McCarty (R-CA) has already started rounding up support for the anticipated recommendations. The Democrat side is reserving its options for now, but has stated that it expects to raise new tax revenues. We will report further developments to you as this process unfolds.

Beyond Deficit Reduction
While the Super Committee is grabbing all the headlines, it’s important to keep an eye on the other legislative activities – including Patient Protection and Affordable Care Act (PPACA).

Senate Agenda
When the Senate majority isn’t focused on the Super Committee and the impending impact on the budgets, they are focused on the economy and jobs. The Senate refused to approve the President’s job proposal and is now moving to address many of the elements of the job proposal piece-by-piece. Of the 10 issues highlighted by Senate Majority Leader Reid at the beginning of this legislative session, jobs and the deficit are consuming most of the oxygen on that side of Capitol Hill.

The Democrat majority in the Senate is in a tough spot. The Washington Post recently reported :

“House Republicans have the energy. President Obama has the spotlight. And thus (the Senate has) become the third wheel of democracy — with a lesser role in Washington’s broader debates, and without the votes to overcome Republican filibusters in their own chamber.

"In response, Senate Democrats have adopted a minimalist agenda. They have blocked bills from the GOP-led House but proposed few broad ideas of their own — hoping to keep vulnerable incumbents from having to make controversial decisions before the 2012 elections.”

The thin agenda is not sitting well with Obama’s fellow Democratic senators, but none were offering alternatives .

The House Agenda
On the other side of the Capitol, the Republicans who control the U.S. House of Representatives are working on an aggressive economic agenda. The Republican committee chairs and congressional leadership are focused on key issues involving deficit reduction, health care reform, job creation and economic recovery. The House has introduced more than one thousand bills since the 112th session commenced in January. However, due to the gridlock in Congress, most if not all will not be approved in the Senate.

Earlier this year, as noted in a previous BenefitMall blog , a bill to repeal PPACA passed the House by a substantial margin, but failed to pass the Senate on a party line vote. Having failed to repeal PPACA, a new effort surfaced in the House to freeze PPACA implementation.

House Budget Committee Chairman Paul Ryan (R-WI) is calling for Republicans to support a comprehensive "replacement" of PPACA. He proposes the federal government provide limited financial contribution to help Americans obtain health insurance coverage. In a presentation made at the Hoover Institute at Stanford University, Rep Ryan recently noted: "While Republicans have advanced many good ideas on health care, it is my candid opinion that the party as a whole has yet to coalesce around a complete reform agenda aimed at dealing with the underlying problem, which is runaway inflation in the cost of health care.”

Health Care Legislative Highlights
OpenCongress is reporting and tracking hundreds of bills that have been introduced directly impacting health care. Here are some highlights in terms of subject matter:

General health issues - 565 bills
Health care costs and insurance - 267 bills
Health care quality - 71 bills
Health facilities and institutions - 129 bills
Health information and medical records - 144 bills
Health personnel - 171 bills
Health program administrative and funding - 231 bills
Health promotion and preventive care - 149 bills
Health technology, devices and supplies – 69 bills
Insurance industry and regulation – 29 bills
Medicaid – 97 bills
Medical education – 72 bills
Medical ethics – 22 bills
Medical research – 168 bills
Medical tests and diagnostic methods – 100 bills
Medicare – 201 bills

Here are some highlights relating to several specific bills:

The Freeze and Investigate Affordable Care Act
Rep. Sam Johnson has introduced the Freeze and Investigate Affordable Care Act, H.R. 3095 , which would freeze the provisions of the health reform law that are not yet in effect until its full impact has been studied. “This law is not what Americans asked for,” said Johnson. “Already, insurance premiums have skyrocketed, forcing employers to pass on the financial burden to their employees. Continuing to implement this ill-advised policy is harmful to the economic recovery of our nation.”

H.R. 1184: Health Care Waiver Transparency Act
Another bill introduced by Rep. Darrell Issa (R-CA) would mandate transparency in the waiver process. This bill would “require greater transparency concerning the criteria used to grant waivers to the job-killing health care law and ensure that applications for such waivers are treated in a fair and consistent manner, irrespective of the applicant's political contributions or association with a labor union, a health plan provided for under a collective bargaining agreement, or another organized labor group.” No further action has been taken on this bill. For additional information, see this BenefitMall blog .

H.R. 1206: Access to Professional Health Insurance Advisors Act of 2011
Introduced by Reps. Mike Rogers (R-MI) and John Barrow (D-GA), this bill would remove insurance broker fees from the calculation of the Medical Loss Ratio (MLR) formula. The current MLR formula penalizes insurance companies that pay commissions to brokers. A committee hearing was held on this bill, but no further action was taken. For additional information, see this BenefitMall blog .

Other bills we have covered in previous BenefitMall blogs include legislation supporting:

Health Saving Accounts – see "The Family and Retirement Health Investment Act of 2011” (H.R. 2010 , S. 1098 )
Medical Liability Reform – see “Help Efficient, Accessible, Low Cost, Timely Healthcare (HEALTH) Act of 2011” (H.R. 5 )

This is only a snapshot of the more than 4,200 bills introduced in the 112th Congress. Both chambers are beginning to focus on the 2012 elections that are now just over one year away. As Congress moves closer to that November 6, 2012 date, the opportunity to find compromise on these issues will continue to shrink. The bipartisan effort earlier this year to successfully repeal the PPACA 1099 clause has proven to be the rare exception. It appears increasingly clear that substantive amendments to PPACA, if any, will have to await the 2012 election results.

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 Coverage Affordability - IRS Seeks Public Comment on Proposed Rule

Thu, 13 Oct 2011 00:00:00 -0500

The Internal Revenue Service (IRS) has released a new proposed Rule, Notice 2011-73 , which establishes a safe harbor for employers under the “shared responsibility” provisions of the Patient Protection and Affordable Care Act (PPACA). Beginning 2014, PPACA requires mid-to-large sized employers to offer their full-time employees a baseline insurance coverage policy. The concept of the “affordability” assessment leading to a “safe harbor” for employers is designed to help businesses determine whether or not they need to pay any additional funds and/or pay a penalty if they are not covering enough or any of the health insurance costs for their employees.

Under the shared employer responsibility requirement, commonly referred to as the “pay or play” mandate, employers with 50 or more employees must provide affordable “minimal essential” health coverage to their full-time employees or pay a penalty. In addition, coverage under an employer-sponsored plan is affordable to a particular employee if the employee’s required contribution to the plan does not exceed 9.5% of the employee's W-2 wages. The safe harbor would allow employers to prospectively and more accurately make a determination of the “affordability” threshold of their group insurance offerings.

The proposed rule is open to public comment, which must be submitted to the IRS by December 13, 2011.

Background
Last spring, the IRS released Notice 2011-36 , a request for public comment intended to jump-start regulatory guidance of the shared employer responsibility provision in Section 4980H of the Internal Revenue Code (with an effective date of January 1, 2014). Section 4980H mandates that employers with 50 or more full-time employees be liable for a “shared responsibility” assessable payment of $3,000 if any full-time employee is certified to receive a premium tax credit or cost-sharing reduction if the employer:

Fails to offer to its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; or
Offers its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan who has been certified for the advance payment of an applicable premium tax credit or cost-sharing reduction, either is unaffordable or does not provide minimum monetary value.
The IRS has had the opportunity to consider the public commentary generated in response to Notice 2011-36.

New Proposed Rule
In an attempt to address the issues raised by the comments, the IRS recently released Notice 2011-73 (2011-21 I.R.B. 792) – Request for Comments on Health Coverage Affordability Safe Harbor for Employers (Section 4980H). This recent notice is a request for public comment on a series of proposed IRS rules designed to clarify the employer requirements and provide a safe harbor to employers offering employer-sponsored health insurance to their employees.

The new rule addresses several key issues. For example, the proposed rules appear to confirm what many benefits specialists were predicting - that Section 4980H only applies to full-time employees, not to dependents. If the proposed rule becomes effective, employers will not have to pay the shared responsibility penalty if dependents choose to not participate in the employer-sponsored health insurance program.

The proposed rule also simplifies the test for providing “affordable” health insurance to employees. As long as the employee contribution remains at or below 9.5% of the employee’s wage paid by the employer, the employer-sponsored health insurance benefit will be deemed “affordable” and will not subject the employer to the $3,000 shared responsibility penalty. This is a significant improvement over the previous speculation that the 9.5% affordability level would be applied to the household income of the employee, and would have required the employer to monitor the household incomes of its employees.

On another employer tax matter related to PPACA, see BenefitMall’s previous blog on PPACA Small Business Tax Credits published earlier this year.

Submitting Comments
Comments on the proposed rule may be submitted three ways:

Email to Notice.Comments@irscounsel.treas.gov (include “Notice 2011-73″ in the subject line).
Mail to Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-73), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
Hand delivery may be made to CC:PA:LPD:PR (Notice 2011-73), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, DC, between 8:00 a.m. and 4:00 p.m., Monday through Friday.

The deadline for comments is December 13, 2011. Remember your comments will become part of the public record and are not confidential.

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.

Future of Brokers’ Commissions

Wed, 28 Sep 2011 13:37:00 -0500

On September 15, 2011, the House Energy and Commerce Subcommittee on Health heard testimony regarding the treatment of Brokers’ commissions in the Medical Loss Ratio (MLR) portion of the Patient Protection and Affordable Care Act (PPACA), as well as the effect the interim final rules on grandfathering will have on the health insurance marketplace (specifically, the MLR Repeal Act of 2011, HR 2077).

Subcommittee Chair Joseph R. Pitts (R-PA) provided the opening remarks, quoting President Obama:

On July 21, 2009, Obama stated, “If you like your current plan, you will be able to keep it. Let me repeat that: If you like your plan, you’ll be able to keep it.”
He also said in April of 2010, “If you like your insurance plan, you will keep it. No one will be able to take that away from you. It hasn’t happened yet. It won’t happen in the future.”

“Despite these repeated claims,” Pitts noted, “it has become abundantly clear that Obama’s ‘if you like it, you can keep it’ promise to the American people has been broken. By the Administration’s own estimates, 49 to 80 percent of small-employer plans, 34 to 64 percent of large-employer plans, and 40 to 67 percent of individual insurance coverage will not be grandfathered by the end of 2013.”¹

Grandfathering Pros and Cons

Steve Larsen, director of the Center for Consumer Information and Insurance Oversight of the Centers for Medicare and Medicaid Services, Department of Health and Human Services (HHS), provided the subcommittee with arguments in favor of PPACA’s grandfathering and MLR provisions. Despite his concise and systemic defense, his testimony failed to break new ground on the issues.

Testifying on behalf of the Galen Institute was President Grace-Marie Turner who said, “It is in the interest of both employers and employees to keep health costs down, and the grandfathering regulations issued by HHS restrict their ability to do that.” Her testimony provided several key observations²:

While most companies initially hoped they would be able to preserve much of their existing group health plans under the new grandfather provisions, a survey by Aon Hewitt Consulting found almost all will not. The Administration’s own estimates indicate most employers will not be able to maintain grandfathered status.
The grandfathering rules box employers into a corner. They cannot make changes or implement minor modifications to their health plans to keep costs down without being forced to comply with expensive PPACA regulations that increase their health costs.
Health costs are directly related to creation of new jobs. Higher health costs put
additional pressures on the employer’s bottom line and increase the cost of hiring new workers, in turn discouraging job creation. This is not good news for the economy or for unemployed workers.

The MLR Misfire

Janet Trautwein, CEO of the National Association of Health Underwriters (NAHU), urged subcommittee members to find a quick and bipartisan solution to the MLR problem. “The economic outlook for many health insurance agents and brokers across the country continues to be bleak,” she said. "As health insurance companies renew and revise their agent and broker contracts for the upcoming year, it is clear the financial situation for many of these business owners is getting worse.”³

She continued, “I am here to save agent and broker jobs and preserve individual consumer and employer access to professional health insurance advocates. I am not here to score political points. There are too many American businesses at stake.”⁴

Trautwein summarized her powerful testimony by stating:

“Removing agent and broker pass‐through commissions from the MLR calculation would restore economic stability for licensed health insurance advisors nationally and it would benefit health insurance consumers and health insurance markets. Exempting the pass‐through fees would preserve existing cost‐saving practices by the producers in the current health insurance market, furthering the intent of the PPACA MLR provisions to reduce overall spending on administrative costs. At the same time, it would preserve important operational conveniences and consumer protections for small businesses and individuals. Finally, eliminating independent producer commissions from the MLR calculation will go a long way toward providing uniform and needed relief to all health insurance markets – and the consumers who reside within them – during the transitional period as PPACA requirements are fully implemented over the next three years.”⁵

She also said that NAHU supported the passage of HR 1206 as well as the repeal of PPACA and subsequent rules via HR 2077.

Wendell Potter of the Center for Public Integrity expressed support of PPACA’s treatment of the grandfather issue, while continuing his attacks on the health insurance industry. His testimony was consistent with prior statements made on the MLR issue as a National Association of Insurance Commissioners’ consumer representative.⁶ He portrayed the health insurance industry as being rapacious and one that must be regulated to the highest extent.

“The top priority of for-profit companies is to drive up the value of their stock,” Potter said. “Wall Street’s dictates determined whether millions of American families would be offered coverage, whether they could keep it, and how much they would be charged for it, but ignores the fact that large segments of the large health insurance carriers are not-for-profits.”⁷

Finally, Lynn Bates Quincy, senior policy analyst for the Consumers Union, in her testimony stated, “The proposed legislation would broaden the definition of what qualifies as a grandfathered plan and calls for a blanket exemption from all PPACA requirements. If enacted, this proposal would reduce access to valuable new consumer protections.”⁸ She further noted, “The proposed legislation not only broadens the definition of grandfathered plan but also expands the list of consumer protections that would no longer apply.”⁹

According to Bates, “Proposals to repeal or weaken the MLR rule should be rejected. These proposals would raise premiums for consumers. In 2014, that means increasing the need for tax-payer financed subsidies. The current MLR provision is working and should be retained. The current MLR rule is providing a value for consumers in the form of lower premiums and more medical care for their premium dollar.”¹⁰

Chairman Pitts summarized the issues by stating:

“Again, while the MLR has been billed as a tool to protect consumers from insurance companies, many states are clamoring for waivers to exempt their citizens from these protections.”
The Secretary of HHS is empowered to grant MLR waivers to states that can prove that meeting the 80 or 85 percent thresholds will destabilize its insurance market.
Currently, HHS has granted MLR waivers to five states – Maine, New Hampshire, Nevada, Kentucky, and Iowa. With these waivers, consumers in these states are now protected from one of the health care law’s key “consumer protections.”
Residents of North Dakota and Delaware are not as lucky. HHS rejected their waivers.
Nine more states – Florida, Georgia, Louisiana, Kansas, Indiana, Michigan, Texas, Oklahoma, and North Carolina – have determined their insurance markets will be destabilized by having to comply with the MLR regulation.

“The MLR regulation is also costing jobs at a time when unemployment remains stubbornly above 9 percent,” Pitts concluded. “HHS’ interim final rule on MLR includes health insurance agent and broker commissions in the ‘administrative costs’ category. Many plans, desperate to meet the 80 or 85 percent threshold, simply cannot afford to use brokers and agents as they once did. I strongly support H.R. 2077, introduced by Dr. Tom Price and Rep. Cathy McMorris Rodgers, which repeals the section of the Public Health Service Act dealing with MLR requirements, which was added by the new health care law, and I would urge my colleagues to support it.”¹¹

BenefitMall recognizes that these are significant issues that go to the very heart of how Brokers can support their clients. It is encouraging that these hearings are being held, but the short-term reality is that HR 2077 will not proceed beyond the U.S. House of Representatives. We will continue to bring these issues to your attention.

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.

Pitts Hearing
Turner Hearing
Trautwein Hearing see page 2
Trautwein Hearing see page 5
Trautwein Hearing see page 6
2010 Consumer Report
Potter Hearing
Quincy Hearing see page 2
Ibid see page 3
Ibid see page 8
Pitts Hearing see page 3

Making Exchanges Affordable

Mon, 29 Aug 2011 00:00:00 -0500

On August 12, 2011, the Department of Health and Human Services (HHS) and U.S. Treasury Department (Treasury) jointly issued a series of new proposed rules intended to make state health insurance exchanges more affordable pursuant to the Patient Protection and Affordable Care Act (PPACA).

What is the government trying to accomplish with these rules?
The proposed rules represent a continuing effort on the part of HHS and Treasury to create the groundwork leading to implementation of affordable state health insurance exchanges. Both government agencies share a vision – to provide a one-stop shop in which the following would be accomplished for Medicare and Medicaid eligibles to:

Improve access to care by filling in coverage gaps for low-income populations;
Decrease the complexity of and barriers to Medicaid and Children’s Health Insurance Programs (CHIP) eligibility and enrollment;
Simplify and streamline Medicare and Medicaid eligibility determinations and redeterminations, increasing coverage and reducing administrative costs;
Provide for coordination of Medicaid and CHIP eligibility procedures with the procedures that will apply to eligibility determinations for the premium tax credits and other insurance affordability programs;
Implement eligibility parameters for advance payments of premium tax credits and cost-sharing reductions and enrollment in a qualified health plan through the exchanges;
Establish the criteria (developed by the Treasury) regarding the health insurance premium assistance tax credits; and
Promote a framework for states to implement changes to the Medicaid program that will take place in 2014 as a result of PPACA.

A copy of the rules is available here .

How many different proposed rules have been issued by the federal government addressing PPACA’s exchanges?
HHS, Treasury and the U.S. Department of Labor have been working closely to release guidance related to exchanges in several phases, including:

The first in this series was a Request for Comment relating to exchanges, published in the August 3, 2010, Federal Register (75 FR 45584).
Second, Initial Guidance to States on Exchanges was issued on November 18, 2010.
Third, a proposed rule for the application, review, and reporting process for waivers for state innovation was published in the March 14, 2011, Federal Register (76 FR 13553).
Fourth, two proposed regulations were published in the July 15, 2011, Federal Register to implement components of the exchange and health insurance premium stabilization policies in the Affordable Care Act (76 FR 41866).
Fifth, a proposed regulation establishing the Consumer Operated and Oriented Plan (CO-OP) Program was published in the July 20, 2011, Federal Register (76 FR 43237).

Click here to view a recent BenefitMall Legislative Alert regarding the background of state health insurance exchanges.

What do the most recent rules seek to accomplish?
The new rules are intended to:

Create a seamless enrollment process for all individuals and small employer groups.
Codify the process through which individuals who meet the eligibility requirements will receive premium tax credits to help defray insurance costs. The premium tax credits will assist millions of lower and middle class Americans to enable them to purchase affordable health insurance.
Expand Medicaid eligibility to individuals with family incomes at or below 133 percent of the Federal Poverty Level (FPL) and eliminate categorical exclusions for all states.
Simplify eligibility rules for most Medicaid and CHIP beneficiaries by implementing a simplified income standard for determining Medicaid eligibility known as the Medicaid Applicable Modified Adjusted Gross Income (MAGI) standard for most populations the Medicaid program will serve (including children and adults under age 65).
Create a series of policies to ensure that individuals who do not meet the simplified income test are evaluated for Medicaid eligibility on other bases such as disability, and for potential eligibility for other insurance affordability programs including premium tax credits.
Streamline the processes designed to create a seamless enrollment experience across Medicaid, CHIP and the state health insurance exchange, which may be accomplished through complete integration of all insurance affordability programs into one administrative entity or through the use of shared services and agreements to promptly and efficiently adjudicate placement for most individuals.
Further simplify the administrative burden by making Medicaid enrollment renewal policies consistent with other insurance affordability programs by establishing a standard 12-month period of eligibility absent information indicating a change in circumstances.

How will these proposed rules accomplish these goals?
The most recent rules focus on the following:

The proposed rules detail the standards and process for enrolling in qualified health plans and insurance affordability programs. They also outline basic standards for the small group employer participation in a Small Business Health Options Program (SHOP).
The electronic eligibility process will minimize the burden upon applicants and the states to provide and verify applicant information, which should result in near real-time eligibility confirmation and enrollment. The use of mandated, standardized forms and information will facilitate this process.

How do individuals qualify for tax credits for enrolling in a health plan?
Beginning in 2014, federal taxpayers with household incomes between 100 and 400 percent of the Federal Poverty Level will be eligible for premium tax credits for health insurance coverage purchased through a state health insurance exchange for themselves and members of their family. The premium tax credits are paid in advance to the health insurance provider. This advance payment will reduce the monthly premiums owed by families to purchase coverage. The Congressional Budget Office estimates that when PPACA is fully phased in, individuals receiving premium tax credits will get an average subsidy of over $5,000 per year.

In addition, the Treasury’s proposed rules provide the eligibility standards for the premium tax credit as well as guidance on how premium tax credits are to be calculated. The exchange will follow these standards in determining eligibility and calculating advance payments of the premium tax credit.

What will be the financial impact of these changes?
The Congressional Budget Office estimates that an additional 16 million people will be covered under the revised Medicare and Medicaid provisions. These changes in Medicaid will significantly increase the cost to states and the federal government. CMS further estimates that state expenditures on behalf of the additional individuals and families gaining Medicaid coverage as a result of the PPACA will total $2.7 billion in FY 2014, $4 billion in FY 2015, and $4.9 billion in FY 2016. The total increase in state coverage costs for FY 2012 through 2021 is estimated to be $80.3 billion. At the same time, the transitional Federal Medicaid Assistance Percentages for expansion in states is estimated to transfer $35.5 billion from the federal government to the states for 2012 through 2021. Thus, the net impact on the states is estimated to be $44.8 billion in additional coverage-related costs from 2012 through 2021.

CMS estimates that the federal government will cover about 94 percent of total additional Medicaid expenditures in FYs 2012-2021, with states paying the balance of six percent. The anticipated impact on the federal budget is substantial. CMS estimates that as a result of PPACA, the Office of the Chief Actuary of CMS estimates an increase in net federal spending on Medicaid benefits for the period FY 2014 and later, with the increase estimated to be about $45.4 billion in 2014 and about $202 billion over the three-year period from FY 2014 through 2016. To see the full report please go here .

How is HHS dealing with the fact that only 10 states have passed legislation to establish a state health insurance exchange?
HHS Secretary Kathleen Sebelius has sent a letter to each of the governors of the fifty states. The letter solicits their comments on the proposed rules and provides the governors with her perspective on why each state should take the appropriate steps to establish a state health insurance exchange. In addition to soliciting public comment on these rules, HHS will hold town hall meetings in the following cities to allow people to ask their questions and voice their comments. Two meetings in Denver and Portland, OR already have taken place. Future meetings will take place at these locations and times:

Atlanta, GA – September 13
New York, NY – September 21
Sacramento, CA – September 22
Chicago, IL – September 26

According to Politico.com, “the meetings are invite-only for groups working on implementing exchanges in the states (insurers, consumer advocates, etc.).” If BenefitMall learns anything more about the meetings, we will be sure to notify you.

What are people saying about the proposed rules?
As with many aspects of PPACA, there are supporters and detractors. "Too many American families have been priced out or locked out of the health insurance market. Exchanges will give them control and could save them thousands of dollars a year," said Secretary Sebelius . "I am encouraged by the progress states have made to date and am excited to give them more resources to continue their work."

"Today, we're laying the foundation to provide tax incentives to help working families purchase health insurance," Treasury Secretary Tim Geithner said in a news release . "This new tax credit brings us a big step closer to achieving one of the signature goals of the Affordable Care Act – to provide tens of millions of Americans with access to affordable health insurance coverage.”

On the other side of the spectrum, critics believe "HHS keeps dipping into its ObamaCare slush funds even as states are sending the money back . . . and continues to claim that ObamaCare will save money, when every non-partisan expert attests that its taxes and mandates are already increasing premiums and will reduce jobs," said Michael F. Cannon, director of health policy studies at the Cato Institute in a recent article . "Have they learned nothing from the recession or the debt crisis?" added Cannon, who said that the "'streamlined’ ObamaCare rules . . . run more than 1,000 pages in length.”

How can I comment on these proposed rules?
You may submit comments in one of three ways:

1. Electronically. You may submit electronic comments via this link .

2. By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS–0032–IFC, P.O. Box 8013,
Baltimore, MD 21244–8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY:

Centers for Medicare & Medicaid Services
Department of Health and Human Services,
Attention: CMS–0032–IFC, Mail Stop C4–26–05,
7500 Security Boulevard, Baltimore, MD 21244–1850.

Comments should reference the file code CMS–9974–P

What is the deadline for public comments?
The deadline for public comments is October 31, 2011, at 11:59 PM ET. Please remember that all public comments are available for public inspection.

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.

Standardizing Health Insurance Data

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

The U.S. Department of Health and Human Services (HHS) recently released an interim final rule (Rule) for public comment that addresses the need for health data standardization and the improved efficiency of health information flows. The proposed regulation, the first in a series intended to simplify administrative processes, establishes operating rules for the electronic verification of patient eligibility for a health plan, the processing of health insurance claims, and the verification of insurance claim status.

Effective January 1, 2013, the Rule requires that all health care providers, facilities, claims processors/payers and health insurance claims clearing houses must comply.

A copy of the proposed Rule is available by clicking here.

What are some of the anticipated benefits of the proposed Rule?

If this Rule is adopted and successful, the new regulation should help decrease administrative costs and make several key health care transactions more efficient. The Rule also will free up more time for health care providers to spend with patients instead of processing paperwork. If HHS is successful in cutting down the number of health care claims that are hung up in the system or incorrectly paid, brokers will spend less time interceding on behalf of their clients trying to clear up these types of problems with insurance carriers. Generally speaking, standardizing health care claims should pay dividends to everyone.

Under what authority was this interim final Rule released?

The Rule was issued pursuant to section 1104(b)(2) of the Patient Protection and Affordable Care Act (PPACA). Congress required the adoption of operating rules for the health care industry and directed by the HHS secretary to ‘‘adopt a single set of operating rules for each transaction with the goal of creating as much uniformity in the implementation of the electronic standards as possible.’’

What does the Rule specifically target?

The Rule focuses on two Health Insurance Portability and Accountability Act of 1996 (HIPAA) transactions: 1) eligibility for a health plan; and 2) health care claim status. The proposed regulations also define the term ‘‘operating rules’’ and promotes key workflows to improve the targeted electronic transactions.

In general, transaction standards adopted under HIPAA enable electronic data interchange through a common interchange structure, thus minimizing the industry’s reliance on multiple formats. Operating rules, in turn, attempt to define the rights and responsibilities of all parties, security requirements, transmission formats, response times, liabilities, exception processing, error resolution and more, in order to facilitate successful interoperability between data systems of different entities.¹

What is the background of this interim final Rule?

HHS functionally adopted the recommendations of the Council for Affordable Quality Healthcare's (CAQH) Committee on Operating Rules for Information Exchange. This Committee promulgated a series of recommendations that was built on existing standards to make electronic transactions more predictable and consistent, regardless of the technology. By addressing the rights and responsibilities of all parties, security, transmission standards and formats, response time standards, liabilities, exception processing, error resolution and more, operating rules facilitate interoperability among parties who exchange health care data.²

Where can I learn more about HHS’ prior regulations on electronic health care transactions?

For further information about electronic data interchange, the complete statutory background, and the regulatory history, see Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards, published in the Federal Register on August 22, 2008 (73 FR 49742).

Why is standardization of the claims payment process so important?

The current matrix of systems used in the U.S. health care industry to bill payers and pay providers for health care claims has created significant amounts of complexity, inefficiency and unnecessary expense. The new operating rules will provide greater uniformity of information, transmission formats and information flows. For example, physicians and other health care providers can use one type of information request for all insurers rather than multiple systems. This commonality will extend to health care providers, facilities and payers of health care claims.

“Doctors and health insurance companies waste thousands of hours and billions of dollars filling out forms and processing paperwork,” HHS Secretary Kathleen Sebelius commented recently. “The Affordable Care Act is helping doctors operate more efficiently and spend their time treating patients, not filling out papers”.³

What are some of the benefits if the proposed Rule is fully implemented?

Although the HIPAA law adopted several years ago helped standardize key electronic transactions, the proposed Rule takes this a step further. If the Rule is successfully implemented, HHS predicts the following:⁴

Health plans will be able to pay providers, authorize services, certify referrals, and coordinate benefits using a standard electronic format for each transaction. Providers also will be able to use a standard format to determine eligibility for insurance coverage, ask the status of a claim, request authorizations for services or specialist referrals, and receive electronic remittance to post receivables.
Employers who provide health insurance to their workers and their dependents also will be able to use a standard electronic format to enroll or disenroll employees and to submit premium payments to any health plan they contract with.
The regulation also includes new standards for other common transactions and coding standards for reporting diagnoses and procedures in the transactions.
The regulation outlines a process for maintaining the format and content of the standard transactions system. National health care standard organizations and data content committees will accept and review requests for changes to the standards.

How will HHS accomplish the “standardization” and “efficiency” goals in practice?

HHS has adopted the CAQH’s Operating Rules and converted them into a federal rule format. The Rule specifically addresses “transaction standards adopted under HIPAA enable electronic data interchange using a common interchange structure, thus minimizing the industry’s reliance on multiple formats.” While the existing HIPAA standards significantly decrease administrative burden on covered entities by creating greater uniformity in data exchange and reduce the amount of paper forms needed for transmitting data, gaps created by the flexibility in the standards permit each health plan to use the transactions in very different ways. This flexibility created significant obstacles to achieving greater administrative simplification. The proposed Rule intends to fill in these gaps by addressing the following:⁵

Performance and system availability. Because the standards permit the flexibility to conduct the transactions in batch mode or real-time, in order to minimize the number of different implementations, some submitters have resorted to contracting with clearinghouses for transaction exchanges that require batch submissions, and simultaneously are utilizing internal resources for real-time submissions. Some batch submissions are only conducted overnight. Typically, batch submissions can be substantially slower than real-time transmissions, and systems may be available only at certain times for conducting certain transactions.
Connectivity and transportation of information. In traditional trading partner agreements, health plans specify their connectivity options for conducting the standard transactions. These options can vary from plan to plan. For example, some payers only conduct the transactions through a contracted clearinghouse. Others offer a direct connection to their system. Still others use both—contract with a clearinghouse for some transactions, and offer direct connect solutions for other transactions. Also, there are some plans that offer a number of options, and negotiate a choice with each trading partner, including providers.
Security and authentication. Currently, security standards do not prescribe requirements for levels of security and authentication when conducting the standard transactions and accessing protected health information. A covered entity’s level of security and authentication requirements is determined by the individual entity’s periodic assessments for security risk and vulnerabilities. Organizations have latitude to determine and document the number and types of security safeguards that they implement. Although this flexibility supports the implementation of security safeguards that are consistent with the uniqueness of various organizations, it also limits standardization for security compliance.
Business scenarios and expected responses. The standards do not define methods by which trading partners, including providers, establish electronic communication links, or types of hardware and software to exchange EDI data. Each trading partner, including providers, separately provides specific requirements, such as the number of transactions submitted in a file. Transaction processing in each entity’s system will vary from one trading partner, including providers, to another. The responses to compliantly implement these various transaction processing systems are identified by trading partners, including providers, in documentation supplementing the adopted implementation guides. These types of documented business requirements can vary in terms of number and complexity.
Data content refinements. In accordance with trading partner agreements, plans can ignore certain submitted data that is not needed to conduct the transaction. Plans also can refine certain data elements and require their submission. Trading partner agreements and other documentation that plans develop allow them to define specific types of data, as well as clarify the specific data required for successful completion of a transaction. Although the standards limit the number of data elements that can be defined or optionally submitted, a plan’s individual business flow and operations may impose specific data definition and submission requirements.

How much will the new Rule cost to implement? How much will the new regulations save?

HHS estimates the implementation costs to providers could approach $800 million over the next 10 years.⁶ Doctors spend about 12% of every dollar they receive from patients to cover the costs of excessive administrative complexity, according to a May 2010 study in Health Affairs. The study found that simplifying these systems could save four hours of professional time per doctor and five hours of support staff time every week.⁷

The AMA just released its 2011 National Health Insurer Report Card, which found that claims processing errors had climbed to nearly 20% for commercial health insurers.⁸

HHS estimates the health care industry could save about $12 billion by the next decade due to reduced transaction costs and denied claims if this proposed Rule is implemented.⁹

How can I file comments on this interim final Rule?

You may submit comments in one of four ways:

Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov.
Follow the ‘‘Submit a comment’’ instructions.
By regular mail. You may mail written comments to the following address ONLY:
Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS–0032–IFC, P.O. Box 8013,
Baltimore, MD 21244–8013.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
By express or overnight mail. You may send written comments to the following address ONLY:
Centers for Medicare & Medicaid Services
Department of Health and Human Services,
Attention: CMS–0032–IFC, Mail Stop C4–26–05,
7500 Security Boulevard, Baltimore, MD 21244–1850.

What is the deadline for public comments?

The deadline for public comments is 5:00 p.m. EST on September 6, 2011. Please remember that all comments are available for public inspection.

What can we expect in terms of further rulemaking on HIPAA transactions (i.e., Section 1104 of PPACA)?

The HHS press release states, “HHS will take additional steps later this year, issuing further regulations under HIPAA authority to improve the processing of health care transactions. These regulations will establish national identification numbers for employers and health care providers to speed claims processing and lower costs. In addition, HHS will lay out steps to make electronic health data secure, and protect the privacy of patients' medical and health insurance records. This will be done without the need for a unique personal identifier for individual patients.”¹⁰

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.

HHS Issues Interim Rules for State Health Insurance Exchanges

Tue, 19 Jul 2011 00:00:00 -0500

On July 11, 2011, the Department of Health and Human Services (HHS) published an interim rule designed to promote the efficient and cost effective implementation of Health Insurance Exchanges¹. The 244-page Proposed Rule is quite extensive in breadth of content and length. The Proposed Rule is being released for public review and comment.

Due to the importance of this rule and the many facets it covers, BenefitMall will be publishing several blogs on HealthcareExchange.com in the coming weeks addressing additional issues not covered in this Legislative Alert.

Why does the Health Insurance Exchange assume such an important role in health care reform?

State Health Insurance Exchanges are the key process through which the Obama administration intends to bring about its vision of health care reform. Section 1311(b) and section 1321(b) of the Patient Protection and Affordable Care Act (PPACA) provide that each state has the opportunity to establish a state Health Insurance Exchange(s) that:

facilitates the purchase of insurance coverage by qualified individuals through qualified health plans (QHPs);
assists qualified employers in the enrollment of their employees in QHPs; and
meets other requirements specified in the PPACA.

Section 1321 of the PPACA discusses state flexibility in the operation and enforcement of state Health Insurance Exchanges and related requirements².

BenefitMall has published several background blogs and legislative alerts on Exchanges, including:

State Insurance Exchange (June 6, 2011)
The Role of Navigators and Producers in an Exchange - Many Questions Few Answers (May 10, 2011)
The Need for Private Exchanges to Co-Exist with Public Exchanges (March 17, 2011)
Healthcare Exchange Overview & Update (December 2010)

What does the Proposed Rule cover?

As noted in the Proposed Rule, the interim regulation:

sets forth the federal requirements that states must meet if they elect to establish and operate an Exchange;
outlines minimum requirements health insurance issuers must meet to participate in an Exchange and offer qualified health plans (QHPs); and
provides basic standards employers must meet to participate in the Small Business Health Options Program (SHOP)³.

What is HHS attempting to do with the Exchange regulations?

Establishing a state Health Insurance Exchange likely will be a challenging undertaking. The Proposed Rule:

Is designed to give the participating states more time and flexibility to comply with the state Exchange provisions of PPACA;
Provides the authority for HHS to provide material federal assistance to bring about state-run Health Insurance Exchanges.
Establishes a process that allows states to partner with the federal government and rely on the federal government to provide certain components of an Exchange’s operations and infrastructure such as information technology.

HHS also notes, “the intent of this Proposed Rule is to afford States substantial discretion in the design and operation of an Exchange. Greater standardization is proposed where required by the statute or where there are compelling practical, efficiency or consumer protection reasons.⁴”

Is this the only regulation HHS has issued regarding Exchanges since PPACA was adopted?

No, this is the fourth regulation that has been issued in the past year. As highlighted in the Proposed Rule:

First, in this series was a Request for Comment relating to Exchanges, published in the Federal Register on August 3, 2010.
Second, Initial Guidance to States on Exchanges was issued on November 18, 2010.
Third, a Proposed Rule for the application, review and reporting process for waivers for State innovation was published in the Federal Register on March 14, 2011.
Fourth, two proposed regulations, including this one, are published in this issue of the Federal Register to implement components of the Exchange and health insurance premium stabilization policies in PPACA⁵.

What is the overall reaction to the Proposed Rule by respected experts?

Reactions are typically divided between party lines. The Obama Administration highlights how Exchanges will help Americans:

“Exchanges offer Americans competition, choice, and clout,” said HHS Secretary Kathleen Sebelius. “Insurance companies will compete for business on a transparent, level playing field, driving down costs; and Exchanges will give individuals and small businesses the same purchasing power as big businesses and a choice of plans to fit their needs.⁶”

However others see the Proposed Rule as an inappropriate encroachment on state rights. For example, an editorial published in the Wall Street Journal on July 16 sums up of a number of concerns:

“In principle, an Exchange isn’t the worst idea, and a transparent clearing house might even command bipartisan support…HHS, unsurprisingly, envisions the Exchanges as 50 (or more) new regulatory agencies designed to let politics run health markets, while letting Washington give order to the states. The draft rules command that the structure of every Exchange needs federal approval, much as in Medicaid, which in practice means an HHS veto of market-based innovation. State standards for the ‘certification, recertification, and decertification of health plans’ will also be subject to HHS. This means Washington will dictate rules about which insurers are allowed to sell plans in the Exchange, and thus which insurer will continue to exist as viable commercial concerns. It also looks as if HHS will require the Exchanges to enforce de factor price controls on premiums.⁷”

In summary, the Exchange concept still has many political dimensions.

How does the Proposed Rule address concerns that many states are not implementing Exchanges fast enough to meet upcoming deadlines?

In order to ensure satisfactory progress toward that goal, states were facing a hard deadline of January 1, 2013, by which HHS was required to certify that a respective state had made sufficient progress in establishing a Health Insurance Exchange, and that the Health Insurance Exchange would be able to enroll persons on October 1, 2013 in order to support the open enrollment activities for a January 1, 2014 effective date⁸.

The Proposed Rule now provides a third option for HHS in that it can issue conditional approval of state Health Insurance Exchanges on the January 1, 2013 deadline that are not ready to meet federal progress standards, but are making satisfactory progress. There was increasing concern among Obama administration policymakers and other proponents of the state Health Insurance Exchange concept that many of the states would not be able to create the infrastructure of a Health Insurance Exchange within the time allowed under the PPACA.

How does the Proposed Rule impact how states run the Exchanges?

The Proposed Rule does not change the basic options for states in terms of how many Exchanges each state sets up. HHS notes:

“The entire geographic area of a State must be covered by one or more Exchanges. A State could meet this requirement by having a combination of a regional Exchange and one or more subsidiary Exchanges although to minimize consumer confusion, only one Exchange may operate in each geographically distinct area. To the extent that more than one Exchange is established in a State, we encourage each Exchange to ensure that consumers understand which Exchange they should utilize to access health insurance coverage.⁹”

State Health Insurance Exchanges still have to be government agencies or not-for-profit corporations. The Proposed Rule requires that persons who make a profit off of the sale of or provision of health insurance cannot constitute a majority of the Board of Directors of an Exchange¹⁰. However, the Proposed Rule does require that persons serving on the Board of Directors should have health insurance experience or health policy experience¹¹. This limited flexibility did not please the consumer advocates who did not want any persons involved in the sale of provision of health insurance on the Boards, but pleased the other persons who were concerned that a Board without persons with this level of experience would face a very steep learning curve before they would have a strong grasp of the complexities of the operations of an Exchange.

How will the federal government certify that a state Exchange meets PPACA’s standards of operations?

States must elect to establish an Exchange by submitting an Exchange Plan to HHS, which constitutes the state’s application for approval of its Exchange¹². Each state must receive written approval or conditional approval of its Exchange Plan in order to be approved to commence operations. If approved, the Exchange Plan will constitute an agreement between HHS and the state Health Insurance Exchange to adhere to the contents of the Exchange Plan. As part of the Exchange Plan, each state will be asked to provide detailed information on how it will meet each of the standards promulgated in the Proposed Rule and through other future guidance documents.

The Exchange Plan will include copies of any agreements into which the Exchange has entered to carry out one or more of the Exchange’s responsibilities, as well as additional supporting documentation. A template outlining the required components of the Exchange Plan, subject to the notice and comment process under the Paperwork Reduction Act, will be issued at a later date. States are encouraged to leverage the implementation plans that are required as part of reporting on state Exchange grant awards when preparing to submit an Exchange Plan.

In the Proposed Rule, each state applying for approval of its Exchange Plan will be subject to an assessment to be carried out by HHS to evaluate a state’s operational readiness. HHS will issue additional guidance on the structure for and schedule of these assessments.

What happens if a state no longer wants to operate an Exchange after January 1, 2014?

The Proposed Rule outlines a transition process where the federal government would take over from the state:

“If a State determines that it will no longer operate an Exchange after January 1, 2014, we propose ….that the State must notify HHS of this determination 12 months prior to ceasing its operations. Also, we propose ….that the Exchange must collaborate with HHS on the development and execution of a transition plan and process to facilitate operation of a Federally-facilitated Exchange. We estimate that we will need 12 months to establish a Federally-facilitated Exchange in a State due to the time required to set up the necessary information technology and QHP certification process.¹³”

How will state Exchanges be required to use "navigators"?

The Proposed Rule still mandates that a state Health Insurance Exchange provide grants to navigators. The new rules propose requirements for the types of entities that will be eligible to apply to a state Health Insurance Exchange for navigator grants. Navigators must demonstrate to the state Health Insurance Exchange that the navigator entity has existing relationships, or could readily establish relationships with employers and employees, consumers (including uninsured and underinsured consumers), or self-employed individuals likely to be eligible to enroll in a qualified health plan through the state Health Insurance Exchange¹⁴.

Most importantly, the Proposed Rule mandates that that a navigator must meet any licensing, certification or other standards prescribed by the state or the state Health Insurance Exchange¹⁵. This will allow a state or a state Health Insurance Exchange to enforce existing licensure standards, certification standards, or regulations for selling or assisting with enrollment in health plans and to establish new standards or licensing requirements tailored to navigators. The Proposed Rule does not address the possibility or probability of potential conflict between state statutes and rules regulating the licensure of insurance producers and the status of navigators who are approved by a state Health Insurance Exchange.

What types of Exchange models can states use?

There is considerable debate among health care policymakers as to the best approach for a state Health Insurance Exchange to undertake to provide the optimal mix of access to health insurers versus cost-effective premiums and coverages. The two existing Exchanges in Utah and Massachusetts reflect this dichotomy. Many single payor advocates and “consumer” groups favor the managed marketplace model in which there are fewer options but have the opportunity to have strongly negotiated benefits/premiums. Other advocates prefer the “All Comer” approach which gives the consumer the widest possible choice of benefits/premiums.

The Proposed Rule is very flexible on this important issue, and does not dictate which model should be followed. This is a definite victory for the broker community in that it leaves the decision to the states in which the broker community has strong, local input, and in which the All Comer approach can offer the widest possible options for coverage. The health insurance industry also supports the approach of leaving the key Exchange decisions to states, because they know local health care markets best.

What is the geographic footprint that Exchanges must cover?

The Proposed Rule mandates that all geographic areas of a state must be covered by a Health Insurance Exchange. The Proposed Rule also continues to allow for a regional compact for a regional Exchange so long as all of the geographic areas of a state are covered by a Health Insurance Exchange.

What ever happened to the Small Business Health Options (SHOP) concept?

The Proposed Rule allows small employers the flexibility of choosing a Health Insurance Exchange plan for its employees or allowing employees to choose their own plans. HHS notes:

“(P)articipation in a SHOP is strictly voluntary for small employers. Like the Exchange generally, the SHOP will improve access to information about plan benefits, quality, and premiums. It gives small businesses the types of choices and purchasing power that large businesses typically enjoy. Purchasing employer-sponsored coverage through the SHOP will also qualify certain small employers to receive a small business tax credit for up to 50 percent of the employer’s premium contributions toward employee coverage…¹⁶”

How will health plans be governed under the Proposed Rule?

The overlay of PPACA, including the Proposed Rule, does create some confusion about which regulatory agencies have jurisdiction in a given circumstance. For example, there are provisions in the Proposed Rule that would appear to give state health Exchanges oversight responsibilities for approving health insurance premium increases which would duplicate the statutory responsibilities of many state Insurance Commissioners and cause further confusion in the market¹⁷. However, provisions also appear to give HHS the authority to approve changes in state Health Insurance Exchanges similar to the authority HHS has over state Medicaid plan amendments¹⁸.

The Proposed Rule does not address some critical operational issues such as what health benefits they will be required to offer. They also do not address marketing rules, or the extent and nature of what constitutes an adequate health care provider panel.

Does the Proposed Rule elaborate on the federal Exchange concept?

Not in great detail. The Proposed Rule does not address what the federal Exchanges will look like if a state refuses to implement a state Health Insurance Exchange. However, the regulation did reinforce that the federal government will in-fact run an Exchange in each state where a state does not move forward. Section 1321(c)(1) of PPACA requires the Secretary of HHS to establish and operate such Exchange within states that either:

Do not elect to establish an Exchange, or
As determined by the Secretary on or before January 1, 2013, will not have an Exchange operable by
January 1, 2014.

However, HHS adds in the Proposed Rule, “We believe that ‘fully operational’ means that an Exchange is capable of beginning operations by October 1, 2013 to support the initial open enrollment period proposed in Section 155.410.¹⁹”

Concerns have been raised recently that HHS would have to step in and establish the Health Insurance Exchanges in the states that were not going to meet the deadline. For many valid reasons, HHS does not want to be in the position of operating Health Insurance Exchanges in states²⁰. However, the federal government will likely play a key role in establishing many of the ground rules on how Exchanges operate, and will likely run the Exchange system in those states that choose not to move forward.

In light of the Proposed Rule, where are states today in terms of their progress in implementing an Exchange?

Ten states currently have legislation signed by their governors into law authorizing the establishment of a state Health Insurance Exchange²¹. Most states have hosted hearings about the Exchange concepts and have set up advisory committees or boards. For background on state activities, see the BenefitMall blogs and legislative alerts referenced above.

However, many states have not moved forward on the establishment of a Health Insurance Exchange. The states of Florida, South Carolina and Louisiana have pledged to refuse to accept federal assistance to establish a state Health Insurance Exchange²². To date, a total of 15 states have had Health Insurance Exchange enabling legislation die in their respective state legislatures²³. In a number of states, efforts to create Exchanges continue to run up against strong resistance from Republican legislators who oppose PPACA.

What are some final thoughts about the Proposed Rule?

By leaving a great deal of flexibility in PPACA and the Proposed Rule about how states can operate Exchanges, it almost guarantees that these issues will be hammered out on a state-by-state basis. However, the federal government will ensure a high degree of standardization within all state Exchanges, and will override any state-based Exchange system if a state takes a path that conflicts with PPACA or the Proposed Rule. HHS also will implement state-based Exchanges in those jurisdictions that will not or cannot operationalize a state Health Insurance Exchange.

The pace of Exchange implementation will need to be significantly increased in most states in order to meet the upcoming deadlines and to become fully operational before 2014.

We will continue to keep you up to date on these and other developments in our ever evolving marketplace.

To view past Legislative Alerts, visit the News and Events tab at www.BenefitMall.com, or go to www.HealthcareExchange.com.

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.

HHS Softens PPACA's External Review Requirements

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

On June 22, 2011, the U.S. Department of Health and Human Services (HHS) and U.S. Department of Labor (DOL) issued a technical release updating the “external review” requirements for health plans and insurers under the Patient Protection and Affordable Care Act (PPACA)¹. These amendments (referred to as the “Technical Amendment”) are still considered an “interim final rule” as the federal government sorts out the details of the new external review processes.

The most recent Technical Amendment alters several key provisions of the external review mandates that were published last summer by the federal government. For background on PPACA’s external review requirements, see the legislative update published by BenefitMall in early March.

Brokers and their clients must stay abreast of their rights to file appeals as the new external review requirements are implemented. This Legislative Alert examines how the Technical Amendment may impact health plans, employers, state regulatory agencies and individual stakeholders.

External review rights remain a key element of the reforms established by PPACA. "The right to an external appeal is considered one of the most important consumer protections that you can have," said Steve Larsen, director of HHS’ Center for Consumer Information and Insurance Oversight. "Consumers do not want insurance companies making medical decisions for them or for their families."² PPACA’s external review requirements could apply to as many as 160 million Americans as estimated by some experts³.

The new Technical Amendment alters the original interim regulations that were released in July 2010 by HHS and DOL⁴. The June 2011 Technical Amendment makes several key changes to accommodate the concerns of health plans, employers and others to make the new requirements and regulatory processes more realistic.

However, many consumer advocates are discontent with these latest revisions.

The effective date of the new Technical Amendment is July 22, 2011. HHS and DOL also are requesting that interested parties file additional comments by July 25, 2011, regarding a number of issues associated with the external review process⁵.

BenefitMall will provide additional updates on how the external requirements are being implemented in the states as HHS/DOL complete their evaluation later this summer and disseminate more regulatory guidance on this issue. View a summary of PPACA’s External Review Amendments .

To view past Legislative Alerts, visit the News and Events tab at www.BenefitMall.com, or go to www.HealthcareExchange.com.

HHS Proposes Expansion of HIPAA Privacy Rule

Thu, 16 Jun 2011 00:00:00 -0500

On May 31, 2011, The U.S. Department of Health and Human Services’ Office of Civil Rights (HHS-OCR) published a notice of proposed rulemaking to amend the Health Insurance Portability and Accountability Act’s (HIPAA) Privacy Rule on the retention and disclosure requirements for entities who maintain Protected Health Information (PHI). This Legislative Alert highlights the proposed amendments.

Overview: What Does the Proposed Rule Cover?

The proposed Privacy Rule changes would expand individuals’ rights to track how their PHI is disclosed or used. The proposed changes cover two main areas:

1. “The right to an access report would provide information on who has accessed electronic protected health information in a designated record set (including access for purposes of treatment, payment, and health care operations);” and

2. “(T)he right to an accounting would provide additional information about the disclosure of designated record set information (whether hard-copy or electronic) to persons outside the covered entity and its business associates for certain purposes (e.g., law enforcement, judicial hearings, public health investigations).”¹

The drafters of the proposed rule commented further by saying, “The intent of the access report is to allow individuals to learn if specific persons have accessed their electronic designated record set information (it will not provide information about the purposes of the person's access). In contrast, the intent of the accounting of disclosures is to provide more detailed information (a “full accounting”) for certain disclosures that are most likely to impact the individual.”²

As a result, the proposed rule will increase some of the record-keeping responsibilities of Covered Entities (CEs) and Business Associates (BAs). However, the time period to store PHI and document how it was disclosed would be shortened from the current requirement of six years to a three-year time period prior to the individual’s report request date. These changes, if adopted as proposed, would begin to take effect on January 1, 2013.

“This proposed rule represents an important step in our continued efforts to promote accountability across the health care system, ensuring that providers properly safeguard private health information,” said OCR Director Georgina Verdugo. “We need to protect peoples’ rights so that they know how their health information has been used or disclosed.”³

Background: Understanding HIPAA’s Key Terms

To understand just what, and who, is impacted by the potential rule change, it is important that you become familiar with several key HIPAA terms.

Protected Health Information (PHI)

HIPAA’s Privacy Rule protects all "individually identifiable health information" held or transmitted by a covered entity or its business associate in any form or media, whether electronic, paper, or oral. The Privacy Rule calls this information "protected health information” or PHI.⁴

Simply put, “individually identifiable health information” is information, including demographic data, which relates to:

An individual’s past, present or future physical or mental health or condition;
The provision of health care to the individual; and
The past, present or future payment for the provision of health care to the individual.

The term is especially applicable to data that identifies an individual, or for which there is a reasonable basis to believe it can be used to identify the individual. This can include, but is not limited to, name, address, birth date and social security number. Additionally, the Privacy Rule excludes from protected health information employment and education records that a covered entity maintains in its capacity as an employer, as well as other data subject to the Family Educational Rights and Privacy Act, 20 U.S.C. §1232g.⁵

Covered Entity (CE)

The term “covered entity” is defined in section 160.103 of title 45, Code of Federal Regulations.⁶ A covered entity is essentially a health care provider or partner of a health care provider who is bound by HIPAA rules and regulations. Currently, HIPAA Security Rule 45 CFR 164.312 requires covered entities (and now business associates – see below) to "implement hardware, software, and/or procedural mechanisms that record and examine activity in information systems that contain or use PHI."⁷

Business Associate (BA)

The term “business associate” has a more complex definition under section 160.103 of title 45, Code of Federal Regulations.⁸ “In general, a business associate is a person or organization, other than a member of a covered entity's workforce, that performs certain functions or activities on behalf of, or provides certain services to, a covered entity that involves the use or disclosure of individually identifiable health information. Business associate functions or activities on behalf of a covered entity include claims processing, data analysis, utilization review, and billing.”⁹

Final Thoughts: Providing Feedback

As mentioned previously, the most dramatic change if the new proposed rule is implemented is that CEs and BAs must provide individuals with a report identifying which organizations have accessed their PHI for up to three years prior to the date of their request. Specifically, the response to the request must identify any party who accessed the PHI in an electronic format, as well as the date and time the party accessed the PHI, a description of the information accessed, and a description of the action by the user, if available.

For Brokers and other industry stakeholders, it is important to review the proposed HIPAA changes and become familiar with the new requirements before and after they become finalized later this year. The public comment period on the proposed rule ends on August 1, 2011.¹⁰

As always, HHS should strive to strike the right balance between too much protection of PHI and too little. Is the expansion of HIPAA worth the additional administrative burdens to CEs and BAs? We encourage you to let HHS know what you think.

All Brokers and industry stakeholders must keep abreast of developments in the health insurance field. This legislative alert is part of a broader initiative by BenefitMall to keep you informed as to the changes affecting your profession.

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As more information becomes available, BenefitMall is committed to keeping you up-to-date in a timely manner. Visit www.BenefitMall.com to view past Legislative Alerts under the News and Events tab. 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. Thank you for taking the time to read through this important notification.

State Health Insurance Exchange

Mon, 06 Jun 2011 00:00:00 -0500

Under the Patient Protection and Affordable Care Act (PPACA), each and every state has been given the option to create a public, state-run health insurance exchange (“Exchange”), or to have an Exchange created for them by the federal government. States across the country are taking various degrees of action (or inaction), but due to recent developments, BenefitMall would like to keep you updated on the latest news.

Exchange Background
The concept of an Exchange is one of PPACA’s central vehicles through which individuals and small employers would be able to obtain health care coverage at rates similar to those enjoyed by large groups that have the ability to negotiate favorable discounts. By pooling the lives of individuals and small groups into large purchasing blocks, the hope is that the cost of future health care coverage could be better contained. By the time PPACA is fully implemented in 2014, these Exchanges will serve as a central health care marketplace for millions of people. The Exchanges also will provide assistance to those who qualify for enrollment in state Medicaid programs (incomes below 138% of the federal poverty level), as well as others who might need access to coverage.

For more information about Exchanges, visit other BenefitMall briefings:

State Updates
Many states are busy implementing the Exchange infrastructure in anticipation of the 2014 deadline, other states are still debating the next steps and many are still in a holding pattern.

View BenefitMall’s last update detailing some of the key state activities prior to May.

This Legislative Alert provides updates on what happened during May for several key states.

New York Loses Momentum
New York is typically one of the more progressive states when it comes to health care reform, having implemented a number of health IT programs and earning a $27 million “Early Innovator” grant from the Departments of Health and Human Services (HHS). The New York Insurance Department held a series of public forums in May to allow New Yorkers to express their ideas on the formation of a state-run public health exchange, but the state has thus far failed to enact legislation implementing a state-run public exchange¹.   Advocates of such a program are optimistic that an Exchange will be in effect by 2014, but momentum appears to have stalled². If New York fails to meet several interim deadlines, it faces losing out on millions more in funding provided by HHS designed to encourage states to adopt and implement the new Exchange model.

California Faces Difficult Road Ahead
Since becoming the first state to form a public health Exchange after the PPACA enactment, California’s multi-billion dollar deficit isn’t making things easy. California’s Health Exchange Board, created through the law signed by former governor Arnold Schwarzenegger, is determined, however, to keep calm and carry on with the state’s efforts, and has hired third-party consultants and applied for grants to ease the tension. The gravity of the situation isn’t lost according to board member Susan Kennedy, who says “If California succeeds, it will lead the nation on health care reform. If it fails, we’ll precipitate the failure of health care reform across the nation³.”

Louisiana Governor Announces Opposition to Creating State Insurance Exchange
On May 31, Louisiana Governor Bobby Jindal released a press release confirming earlier reports that the state would not take part in creating a state-run Exchange. “Obamacare is a terrible policy that needs to be repealed and replaced. It creates enormous new costs and future unfunded liabilities for states financing their Medicaid programs,” Jindal press secretary Kyle Plotkin said in the release⁴. With this announcement, Louisiana joins the ranks of a number of states with Republican governors who vehemently oppose PPACA, most notably Georgia, New Mexico, Texas, Idaho and Florida⁵.

Indiana, Wisconsin and Mississippi Governors Back the Trend
Despite general Republican distaste for PPACA, Republican regulators in many states across the country are facing quite a catch-22 when it comes to the creation of state–run health Exchanges. Having publically declared their opposition to PPACA, and by extension, the mandate to create a state Exchange, the only option left is for them to step aside and let the federal government establish the Exchange. Many governors are choosing, in their eyes, what seems to be the lesser of two evils by making efforts to move forward with the creation of health Exchanges in their respective states. Indiana governor Mitch Daniels signed an executive Order establishing an online portal for purchasing health Exchanges, along with Wisconsin Governor Scott Walker⁶. Even Mississippi Governor Haley Walker is reviving previous Democratic efforts to establish a Mississippi Exchange through the state legislature⁷. Despite potential legal challenges to PPACA, some of these Republicans are choosing to take the fate of the health care Exchanges into their own hands.

Colorado and Maryland Move Ahead
Colorado and Maryland are two states that have recently come one step closer to finalizing plans for their health insurance Exchanges. On May 26, Maryland Governor Martin O’Malley signed an executive Order creating a state Office of Health Care Reform. O’Malley also appointed nine members to a coordinating board who will oversee the “Maryland Health Benefits Exchange⁸.”   Meanwhile, on June 1, Colorado Governor attended a ceremony at a hospital where he signed a bill that would establish an Exchange in his state⁹. Oddly enough, Colorado is one of a number of states that are BOTH applying for federal grant money via the PPACA and suing the federal government over the law’s constitutionality¹⁰.

Existing Exchanges: Utah and Massachusetts
Two different Exchange models are in operation today that pre-date PPACA, which represents two different approaches.

The Utah Exchange is housed in a state agency, has a very small staff, runs on a small budget and is an “all comers” Exchange model. It will accept any insurance carrier that is licensed in the state of Utah.
The Massachusetts Exchange, is in many respects, the direct opposite. It is an independent not-for-profit, has a larger staff, operates on a larger budget and may be characterized as an Active Purchaser Exchange model that attempts to demand a higher value for its members than the “all comer” Exchange model.

A recent study published this spring and funded through Kaiser Family Foundation offers some interesting insights on the Utah and Massachusetts experiences. Sabrina Corlette, Research Professor, Georgetown University Health Policy Institute and one of the co-authors of the study write:

“In the end, perhaps the most important element for both exchanges is the commitment of their political leadership to their long-term success and sustainability. In particular, both states have demonstrated a willingness to be flexible and pragmatic in making the legal and administrative choices necessary to innovate, adjust to market changes and respond to customer feedback. As other states begin the hard work of creating their own exchanges, they'd be wise to see the Utah and Massachusetts models -- not as ideological 'bookends' but rather as entities that must continually evolve to meet the needs of real people¹¹. ”

Interesting, she notes that both the Utah and Massachusetts live up to some of the pre-conceived stereotypes, but in other cases do not. Regarding the perceptions that the “Bay State” Exchange is based upon a big government approach, she challenges that perception when she writes:

“(T)he Massachusetts Connector has yet to turn away a plan that expressed a wish to participate. And it doesn't dictate prices. For its unsubsidized population, including small businesses, it does little to negotiate premium discounts. It simply doesn't have the leverage to do so. But it does use web-based decision tools to help consumers find the best value plan. Again and again we found evidence that the Connector was using free-market principles -- not heavy-handed regulation -- to generate better prices and quality for consumers¹². ”

Looking Ahead
As with many things in politics these days, the future of PPACA’s mandated Exchange platform still needs to evolve – which will likely continue after 2014. In reality, the design concepts, infrastructure, administrative workflows and so on need to be implemented for each Exchange, and must be developed, tested and then revised based upon actual experience.

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As more information becomes available, BenefitMall is committed to keeping you up-to-date in a timely manner. 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. Thank you for taking the time to read through this important notification.

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.

Health Insurance Reform What Does It Mean for Dental and Vision Plans

Thu, 12 May 2011 00:00:00 -0500

Vision and dental coverage is often an integral part of your client’s group health benefits package for employees and dependents. For many, there is still some confusion about how the Patient Protection and Affordable Care Act (PPACA) impacts vision and dental plans, both in terms of how they are offered and when plans are exempt from the new health care reform law.

When does PPACA reform apply to dental and vision plans?

Both the provisions in PPACA and Health Insurance Portability and Accountability Act (HIPAA) view limited scope benefits plans, such as dental and vision offerings, as either an integral part of the overall health benefit plan or as an “exception”.

Included. If the limited benefit plan is included in a bundle of health insurance benefits and the employee does not have the ability to opt out of the coverage, the dental and vision benefits will be subject to the same terms and conditions as the overall health insurance benefits, including PPACA reform requirements.
Excluded. If the limited scope benefit plan is offered on a stand-alone basis or is separated from the overall health insurance benefit package, the dental and vision plans (the separate limited benefit benefits) can be treated differently and do not need to comply with many of changes that have been or will be required due to the passage of PPACA.

What is the statutory test that decides whether the dental and vision plans are included in the definition “medical care” and are “exempted”?

PPACA employs the definitions that already were in existence in HIPAA1, which defines “medical care” very broadly and contains an exception for limited benefit plans. HIPAA regulations were issued on December 13, 2006 and further defined “limited scope benefit plans”2 as benefits that are substantially for treatment of the mouth, and "limited scope vision benefits" as benefits primarily for treatment of the eye. If benefits meet the definition of limited scope dental or vision benefits, they may not be subject to HIPAA or PPACA if they either are:

i) Provided under a separate policy, certificate, or contract of insurance; or

ii) Not an "integral part" of a group health plan.

Are there any official “FAQs” that the federal government has published addressing this issue?

Yes, the concept of an “excepted” limited scope benefit plan is further illuminated by an FAQ3 that the Department Of Labor published on its website, which reads:

Q6: What if my dental (or vision) benefits are structured as excepted benefits under HIPAA? Does that exemption except my dental (or vision) plan from the Affordable Care Act’s market reforms?

Yes. If benefits constitute excepted benefits under HIPAA, the requirements of PPACA’s market reforms do not apply. Under HIPAA, dental (and vision) benefits generally constitute excepted benefits if they:

Are offered under a separate policy, certificate, or contract of insurance; or
Are not an integral part of the plan. For dental (or vision) benefits to be considered not an integral part of the plan (whether insured or selfinsured), participants must have a right not to receive the coverage and, if they do elect to receive the coverage, must pay an additional premium.

Accordingly, if a plan provides its dental (or vision) benefits pursuant to a separate election by a participant and the plan charges even a nominal employee contribution towards the coverage, the dental (or vision) benefits would constitute excepted benefits, and the market reform provisions would not apply to that coverage.4

Does it matter if the limited plan is offered pursuant to a fully insured or selfinsured arrangement?

Not really. The over-all criteria described in this legislative alert appear to apply to both fully funded and self-funded health arrangements. Here are some illustrative examples:

If the limited benefit plan is insured or self-insured under the same policy as the health insurance benefit, in most cases PPACA applies.
If the health benefit plan is insured and the dental and/or vision benefits are under separate insurance policies, and if an employee may opt out of the limited benefit plan coverage(s), the limited benefit plan likely would be eligible as an exception and would not be subject to the health insurance reform provisions of the PPACA.
If the health care benefit is self-funded, employees must be able to choose the comprehensive plan and the limited benefit plan separately, and pay a different premium for the different levels of coverage for the limited plan to be exempt.
If one plan is “fully insured” under one policy and the other plan is “self-funded” under another policy, in most cases that would directly support the fact that the plans are “separate” policies with different cost sharing arrangements and election options.

What are some of the PPACA provisions that will apply to dental and vision plans?

If the dental and vision plans are covered, most of PPACA’s normal requirements will apply, including:

No annual and lifetime dollar limits on benefits
Employees’ children remain eligible until age 26
Mandatory coverage of preventive services with no cost sharing
Mandatory external review of adverse claims decisions
No preexisting condition exclusions
No waiting periods exceeding 90 days

If the limited benefit plan is not excluded, the lifetime benefits that limited scope benefit plans often have must be deleted. Consequently, this will likely increase the cost of the limited benefit plan to the employer.

Can limited scope benefit plans be offered on a stand-alone basis though a state exchange?

Yes, under section 1311 of PPACA, there does appear to be an exception to allow a stand-alone “dental” benefit plan to be offered within a state exchange. In addition, “pediatric dental benefits” will likely be included as part of the “minimum essential benefits” requirements for qualified health plans.5

However, the ability to offer other limited scope benefit plans is still being sorted out. The National Association of Specialty Health Organizations (NASHO) is asking regulators to think about vision plans, behavioral health plans, and other types of specialty plans as the federal and state governments move forward with the exchanges. “One of our main concerns is, with the exception of dental, no other specialty health organizations were listed in the [reform] bill to be a part of the exchanges. Vision was in there, but it was taken out as one of the last amendments,” says Julian Roberts, Executive Director of the National Association of Specialty Health Organizations.6

In relation to specialty benefits, what happens after January 1, 2014 when all qualified health plans must offer the essential benefit package through the exchange?

Regarding dental coverage, the National Association of Dental Plans, makes the following observations:

By January 1, 2014, all health insurance issuers offering health insurance coverage in the Individual or small group market (with the exception of grandfathered plans) must ensure that the coverage includes the essential health benefits package, including pediatric dental benefits.

Outside of the new health insurance exchanges: Although stand alone dental plans are specifically exempt from the requirement to offer all essential benefits, for health plans to be recognized as meeting the essential benefits package in the individual and small group market, they must offer pediatric dental benefits.

Inside of the new health insurance exchanges: By 2014, states are to establish health insurance exchanges to provide access to affordable health insurance options for individuals and small employers. (By 2017, states can allow large employers to obtain coverage through an exchange.) Plans must include all essential benefits to be offered in the exchange. However, stand alone dental plans are allowed to offer the required pediatric dental benefits. If a stand alone dental plan offering required pediatric dental benefits is available in an exchange, a health plan without these benefits that offers all other essential benefits can be treated as a qualified health plan to offer coverage in the exchange.7

As referenced in the prior Q&A, the impact of other specialty benefits still needs to be sorted out.

What can brokers do for their clients?

Brokers can do a number of things to help their clients sort out the applicability of limited scope benefit or plan offerings. In cases where a dental or vision plan is or will be exempted, brokers should encourage employers to communicate in writing to the enrollees in the limited scope benefit plan and explain that it is an exempted benefit plan and that the health insurance reform provisions of the PPACA provisions do not apply to the limited benefit plan(s). Brokers should also provide some insights on the advantages (e.g., ease of administration) and disadvantages (e.g., likely higher cost) of combining specially benefits in the comprehensive policy.

In some cases, brokers may need to provide advice based upon the specifics of each case. The regulations do not provide a definitive answer in each situation as to whether a limited benefit offering is included or exempted under PPACA. However, you can begin by forwarding applicable part of this legislative alert to your clients. In cases that are more difficult, HHS or a PPACA benefit consultant should be contacted for guidance.

With some care and planning, your clients can protect their limited benefit plans from any of the potential negative effects of health insurance reforms in PPACA. BenefitMall will keep you updated on any additional changes to the “specialty health” requirements in the coming months.

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As more information becomes available, BenefitMall is committed to keeping you up-todate in a timely manner. 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 for assistance. Thank you for taking the time to read through this important notification.

The Essential Health Benefits Package

Tue, 19 Apr 2011 00:00:00 -0500

Significant changes can be expected for many Americans in terms of the “Essential Health Benefits” plans that will be offered when states begin implementing the public health care exchanges mandated by the Patient Protection and Affordable Care Act (PPACA) in less than two years.

These changes are in addition to the benefit plan adjustments that already went into effect for new and existing insurance coverages over the past year. Changes that already have been made include limits on pre-existing conditions, raising the cap on lifetime limits for essential benefits, limitations on when coverage can be rescinded, the age extension on coverage eligibility for children up to age 26 and coverage for preventive care – among other reforms.

Unless PPACA is over-turned or modified, brokers and agents need to be vigilant and track the impending mandates that will take effect. The good news is that there will be opportunities to standardize health care benefit offerings, but the potentially bad news is that the PPACA-mandated changes may increase premium costs for many and may disrupt some existing insurance markets.

This Legislative Alert highlights some current activities as the U.S. Department of Health and Human Services (HHS) takes the lead in defining what the new benefit offerings will be.

Essential Health Benefits Defined

Effective January 1, 2014, a health benefit plan offered through a state exchange will have to provide an Essential Health Benefits Package. PPACA defines Essential Health Benefits in Section 1302 of PPACA:

SEC. 1302. ESSENTIAL HEALTH BENEFITS REQUIREMENTS.

(a) ESSENTIAL HEALTH BENEFITS PACKAGE.--In this title, the term "essential

health benefits package" means, with respect to any health plan, coverage that--

(1) provides for the essential health benefits defined by the Secretary under subsection (b);

(2) limits cost-sharing for such coverage in accordance with subsection (c); and

(3) subject to subsection (e), provides either the bronze, silver, gold, or platinum level of coverage described in subsection (d).

Under Section 1302 subsection (b), PPACA then further defines “Essential Health Benefits” as

(1) IN GENERAL.--Subject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:

(A) Ambulatory patient services.

(B) Emergency services.

(C) Hospitalization.

(D) Maternity and newborn care.

(E) Mental health and substance use disorder services, including behavioral health treatment.

(F) Prescription drugs.

(G) Rehabilitative and habilitative services and devices.

(H) Laboratory services.

(I) Preventive and Wellness services and Chronic Disease Management.

(J) Pediatric services, including oral and vision care.

Regulatory Details

After the initial adoption of PPACA, the real work often emerges through the regulatory process. The shaping and fine-tuning of the specifics behind the Essential Health Benefits concept is no exception. As part of the regulatory process, the Secretary of HHS has asked a number of different agencies and groups of experts to help with this assignment.

For example, HHS has requested the National Association of Insurance Commissioners (NAIC) to develop standards for a summary of benefits, coverage explanations and enrollment forms for Essential Health Benefit plans for individuals and groups.¹ These documents are in the final stages and will be submitted to the Secretary this spring.

In addition, the Institute of Medicine (IOM), a non-profit group which was charted by Congress in 1970 through the U.S. National Academy of Sciences, has been asked by HHS to provide guidance on this issue. The IOM has been meeting on this topic since last November. Rather than suggesting specific benefits or services, IOM researchers have been asked to consider how insurers determine coverages and medical necessity criteria, then make recommendations to the HHS Secretary.²

PPACA further instructs the Secretary of HHS to ensure that the scope of the Essential Health Benefits Package is greater than or equal to the scope of benefits provided under a typical employer plan. In order to make this determination, Section 1032 of PPACA instructs the Secretary of HHS to “conduct a survey of employer-sponsored coverages to determine the benefits typically covered by employers, including multiemployer plans…” The HHS Secretary also has asked the U.S. Department of Labor (DOL) to conduct this survey, which is underway. DOL expects to issue a report to the Secretary in late spring.

A NAIC analysis of PPACA offers the following as well:

The scope of benefits is to be determined by the Secretary of HHS and equal to the scope of benefits under a typical employer-based plan. Nothing shall prevent a qualified health plan from providing benefits in excess of the essential benefits package.

The cost-sharing under a health plan may not exceed the cost-sharing for highdeductible health plans in 2014 (currently $5,950 individual/$11,900 family). In following years, the limitation on cost-sharing is indexed to the rate or average premium growth.

Deductibles for plans in the small group market are limited to $2,000 individual/$4,000 family, indexed to average premium growth. This amount may be increased by the maximum amount of reimbursement available to an employee under a flexible spending arrangement.³

Levels of Coverage

PPACA defines specific levels of coverage to be offered by the state exchanges. They are:

BRONZE LEVEL- A plan at the bronze level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the benefit plan.
SILVER LEVEL- A plan at the silver level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the benefit plan.
GOLD LEVEL- A plan at the gold level shall provide a level of coverage that is designed to provide benefits actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the benefit plan.
PLATINUM LEVEL- A plan at the platinum level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 90 percent of the full actuarial value of the benefits provided under the benefit plan.⁴

Any reference to a bronze, silver, gold or platinum plan shall be treated as a reference to a qualified health plan providing a bronze, silver, gold or platinum level of coverage. PPACA authorizes the Secretary of HHS to develop guidelines that provide minimal variation in the actuarial valuations used in determining the level of coverage of a plan to account for differences in actuarial estimates.

To date, no proposed or interim final rules on this issue have been released for public comment.

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While January 1, 2014 appears to be relatively distant, the time that your clients will be considering their coverage for that date will be here in a little more than a year. It is not too soon to become conversant in the major changes that will be happening then. As more information becomes available, BenefitMall is committed to keeping you up-todate in a timely manner. 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. Thank you for taking the time to read through this important notification.

PPACA Small Business Tax Credits

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

As a valued broker, you have a tremendous opportunity to enhance your relationship with small group employers by advising them about an important cost-saving opportunity.

Small employers who provide health insurance coverage to their employees may not realize they can claim a federal income tax credit on their 2010 filing, due to the Patient Protection and Affordable Care Act (PPACA). Unfortunately, a very low percentage of qualified business owners are taking advantage of this credit according to recent government reports. Even if companies have completed their 2010 filing, they can still submit an amended filing to request this tax credit.

Eligibility Rules
Small group employers must meet the following guidelines to be eligible for this federal income tax credit¹. The requirements are a combination of three factors related to the business - size of their company, percentage of health care coverage they provide, and total wages paid.

Firm size. First, there are restrictions on the number of employees that an employer may have. A qualifying employer must have less than the equivalent of 25 full-time workers when totaling all individuals' hours of employment. When all part-time and full-time hours of employment are combined and divided by a full time 40 hour week, and if the number of employees needed to cover the total hours is less than 25 employees, the employer will qualify for the credit.
Provide health care coverage. Secondly, the employer must confirm that they cover at least 50 percent of the cost of health care coverage for their employees. To determine this, the firm size equivalent number determined above must be used. Next, the employer must know the cost they pay to cover a single full time employee's insurance premium. The employer must then make the following calculation:
- Equivalent firm size multiplied by (X) the cost paid for an individual premium and divided by (/) two.
- The above calculation is the percentage of health care coverage that the employer must cover in order to qualify for the credit. Therefore, they do not have to pay full coverage for each employee. They could reach the required premium with some full coverage and some partial coverage of employees.
Total Wages Paid. Finally, there are wage restrictions on the qualifications.
- Employers with 10 or fewer Full Time Equivalent (FTE) employees, paying annual average wages of $25,000 or less will receive the maximum credit of 35 percent.
- Employers with greater than 10 and fewer than 25 Full Time Equivalent (FTE) employees, paying annual average wages of less than $50,000 will also receive the minimum credit of 35 percent of premiums paid.
- All tax-exempt organizations that meet either of the above criteria can only claim the minimum credit of 25 percent of premiums paid.
  
  As the IRS states: “The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.²”
Amount of credit and years available.

As stated by the IRS: “Small businesses can claim the credit for 2010 though 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible taxexempt organizations.²”

More information. Please visit the FAQ section on the IRS website as there are several examples listed and helpful questions and answers pertaining to different circumstances.

Claiming the Credit

Small employers, whether businesses or tax-exempt organizations, will use the new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit.
For-profit small businesses will include the amount of the credit as part of the general business credit on their income tax returns.
Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filing season to enable eligible taxexempt organizations, even those that owe no tax on unrelated business income, to claim the small business health care tax credit.

For your interest: In an Analysis of the Small Business Health Insurance Tax Credit and Effects on Coverage conducted by the Committee on Small Business Democrats U.S. House of Representatives, a document was created showing the Impact of Health Care Tax Credit, by State. Please take a look at this document, as it pertains to the small group market in each individual state.

In order to make this information easier to communicate to your clients, BenefitMall has provided a client letter explaining the details above – Small Business Tax Credit. Please feel free to add your personal contact information to better utilize this component with your clients.

For further details on this opportunity for your valued customers, please visit the IRS website. Here the IRS provides form 8941 filing instructions, an informational video as well as a useful FAQ. Also, for further assistance with specific questions which cannot be answered in the information or links provided above, please click here for a state-bystate IRS Taxpayer Assistance guide.

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As more information becomes available, BenefitMall is committed to keeping you up-todate in a timely manner. 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. Thank you for taking the time to read through this important notification.

PPACA’s One Year Anniversary - In Retrospect

Wed, 23 Mar 2011 00:00:00 -0500

This week marks the one-year anniversary of the Patient Protection and Affordable Care Act (PPACA), which was passed and signed into law on March 23, 2010. The primary reason for the passage of the Act was to address many of the delivery and quality health care short-comings in America, whether real or imagined. Currently, the law is being implemented across multiple agencies within the federal and state governments.

Stages of Implementation

Several federal agencies, including the U.S. Departments of Labor, Education, Justice, and Health and Human Services (HHS), were called on to begin the implementation process for PPACA immediately after the President signed the bill into law. In addition, governors, state legislatures and regulatory branches are now charged with implementing some of the reforms, including the creation of state-run health care exchanges.

Due to the sometimes vague nature of PPACA, the federal regulatory process is ongoing and will continue for years to come. To date, many key provisions have already been enacted. Some of those are:

Extending the age of adult children eligible for coverage under their parents’ health care plan to age 26
Prohibiting individual and group health plans from placing lifetime limits on the dollar value of coverage
Preventing health insurers from rescinding coverage (except in cases of fraud)
Prohibiting health insurers from imposing pre-existing condition exclusions for children
Mandating coverage for recommended immunizations and preventive care

PPACA also established new offices and programs at HHS such as the Office of Consumer Information and Insurance Oversight (OCIIO)¹ and the Patient-Centered Outcomes Research Institute (PCORI)². In addition to creating new organizations, PPACA also calls for the expansion of the Center for Medicare and Medicaid Services Innovation Center among other initiatives.³

Political & Legal Turmoil

The passage of PPACA in March 2010 prior to the November elections created a dramatic effect on America’s political landscape. Propelled by a somewhat skeptical electorate that doubted the potential benefits and the cost of the Act, Republicans took majority control of the U.S. House of Representatives and cut into the Democratic majority in the U.S. Senate. As a result, House Republicans were able to pass H.R. 1, a measure that would repeal PPACA in its entirety. Though the legislation failed in the Democrat-controlled Senate, 200 separate bills have been introduced in the House to address, repeal or defund elements of the Act as Republicans take a mostly symbolic stand against health care reform.

In addition, a host of lawsuits have been filed in an attempt to declare some or all parts of the President’s reform bill unconstitutional. One such argument holds that PPACA is unconstitutional due to its violation of an Interstate Commerce clause that somewhat restricts the federal government’s ability to control states and individuals. One case in particular was filed by more than 26 state attorneys general, and a district judge declared the Act unconstitutional (an appeal is currently in progress) in this trial. Another judge ruled against the Act’s constitutionality due to the lack of a severability clause, which holds that if one section of a piece of legislation is declared unconstitutional, it does not void the rest of the legislation. Since PPACA did not include this clause, it was found unconstitutional as a whole. Three other judges have upheld the legality of PPACA. It is anticipated this case will be heard by the U.S. Supreme Court prior to the 2012 elections.

The timing of these lawsuits is particularly problematic for PPACA supporters. Proponents of the Act promised that as the American public became more familiar with the Act, they would come to accept it. That has not happened. Polls continue to reflect a great deal of skepticism, with 55% of Americans opposing the law at its inception, while recent polls indicate that the negative sentiment has only increased. Polls now show as many as 62% of Americans favor the repeal of the law.4 Declining public support continues to be an area of significant concern for the President. White House staff continues to try to change public opinion by deploying experts to educate the public on the law’s benefits. To date, they have been largely unsuccessful in their efforts.

The Future of Health Reform in America

If the U.S. Supreme Court hears the cases on the constitutionality of PPACA and issues an opinion later this year as anticipated by some legal experts, health reform promises to become one of the preeminent issues in the 2012 elections. Early election polling hints at expanding public opposition to PPACA, which does not bode well for Democrats who are up for re-election.

The insurance marketplace has been dramatically altered in the past year due to PPACA. More provisions addressing Medicare and Medicaid, long-term care and quality of care are expected to be rolled out, but the timeline for complete implementation of the law continues to stretch past 2018. In addition, states are expected to adopt a wide range of exchange models before 2014. Limitations on funding both at the federal and state levels will need to be addressed to avoid a rise in government deficit levels.

At the same time, world events could impact how government officials and policymakers move forward with changing the U.S. health care system. Natural disasters, political conflicts abroad, fluctuations in the global economy and local markets, for example, can create distractions, which may lead policymakers to adopt an incremental approach to revamping the U.S. health care system.

In the short term, PPACA will continue to face significant political and legal hurdles. Nonetheless, implementation will continue, with more provisions and offices becoming established under the law.

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As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

NAIC's Task Force Releases Draft Bill

Fri, 18 Mar 2011 00:00:00 -0500

The National Association of Insurance Commissioners’ (NAIC) Professional Health Insurance Advisors Task Force released a draft bill on Thursday that would pull brokers’ fees out of the Medical Loss Ratio (MLR) calculation.

More specifically, Section 2718 of the proposed bill states:

“(a) CLEAR ACCOUNTING FOR COSTS. – A health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan) shall, with respect to each plan year, submit to the Secretary a report concerning the ratio of the incurred loss (or incurred claims) plus the loss adjustment expense (or change in contract reserves) to earned premiums. Such report shall include the percentage of total premium revenue, after accounting for collections or receipts for risk adjustment and risk corridors and payments of reinsurance, that such coverage expends –

(1) on reimbursement for clinical services provided to enrollees under such coverage;

(2) for activities that improve health care quality; and

(3) on all other non-claims costs, including an explanation of the nature of such costs, and excluding Federal and State taxes, licensed independent insurance producer remuneration, and licensing or regulatory fees.”

Florida Insurance Commissioner Kevin McCarty requests comments of the draft to be sent to his office by March 14, one week prior to NAIC’s national meeting.

BenefitMall strongly supports this language and will comment as such to Commissioner McCarty.

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As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

BenefitMall Meets with Policymakers at the Capitol

Fri, 18 Mar 2011 00:00:00 -0500

Last week, BenefitMall representatives met with regulators and policymakers from several key agencies and associations. The goal of the meetings was to promote a substantive exchange of information leveraging BenefitMall’s experience and knowledge regarding the insurance marketplace and how to address several key challenges associated with the implementation of the Patient Protection and Affordable Care Act (PPACA).

In separate meetings over a three-day period, BenefitMall met with health policy staff who work with the U.S. Department of Health and Human Services (HHS), the National Association of Insurance Commissioners (NAIC), the National Conference of State Legislators (NCSL), American Health Insurance Plans, Blue Cross Blue Shield Association and the National Association of Health Underwriters.

Several common themes emerged during the meetings:

Timelines
- Both the public and private sector policy experts appear to be genuinely concerned about addressing PPACA’s quick timelines for implementation. Beyond the politics, there appears to be an apolitical sentiment that we need to move more slowly. However, the regulators would need additional legislative or regulatory guidance to change the major timelines that were established through PPACA statutory requirements.
Exchanges¹
- Most states are busy sorting out the governance structure of the public exchanges and beginning to identify some of the key exchange operational elements in 2011.
- PPACA authorizes a variety of options related to how the exchange models can be configured ranging from the Massachusetts’ “active purchaser” model to Utah’s “all comers” approach.
- The Small Business Health Options Program (SHOP) exchange concept appears to be a legislative after-thought and more details need to be sorted out.
- The same rating rules should be implemented both inside and outside each public exchange to help avoid adverse selection.
- Tracking eligibility for individuals and families overtime is going to be a challenge and might generate privacy concerns.
- Policymakers were very interested in learning more about how private exchanges, such as BenefitMall, have been successful.
Benefits
- The definition of the essential benefit package(s) offered through the exchanges will have a profound impact on PPACA’s ultimate success.
- Existing and future federal/state mandated benefits will likely be unaffordable.
- After the BenefitMall meetings, regulators appear to have a greater understanding of the wide range of current benefit offerings (which supports the premise that one size does not fit all.)
Funding
- Many of PPACA’s original cost estimates were not accurate.
- Significant cost and implementation challenges lie ahead – both at the state and federal levels.
- The threat of de-funding PPACA and the ongoing budget battles are having a chilling effect on some regulatory activities.
Understanding the Market
- There appears to be a greater appreciation of how PPACA could help and hurt the private sector.
- More attention needs to be devoted to the impact of PPACA’s insurance market reforms.
- Regulators are interested in learning more about local market purchasing trends from experts like BenefitMall.
Supporting the Consumer²
- Meeting participants appear to recognize that inexperienced Navigators (a concept embedded in PPACA) should not replace the role of a licensed broker.
- A greater awareness of the backend support services is more apparent, including the need for a broker’s services to help consumers answer health questions.

Current PPACA activities in the pipeline include:

On Thursday, Representatives Mike Rogers and John Barrow introduced legislation to exempt broker compensation from the medical loss ratio calculations. (BenefitMall will provide more details on this proposed bill in our next Blog).
A myriad of funding and defunding measures continue to wind their way through the halls of Congress.
Health care providers continue to wait for the Centers for Medicare and Medicaid Services (CMS) to publish regulations governing accountable care organizations (ACOs).
The Institute of Medicine is currently studying how PPACA’s Essential Benefit packages should be designed.³
State activity continues to heat up with almost 500 bills recently introduced in the majority states which reference PPACA’s state-based exchanges.⁴
The five court cases challenging PPACA’s individual mandate will likely be appealed to the U.S. Supreme Court.⁵
With Republicans beginning to announce their intention to run for President, the 2012 campaign season will begin shortly – which will provide an opportunity to re-evaluate PPACA’s insurance market pre-suppositions and legislative policy goals.
Congress is still addressing the repeal of the 1099 reporting requirements.⁶
With 42 out of 100 Senators firmly opposed to the nomination of Don Berwick as CMS Administrator, President Obama will likely need to consider new candidates since 60 senators must vote for the nomination.

Interestingly, this week HHS Chief Sibelius again signaled more flexibility in how the states can implement PPACA. However, Republicans continue to complain that they are not seeing enough follow-up to these promises.⁷

BenefitMall will continue to offer its insights and insurance expertise to all public policymakers, who might have a legitimate question or otherwise need information. Although the implementation of PPACA continues to have a lot of moving parts, it is important that all of us encourage informed public policy decisions throughout the process. As BenefitMall meets with policyholders, we will continue to have the opportunity to present our Brief on Exchanges.

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PPACA’s Nondiscrimination Provisions

Thu, 03 Mar 2011 00:00:00 -0600

Section 2716 of the Patient Protection and Affordable Care Act (PPACA) contains a provision that applies the “non-discriminatory” requirements of Section 2716 of the Public Health Services Act (PHSA) [Section 105(h) of the Internal Revenue Code] to all non-grandfathered health plans issued on or after September 23, 2010. This provision prohibits health plans from discriminating in the way benefits or costs are allocated and shared among classes of employees.

The implementation of the nondiscrimination requirements continues to be delayed. On January 10, the Internal Revenue Service (IRS) issued Notice 2011-2, which states that compliance with PPACA is once again delayed for insured group health benefit plans until at least March 11.¹

There is significant confusion surrounding the nondiscrimination requirements. The following information details the timeline of the attempts on the part of the federal regulators to clarify these issues.

Provision and Scope
SEC. 2716. PROHIBITION OF DISCRIMINATION BASED ON SALARY.

"(a) IN GENERAL – The plan sponsor of a group health plan (other than a selfinsured plan) may not establish rules relating to the health insurance coverage eligibility (including continued eligibility) of any full-time employee under the terms of the plan that are based on the total hourly or annual salary of the employee or otherwise establish eligibility rules that have the effect of discriminating in favor of higher wage employees.²”

Generally, the regulations issued pursuant to Section 105(h) apply to employer sponsored health benefit plans that cover premiums and expenses for qualified medical and other specialty plans.³ The recent amendments expand the nondiscrimination provisions to health benefit plans irrespective of whether they are fully-insured, self funded or medical reimbursement plans. Some types of plans are excluded from the new requirements, including “grandfathered” plans, government-sponsored health plans and limited benefit plans.

The “benefits” provided under the health plan must not discriminate in favor of highly compensated individuals. The health plan should incorporate several design features in order to be non-discriminatory. For example, plans should:

Establish parity in employee contributions for each benefit level
Preclude offering lower co-pays for highly compensated employees
Not impose different waiting periods

The employer sponsoring the health plan also must not discriminate in favor of highly compensated individuals in actual operation. For example, discrimination in operation could arise if a plan administrator approves certain claims for medical expenses under the utilization management process for highly compensated employees while denying them to lower compensated employees.

As the regulation is developed, the definition of terms such as “benefit” and “highly compensated” will continue to be addressed in the provision development.

Comments and Timelines
Currently, implementation of the anti-discrimination provision continues to be delayed due to several outstanding issues that need to be addressed. The Department of Treasury, along with the Departments of Labor (DOL) and Health and Human Services (HHS), has released a series of public notices to gain guidance on how to best implement this provision.

Notice one: IRS Bulletin 2010-63⁴
The first notice to address Section 2716 was issued on May 17, 2010. “This notice invites public comments concerning the application of rules prohibiting insured group health plans from discriminating in favor of highly compensated individuals. The United States Department of Labor and the United States Department of Health and Human Services have reviewed this notice and have advised the Department of the Treasury and the Internal Revenue Service (IRS) that they agree with it.”

Previous Request for Comments

“The final regulations under section 105(h) of the Code, prohibiting discrimination in favor of highly compensated individuals under self-insured medical expense reimbursement plans, were issued in 1981. The Department of the Treasury and the IRS are considering issuing guidance on the extension, through section 2716 of the PHSA and new section 9815 of the Code, of the requirements of section 105(h)(2) to insured group health plans. The Department of the Treasury and the IRS request comments on what additional guidance relating to the application of section 105(h) (2) would be helpful with respect to insured group health plans.”

Comment due: November 4, 2010

Notice two: IRS Bulletin 2011-1 ⁵The second notice to address Section 2716 was issued on December 22, 2010. Notice 2011-1 which states compliance with the nondiscrimination provisions of the PPACA are suspended for insured group health benefit plans until an undefined date.

Request for Comments

“Comments submitted in response to Notice 2010-63 maintained that, without regulations or other administrative guidance under Section 2716, plan sponsors are uncertain how to apply the nondiscrimination provisions. In addition to what is meant by rules 'similar to,' comments raised a number of other issues regarding the application of Section 2716. Comments suggested that guidance address the application of Section 2716 before plan years beginning in 2014 (when the State Exchanges, employer responsibility and penalty provisions, and related provisions take effect) and also in and after 2014. The Departments recognize that the guidance under Section 2716 must take into consideration the Exchange operations and individual and plan sponsor requirements that go into effect after 2013.”

Notice three: IRS Bulletin 2011-2 ⁶The IRS continued to delay the implementation of Section 2716. The agency reissued Notice 2011-1 on January 10, 2011 to gain additional guidance.

Additional Request for Comments

Notice 2011-1 asks 13 key questions that need to be address to successfully implement Section 2716:

The basis on which the determination of what constitutes non-discriminatory benefits under Section 105(h)(4) should be made and what is included in the term “benefits.” For example, is the rate of employer contributions toward the cost of coverage (or the required percentage or amount of employee contributions) or is the duration of an eligibility waiting period treated as a “benefit” that must be provided on a non-discriminatory basis?
The suggestion made in previous comments that the Departments have the authority to provide for an alternative method of compliance with Section 2716 that would involve only an availability of coverage test.
The application of Section 2716 to insured group health plans beginning in 2014 when the health insurance exchanges become operational and the employer responsibility provisions (Section 4980H of the Code), the premium tax credit (Section 36B of the Code), and the individual responsibility provisions (Section 5000A of the Code) and related Affordable Care Act provisions are effective.
The suggestion in previous comments that the non-discriminatory classification provision in Section 105(h)(3)(A)(iii) could be used as a basis to permit an insured health care plan to use a highly compensated employee definition in Section 414(q) of the Code for purposes of determining the plan’s nondiscriminatory classification.
The suggestion in previous comments that the nondiscrimination standards should be applied separately to employers sponsoring insured group health plans in distinct geographic locations and on whether application of the standards on a geographic basis should be permissive or mandatory.
The suggestion in previous comments that the guidance should provide for “safe harbor” plan designs. Specifically, comments are requested on potential safe and unsafe harbor designs that are consistent with the substantive requirements of Section 105(h).
Whether employers should be permitted to aggregate different, but substantially similar, coverage options for purposes of Section 2716 and, if so, the basis upon which a “substantially similar” determination could be made.
The application of the nondiscrimination rules to “expatriate” and “inpatriate” coverage.
The application of the nondiscrimination rules to multiple employer plans.
The suggestion in previous comments that coverage provided to a “highly compensated individual” (as defined in Section 105(h)(5)) on an after-tax basis should be disregarded in applying Section 2716.
The treatment of employees who voluntarily waive employer coverage in favor of other coverage.
Potential transition rules following a merger, acquisition or other corporate transaction.
The application of the sanctions for noncompliance with Section 2716.

Comments due: March 11, 2011

Next Steps
To ensure the smooth implementation of Section 2716, the federal agencies reviewing comments have stated that the request for public comment and guidance is critical. Unfortunately, the anti-discrimination provisions, along with many other PPACA requirements, are difficult to implement due to limited or poor statutory language construction.

Comments are due on March 11, 2011 for Notice 2011-1⁷, and analysis by HHS, DOL and the IRS will take place over the next few months. Karen Levin out of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) will be the main drafter of the next notice.

BenefitMall will keep you updated on any additional changes to the “anti-discrimination” requirements in the coming months.

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As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

New Federal External Review Requirements

Tue, 01 Mar 2011 00:00:00 -0600

Today, health plans and insurers issuing new policies and offering “non-grandfathered” coverage must provide individuals an expanded reconsideration and appeals process when an adverse benefit determination is made. Last summer, the U.S. Department of Labor (DOL) and Department of Health and Human Services (HHS) regulations issued specific regulatory guidance detailing how health plans and insurers must comply with new national minimum standards for external review pursuant to the Patient Protection and Affordable Care Act of 2010 (PPACA).¹

Brokers and agents should become familiar with the new rules to help support their clients when a health plan or insurer does not provide adequate coverage. To that end, health plans and insurers that have not been subject to state external review requirements must now comply with these new minimum federal requirements. Specifically, the federal government now mandates that each “non-grandfathered” health plan comply with either the higher of the new federal external review regulations, the NAIC Uniform Health Carrier External Review Model Act ², or a state’s external review requirements.³ Although some additional details still need to be worked out, the new rules were effective on September 21, 2010.

The federal government noted that one goal is to make the external review process more efficient, as stated in the interim final rule:

"By making claims and appeals processes more uniform, these interim final regulations will increase efficiency in the operation of employee benefit plans and health care delivery as well as health insurance and labor markets. These interim final regulations are expected to increase efficiency by reducing complexity that arises when different market segments are subject to varying claims and appeal standards."⁴

It is not clear whether or not DOL/HHS will accomplish this goal, but individuals do have more rights under the new federal regulations resulting from an adverse coverage decision or payment.

An Overview of the New Federal Requirements

Here are a few highlights:

Types of decisions that can be appealed. The definition of “adverse benefit determination” is expanded to include a rescission of coverage which applies when coverage is cancelled or discontinued, except when an individual has failed to pay the required premiums or other contribution toward the cost of coverage.
More information about how to appeal. The plan or issuer must provide information pertaining to the “available internal appeals and external reviews processes, including information about how to initiate an appeal.”⁵
Failure to make full payment. The new federal external review protections apply to both “pre-service” and “post-service” claims – including situations where the health plan pays an individual less than the total amount. This includes “(f)ailure to make a payment in whole or in part (and) includes any instance where a plan pays less than the total amount of expenses submitted with regard to a claim…”⁶
Emergency appeals. The time period for responding to a claim involving urgent care is shortened from 72 hours to 24 hours.
More information about denial. To ensure a claimant receives a full and fair review, the health plan must provide additional details on any new or additional evidence considered, relied on or generated by the plan that led to the adverse determination. The rationale must be provided free of charge, as soon as possible and before the appeal process begins. In addition, the “plan or issuer must also ensure that the reason or reasons for the adverse benefit determination…includes the denial code…It must also include a description of the plan’s or issuer’s standard, if any, that was used in denying the claim…” ⁷
More common language. Notices to individual claimants throughout the process must be provided in a culturally and linguistically appropriate manner.

Last month, the National Association of Independent Review Organizations (NAIRO) released a white paper in order “to make it easier for health plans, third-party administrators and self-insurers to comply with the Interim Final Regulations.” This guidance also should be helpful to brokers and agents. The white paper is available here.

Among other observations, NAIRO notes that “(t)he regulations require that all claims and appeals must be decided in a manner that ensures the independence and impartiality of the person making the benefits determination.” They also highlight the fact that “(c)laimants must be provided continued coverage while waiting for an internal appeal decision.”

Federal or State Oversight?

The new federal external review requirements apply both to “non-grandfathered” groups and individual coverage. The federal government elaborates that “it is preferable to have similar processes in the group and individual markets.” ⁸ In terms of grandfathered plans, it is important to note that they are exempt from the new federal requirements, but state external requirements will likely still apply unless a regulatory exception exists. Interestingly, state external review requirements in many instances will apply to self funded plans, where Employee Retirement Income Security Act (ERISA) would normally preempt state law.⁹ If there is any conflict in terms of which external review rule applies or does not apply, HHS will likely decide whether the state or federal rules apply.¹⁰

In terms of determining whether the new federal requirements or an existing state law applies in a particular jurisdiction, it is recommended that you contact the state insurance department. An insurance regulator should be able to help brokers, patients and others determine which process is applicable.¹¹

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The federal government expects to issue more regulations on the external review process later this year. As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

BenefitMall’s Michael Gomes Testifies in Austin TX

Tue, 01 Mar 2011 00:00:00 -0600

As BenefitMall continues to work closely at both the local and national Congressional level we wanted to inform you that today, Tuesday, March 1, Michael Gomes, Executive Vice President for BenefitMall, will testify in Austin, TX before a committee regarding Representative John Zerwas’ (R-TX) legislation, section CSHB 636. While brokers are not mentioned in this particular piece of legislation, we want to reiterate the importance of the broker role in the distribution and servicing of health insurance. We feel that the bill must specifically identify the importance of brokers in the support of their position.

Leading up to this testimony, BenefitMall’s President and CEO, Bernard DiFiore, recently participated in an invitation-only committee conference with NAIC. With respect to broker commissions, BenefitMall knows that NAIC is working on the issue and that during the call, NAIC said that they would study language to recommend that the brokers’ role and their commissions would be protected. We strongly are in favor of this position and further emphasize that commissions should be treated similar to taxes and should be a part of an insured’s premium, but be dealt with outside the Medical Loss Ratio calculation.

Michael Gomes’ Testimony
In support of Rep. Zerwas’ legislation, CSHB 636, BenefitMall would like to share with you some general comments about health insurance exchanges and the committee substitute addressed by Mr. Gomes before the committee.

BenefitMall believes that privately-funded and operated health insurance exchanges, which have been in successful operation for years, should co-exist with the public exchanges. For that to occur, there are several guiding principles we encouraged members of this committee to consider when passing legislation to create this exchange.

It is important that the legislature clearly define the purpose and goal of an exchange. The connector cannot be all things to all people, but it should perform several basic functions, including certifying health plans to ensure they meet minimum benefits standards, assisting employers and individuals with purchasing and enrolling in certified plans, utilizing quality assurance measurements, and providing assistance for eligible individuals and small businesses in accessing premium subsidies.

However, we believe it is important to keep in mind that there are more than 100 private health insurance exchanges in existence today that cumulatively represent more than one third of most insurance carriers’ distribution efforts. There is a role for a public exchange to play, but it should not serve to crowd out private exchanges that already exist in the market. We stress the importance that nothing be included in this legislation that would require individuals and small groups to purchase their insurance through a government-administered exchange.

So how can public and private exchanges work together to maintain the right balance? Private exchanges need to co-exist with public exchanges to ensure a “healthy” and effective health insurance system. Both private and public exchanges working collaboratively will:

Aid in the expansion of coverage for the uninsured
Ensure public exchanges will not bear the burden of high-risk populations alone
Protect consumers’ right of choice
Ensure a seamless transition for consumers from one coverage arrangement to the next
Promote informed decision-making through the services of a broker and online resources

Private exchanges also can accomplish most of the public exchange functions described in PPACA, either through their own systems and/or in collaboration with the public exchanges. The goal of the establishment of the public exchange should be consistent with the establishment of the greatest and most vibrant outside marketplace, and contain as few restrictions on that private marketplace as possible. One of the ways this could be accomplished is to focus the public exchange on the uninsured or subsidized population, while allowing the private market to continue serving those who currently have insurance or who are not eligible for government subsidies.

There are some policy details in this bill that we have questions and comments about, but we believe this legislation represents a solid first step in the process of establishing a connector.

As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

US Senate Blocks Health Care Repeal

Wed, 16 Feb 2011 00:00:00 -0600

On Wednesday, the U.S. Senate took the floor to debate the Republican sponsored bill to repeal the Patient Protection and Affordable Care Act (PPACA). However, the Republicans' effort to repeal the health care law was blocked by the Democrats by a margin of 51-47.

On HealthcareExchange.com, BenefitMall’s Chief Executive Officer, Bernard DiFiore, said:

“The Senate started debating the merits of PPACA on the floor today, with the Republicans highlighting the problems of the new law, and Democrats arguing the need to move forward with the current healthcare reform law.”

To read DiFiore’s article in its entirety or to voice your opinion, visit www.HealthcareExchange.com. If you have any questions, please contact your local BenefitMall Sales Team and they will be happy to assist you. Thank you for taking the time to read through this important notification.

Florida Federal Court Rules against Legality of PPACA

Wed, 02 Feb 2011 00:00:00 -0600

A Florida district court ruling on Monday generated nationwide headlines by deeming the 2010 Patient Protection and Affordable Care Act (PPACA) unconstitutional. This most recent ruling has greatly increased the chances that the legitimacy of the new health care law will be examined by the U.S. Supreme Court.

"A year ago, it was a long shot," said Randy Barnett, a law professor at Georgetown University, of the law’s chances of winding up before the Supreme Court. "Now, it’s seen as a 5 to 4 case. And nobody’s exactly sure which way the 5 to 4 will come down."¹

On Monday, U.S. District Judge Roger Vinson of the Northern District of Florida, Pensacola Division, ruled that PPACA violated the Commerce Clause by forcing individuals to purchase insurance. In addition, Judge Vinson’s ruling has the broadest legal impact to date because he determined that the entire federal law must be struck down since a “severability” clause was not included in the language. Without such a provision, if one part of the law is struck down, the rest of PPACA cannot be implemented. This part of the ruling in particular sent shock waves throughout the country yesterday. The Obama administration plans to appeal this part of the ruling.

However, Judge Vinson ruled in favor of the Obama administration when he failed to order an injunction (i.e., a “cease and desist” order) on the implementation of the new law, reasoning that since the “individual mandate” provision in question will not go into effect until 2014, the plaintiffs could not prove immediate harm. He also ruled against the plaintiffs on a second motion asserting that PPACA forces states to participate in an expansion of Medicaid since it is a voluntary program, and a state could always withdraw from the Medicaid program.

A copy of the court decision can be downloaded here.

As a result, the new ruling will not have an immediate impact on how the new law and the accompanying regulations are being implemented this year. However, this opinion will provide a strong impetus for the Republicans in the U.S. Senate who are already demanding that the Democrats allow an up or down vote on the bill that the House approved to repeal the PPACA last week.

Background
The Florida case was filed just minutes after the federal legislation was signed by President Obama on March 23, 2010. The plaintiffs are attorney generals and governors from 26 states², two private citizens and the National Federation of Independent Business (“NFIB”) (collectively referred to as the “plaintiffs”). The defendants are the United States Department of Health and Human Services, the Department of Treasury, the Department of Labor and their secretaries (collectively referred to as the “defendants”).

The 78-page ruling on Monday addressed several legal issues regarding the defendants’ motion for summary judgment. Judge Vinson at the beginning of his opinion wrote:

"The Framers believed that limiting federal power, and allowing the 'residual' power to remain in the hands of the states (and of the people), would help 'ensure protection of our fundamental liberties' and 'reduce the risk of tyranny and abuse……' As Chief Justice Marshall aptly predicted nearly 200 years ago, while everyone may agree that the federal government is one of enumerated powers, 'the question respecting the extent of the powers actually granted, is perpetually arising, and will probably continue to arise, so long as our system shall exist.' This case presents such a question."³

Vinson’s decision focuses on two aspects of the case. First, the plaintiffs’ claim that the individual mandate, which requires everyone (with a few minor exceptions) to buy health insurance or pay a penalty, violated the Commerce Clause in the Constitution and is therefore illegal. And secondly, PPACA usurps state autonomy by forcing states to expand its respective Medicaid programs to cover individuals under the age of 65 with incomes up to 133% of the federal poverty level, along with the requirement that states are responsible for the actual provision of health services thereunder.

Individual Mandate
The Florida District Court is the fourth court in recent months to rule on the legality of PPACA. These rulings have produced mixed results. With Judge Vinson’s decision, there are two rulings asserting the individual mandate does not violate the Constitution, and two decisions saying that the mandate does.⁴

Judge Vinson reminds us that the Commerce Clause is only 16-words-long. He elaborates that Congress shall have the power: “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”⁵ However over the years, many courts have interpreted and perhaps expanded the original intent of this provision. Judge Vinson notes that:

"[W]e have identified three broad categories of activity that Congress may regulate under its commerce power. First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress’ commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e., those activities that substantially affect interstate commerce."⁶

He adds, “The defendants' argument that people without health insurance are actively engaged in interstate commerce based on the purported 'unique' features of the much broader health care market is neither factually convincing nor legally supportable.”⁷

In addition to rejecting the defendants' arguments that the individual mandate falls within Interstate Commerce and therefore is a legitimate exercise of power under the Commerce Clause, the judge also said that PPACA does not fall under the “Necessary & Proper” Clause. He wrote:

"The Necessary and Proper Clause cannot be utilized to 'pass laws for the accomplishment of objects' that are not within Congress' enumerated powers. As the previous analysis of the defendants' Commerce Clause argument reveals, the individual mandate is neither within the letter nor the spirit of the Constitution. To uphold that provision via application of the Necessary and Proper Clause would authorize Congress to reach and regulate far beyond the currently established 'outer limits' of the Commerce Clause and effectively remove all limits on federal power."⁸

After an exhaustive and comprehensive review of court cases addressing the Commerce clause, Judge Vinson stated:

"I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system…..Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void. This has been a difficult decision to reach, and I am aware that it will have indeterminable implications. At a time when there is virtually unanimous agreement that health care reform is needed in this country, it is hard to invalidate and strike down a statute titled 'The Patient Protection and Affordable Care Act.' "⁹

State Medicaid Claim
On the second claim, Judge Vinson writes “state plaintiffs object to the fundamental and 'massive' changes in the nature and scope of the Medicaid program that the Act will bring about.” Among other assertions, the plaintiffs claim PPACA violates the “Spending Clause” by significantly expanding the Medicaid program to such a degree that the states cannot afford the newly-imposed costs and burdens.¹⁰

On this issue, Judge Vinson ruled in favor of the defendants and dismissed this claim since participation in the Medicaid program by the states would remain voluntary, so the plaintiff's "coercion theory" argument did not hold up.

Severability Clause
The impact of the recent Florida ruling is much broader in scope than that of the Virginia case, due to the lack of a “severability clause” embedded in PPACA. In the Virginia case, presiding Judge Henry E. Hudson simply ruled that only the PPACA’s “individual mandate” was unconstitutional. However, in his ruling, Florida’s Judge Vinson wrote:

"First, the Act does not contain a 'severability clause,' which is commonly included in legislation to provide that if any part or provision is held invalid, then the rest of the statute will not be affected. Although it is true that the absence of such a clause, in and of itself, does not raise a presumption against severability… The lack of a severability clause in this case is significant because one had been included in an earlier version of the Act, but it was removed in the bill that subsequently became law."¹¹

Ruling Impact
This ruling in Florida, which strikes down the individual mandate to purchase health insurance as a violation of the Commerce Clause, is significant for several reasons:

This is the largest lawsuit that has been filed to date with 26 states joining as plaintiffs to the legal action.
This lawsuit backs the ruling in December by Judge Hudson of the U.S. District Court for the Eastern District, who also ruled PPACA unconstitutional, which evens out the court decisions “2 to 2.”
This ruling raises serious questions about whether the Obama administration can continue to move forward with a blind eye to the legality of one of PPACA’s fundamental provisions, the individual mandate.
If this ruling is upheld on appeal, many of the major provisions of PPACA will need to be redesigned or removed altogether. If the Supreme Court affirms Judge Vinson’s decision, the entire Act will be void. If President Obama wants to retain any of the PPACA provisions, Congress will have to pass new legislation, which may be difficult considering the hit Democrats took in the 2010 election.

In addition to re-affirming that the plaintiffs had standing to sue the federal government, Judge Vinson pointed out that several states have passed legislation contesting the power of the federal government, including Idaho, Virginia and Utah. For example, a new Utah proclamation was adopted stating PPACA will infringe on states’ powers and the rights of citizens to provide for their own health care by “requiring a person to enroll in a third-party payment system” and “imposing fines on a person who chooses to pay directly for health care rather than use a third party payer.”¹² Similar to the Virginia law that Judge Hudson addressed in his recent court decision¹³, there appears to be growing momentum in many states to oppose PPACA’s individual mandate.

Now, the Florida-based lawsuit moves into more mixed ideological territory. The case will go to the 11th Circuit Court of Appeals in a fashion similar to the other three court cases, where those lawsuits are being appealed in different circuit courts. To date, all court decisions have been decided by party lines. Until a court appointed judge breaks ranks with his or her party, none of the appellate decisions will be surprising.

Notwithstanding Judge Vinson’s ruling, the Obama Administration remains steadfast in moving forward with its implementation timeline. Most states also are moving forward in the development of key aspects of the health care reform legislation, including the creation of health care exchanges. One commentator noted that even so-called “conservative” states are responding to the PPACA’s short-term requirements as a defensive measure to avoid a federal takeover.

Whether through legal proceedings or legislative modifications, it will certainly be interesting to see what parts of PPACA end up standing and what components will be modified.

House Actions to Repeal PPACA

Tue, 01 Feb 2011 00:00:00 -0600

The 112th session of the U.S. House of Representatives convened on January 5, 2011. On this first day of the session, several bills were placed in the hopper to defund, amend or repeal the Patient Protection and Affordable Care Act (PPACA).

On January 8, the House approved a procedural rule as part of a Republican attempt to repeal the new health care law. Congressional House members voted 236-182 in favor of approving the rule, a House requirement setting the parameters of debate on underlying legislation. The actual vote to repeal PPACA, based on one or more of the bills summarized below, will be voted on in the near future.

Overview of House Bills
The following bills seek to amend PPACA:

H.R. 21: Amends the Internal Revenue (Tax) Code of 1986 to repeal the recent mandate that individuals purchase health insurance. Sponsor: Scott Garrett (RNJ)
H.R. 118: Amends PPACA to permit a state to elect not to establish a health insurance exchange. Sponsor: John Fleming (R-LA)
H.R. 119: Prevents the hiring of additional employees by the IRS to implement, administer or enforce health insurance reform. Sponsor: John Fleming (R-LA)

Four bills seek outright repeal of PPACA:

H.R. 2: Repeals PPACA through the Job-Killing Health Care Law Act, as well as the Health Care and Education Reconciliation Act of 2010. Sponsor: Eric Cantor (R-VA)
H.R. 141: Repeals PPACA and the Health Care and Education Reconciliation Act of 2010. Sponsor: Steve King (R-IA)
H.R. 105: Repeals PPACA and all related health care provisions while providing incentives to encourage health insurance coverage among other purposes. Sponsor: Dan Burton (R-IN)
H.R. 145: Repeals PPACA and related health care provisions. Sponsor: Connie Mack (R-FL)

Bills seeking to restrict or eliminate the funding of the PPACA:

H.R. 38: Withdraws funds appropriated to the Health Insurance Reform Implementation Fund under the Health Care and Education Reconciliation Act of 2010. Sponsor: John Fleming (R-LA)
H.R. 127: Withdraws allotment of funds for PPACA, as well as the 2010 Health Care and Education Reconciliation Act. Sponsor: Tom Graves (R-GA)
H.R. 154: Prohibits the use of funds being used for the implementation or enforcement of any federal mandate requiring individuals to purchase health insurance. Sponsor: Ted Poe (R-TX)

And finally, H.R. 191: Amends PPACA to establish a public health insurance option. Sponsor: Lynn C. Woolsey (D-CA), whom seeks to significantly increase the scope of PPACA.

Congressional Battle Ahead
Of the above bills, H.R. 2, offered by Rep. Cantor, is receiving the most media attention. Rep. Cantor is using the power of his position as Majority Whip to push his bill along. Pundits are predicting a strong probability of passage in the House. It will probably meet a different fate in the U.S. Senate due to Democratic control.

The combined caucus of Democrats and the two Independents hold a 53-47 voting majority in the Senate. While it’s possible to think Republicans could focus their efforts on three or four of the 10 Democrats who run for re-election in 2012 in states that ran heavily Republican in the 2010 election, it will be another matter to gather the 60 votes to close debate on a bill. The Democrats will be able to kill any Republican effort to repeal by filibuster. Even if Republicans could somehow pass a repeal, President Obama has already stated he would veto the bill. Repeal may play well to the Republican core constituencies, but the odds are stacked against any effort becoming law.

In contrast to efforts to repeal the entire law, Republican House members will likely use a more focused effort to repeal or defund what they perceive as the more onerous aspects of the bill. Several of the limited-scope bills could pass the House and would face a more favorable prospect in the Senate, but would still be challenged by a Democratic President who is more than willing to veto any initiative to make significant changes to this signature legislation of his first term.

However, if the economy continues to stagnate, this could force the issue in the direction of the Republicans. Unemployment remains at the top of the list of key issues, and if enough Democrats become sincerely concerned about their re-election prospects, their votes to amend or repeal the PPACA may become more probable. Rep. Cantor’s bill is aptly named: “Repealing the Job-Killing Health Care Law Act.” As with this past election, it will be a matter of jobs, and if the public perceives PPACA as a job killer, the opportunities to repeal or significantly amend it will only improve.

To access the details of the bills listed above, visit the Library of Congress website at http://thomas.loc.gov/home/bills_res.html.

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As more information becomes available, BenefitMall is committed to keeping you up-to date in a timely manner. 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. Thank you for taking the time to read through this important notification.

Florida Judge Ruled on PPACA Case

Tue, 01 Feb 2011 00:00:00 -0600

BenefitMall would like to inform you that U.S. District Judge Roger Vinson of the Northern District of Florida ruled today that the Patient Protection and Affordable Care Act (PPACA) is unconstitutional. The text of the ruling is not available yet, but in a recent court document filed by the lead plaintiff Florida Attorney General Bill McCollum, he argued:

"The Individual Mandate is unprecedented. It compels citizens to engage in commerce even though they have not themselves chosen to enter the marketplace. Never before has Congress purported to use its power over interstate commerce to compel activity, rather than to regulate existing economic activity."

This ruling, which likely strikes down the individual mandate to purchase health insurance as a violation of the Commerce Clause, is significant for several reasons:

First, this the largest lawsuit that has been filed to date with 25 states joining the legal action initiated by Mr. McCollum.
Secondly, this lawsuit backs the ruling in December by Judge Henry Hudson of the U.S. District Court for the Eastern District, who also ruled that PPACA is unconstitutional.
Thirdly, this ruling raises serious questions as to whether the Obama administration can continue to move forward with a blind eye to the legality of PPACA’s fundamental provisions, which would mandate that everyone purchase health insurance coverage or pay a penalty.

Judge Vinson’s comments in relation to the ruling:

"I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and Inequities in our health care system."

"Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void. This has been a difficult decision to reach, and I am aware that it will have indeterminable implications. At a time when there is virtually unanimous agreement that health care reform is needed in this country, it is hard to invalidate and strike down a statute titled 'The Patient Protection and Affordable Care Act.' "

If this ruling is upheld on appeal, many of the major provisions of PPACA will need to be redesigned or removed altogether. Further details regarding this ruling can be viewed here.