Health Care Reform Update
UAHU Salt Lake Valley Luncheon
Doty Family Education Center—Intermountain
Medical Center
January 11, 2012
Roadmap
Insurance Reform
Is it Constitutional?
Public Health/Quality of Care
Payment Reform
Crystal Ball
Insurance Reform Update
Medical Loss Ratio Rebates
Insurers must provide premium rebates to each
enrollee on a pro rata basis if the ratio is less
than:
• 85% in the large group market; and
• 80% in the small group and individual markets.
Rebates
• Calculated for each State and by Line of
Business (no aggregation)
• Report to HHS by June 1st and distribute by
August 1st
• Form of payment: premium credit (current
enrollees only), lump sum check, lump sum to
credit or debit account
• No rebate required if less than $5 per
subscriber
.
MLR Waivers
• The ACA allows the states to apply for waivers
from application of the MLR requirements if
they would “destabilize the individual market”.
• Seventeen states have applied for a waiver.
• Six waivers have been granted by HHS.
• Eight refused.
• Victory or failure?
MLR Waivers for Maine—a case study
• HHS review was meticulous and wellreasoned.
• 3 main carriers in individual market; fear that
one of them (MEGA Life), with 37% market
share, would leave.
• Based on prior experience: when Maine
implemented a 75% MLR requirement in 2004,
MEGA withdrew—at the time, it operated at a
52% MLR in the small group market!
Not Just Maine
Texas Waiver Request:
• Standard Life and Casualty has a published
MLR of 53 percent.
Other States
Other waivers are not as dramatic:
• New Hampshire
-72% in 2011; 75% in 2012
• Nevada and Kentucky
-75% for 2011
• Iowa
-67% for 2011; 75% for 2012
Effect on Commissions
• Nationwide cuts by as much as 50%.
• NAIFA poll in May—over half of the
respondents report reductions of 25% or more.
• 44% will start charging for certain services
• 23% have reduced services
• 11% stopped selling individual
• 4% left health insurance altogether
NAIC Votes to Protect Producer Comp
After months of waffling, in late November the
NAIC finally adopted a resolution urging
Congress and HHS to protect producer
compensation by:
• Approving state waiver requests;
• Placing an immediate hold on implementation and
enforcement; and/or
• Reclassifying an appropriate portion of compensation
expense in the calculation.
HHS Ignores Request
In early December, HHS issued its Final Rule on
MLR’s, without changing the treatment of
producer compensation in the MLR calculation.
HR 1206
• Sponsored by Mike Rogers (R-MI) and John
Barrow (D-GA).
• Would remove commissions from the
denominator.
• Likely would pass the House
• Stiffer challenge in the Senate (Rockefeller
and Harkin key opponents)
• AMA and consumer advocacy groups oppose
The New Summary of
Benefits and Coverage
Nutrition Facts
• A standardized summary
of key nutrition
information.
• Implemented in 1994.
• Why is he nervous?
• Do you read them when
making consumption
choices?
Decisions, Decisions
Background
• The Affordable Care Act required that, by March
23, 2011 (one year after passage), HHS develop
uniform standards for group health plans and
insurers in the group and individual markets to
provide enrollees with a summary of benefits and
coverage (SBC).
• These federal standards will preempt state law.
• Proposed regulations were finally published on
August 22.
Statutory Requirements
• By March 23, 2012, plans must provide
the SBC at the time of application and
prior to enrollment/issuance.
• Notice of material changes must be
provided at least 60 days prior to the date
the modification will become effective.
Statutory Requirements
The SBC:
• Cannot exceed 4 pages in length;
• Cannot use smaller than 12-point font;
• Must be presented in a culturally and linguistically
appropriate manner, using language
understandable by the average plan enrollee; and
• Has additional, elaborate, content requirements.
Statutory Requirements
Penalties:
Any entity that willfully fails to provide the
required information is subject to a fine of
not more than $1,000 per enrollee.
Proposed Regulations
The guidance includes a proposed SBC
template and a uniform glossary of common
health coverage terms. The proposed SBC
template includes instructions, samples,
and a guide for providing coverage
examples to illustrate benefits provided
under the plan for common benefits
scenarios.
Proposed Regulations
• Group health plans with multiple coverage
options must provide a separate SBC for
each option.
• Convenient Math employed.
Convenient Math
Examples from SBC Regs
• March 23, 2011 = August 21, 2011
• 4 Pages = 8 Pages
Practice on Your Own!
• Tell the IRS that you’ll respond to their
audit request “in 7 days.”
• Then respond 7 weeks later.
• When they ask about the delay, explain
that you didn’t specify which days and
decided to count the Tuesdays.
Proposed Regulations
Effective Date:
•
The ACA called for the SBC requirement to
become effective on March 23, 2012 (two years
after passage);
•
The proposed regulations requested comment on
the whether this is feasible, noting that the
comment period for the regs closes on October 21,
and it will take time after that to finalize the SBC
template and related materials.
Proposed Regulations
Effective Date Delayed!
•
In an FAQ document released in November, the
Departments stated that the final regulations will
"include an applicability date that gives group
health plans and health insurance issuers sufficient
time to comply." The FAQs also state that until final
regulations are issued and applicable, plans and
issuers are not required to comply with the SBC
requirements of the ACA.
Other Punts and Slides
• Free Choice Vouchers—repealed
• 1099’s—repealed
• CLASS Act (long-term care)—DOA
• Discrimination testing—delayed
• W-2 Reporting—delayed
W-2 Benefit Disclosures
• Effective for the 2011 tax year, employers are
required to disclose the aggregate cost of
applicable health insurance coverage on the
employee’s W-2 forms.
• But see Notice 2010-69, making this
requirement optional for Forms W-2 issued for
2011.
W-2 Benefit Disclosures
• On March 29, 2011, IRS released Notice 201128, which provides detailed guidance on how
and what to report.
• This guidance includes several categories of
transition relief, including for: employers filing
fewer than 250 W-2’s, who have at least until
2013 (filed in 2014); HRA’s; certain dental and
vision plans; etc.
W-2 Benefit Disclosures
Breaking News:
• On January 4, 2012, IRS released Notice Notice 20129, which updated and replaced Notice 2011-28, and
provides significant additional detail.
• Requirement doesn’t apply to Health FSA’s.
• Report can be based on information available on
December 31, and need not be adjusted for later
elections or notifications with retroactive effect.
Exchanges
Update on the Utah Health Exchange
• Total Employer Groups – 205
• Covered Lives – 5,091
• Avg. Employer DC Amount – $430
• Highest Employer DC Amount – $1,855
• Percentage of groups without prior
coverage – 23%
•
Exchanges
UHE – Work in Progress
• Cost and Quality Transparency (utilizing
the APCD)
• Navigator (no wrong door)
• Aggregation of premiums
• Preparing for ACA functional requirements
• Approach to the Feds: divided house
Exchanges – The Feds
• Series of regulations issued over the
summer.
• Industry and Intermountain responded.
• Late in 2011: the federal regulators
announce their intention to be more
flexible— “federally facilitated exchanges”
and hybrid models.
Exchanges – The Feds
• Grant money flying off the shelves (Nov. 29
announced $220M to 13 states).
• Some of these states among the plaintiffs in
the federal litigation.
• Utah still has a decision to make, but the
new guidance should make it easier.
• Upcoming legislation session will be key.
Essential Health Benefits
Background
• Non-grandfathered plans in the individual and
small group markets, both inside and outside of
exchanges, must cover “essential health benefits”
(ESB) beginning in 2014.
• Large and self-insured group health plans are not
required to cover ESB.
Essential Health Benefits
Statute: Ten Benefit Categories
• Ambulatory patient services;
devices;
• Emergency services;
• Lab services;
• Hospitalization;
•
•
•
•
• Preventive and wellness
services and chronic
Maternity and newborn care;
disease management; and
Mental health and substance
• Pediatric services,
use disorder services;
including oral and vision
Prescription drugs;
care.
Rehabilitative and
habilitative services and
Essential Health Benefits
Statutory Mandate
• Secretary of HHS must define EHB.
• The scope of EHB should equal the scope of
benefits provided under the typical employer plan.
• Establish an appropriate balance among
coverage categories, but not make coverage
decisions, determine reimbursement rates, or
establish incentive programs.
Essential Health Benefits
Statutory Mandate [cont.]
• Must not be designed in ways that discriminate
based on age, disability, or expected length of life.
• But must consider the health needs of diverse
segments of the population.
Essential Health Benefits
Is this starting to sound familiar?
Essential Health Benefits
Institute of Medicine
• In order to balance cost and comprehensiveness,
recommended that EHB reflect plans in the SE
market and that the EHB package be guided by a
national premium target, with flexibility across the
States to implement actuarially equivalent
substitutes.
Essential Health Benefits—MI5
From the HHS Listening Tour
• Some consumer groups were upset at IOM’s emphasis on
cost (v. comprehensiveness).
• Some consumer groups requested that specific benefits
should be spelled out by HHS.
• Employers and insurers stressed concerns about cost and
urged adoption of a more moderate package.
• Some consumers requested a uniform benefits package.
• Employer, insurance industry and State reps pointed out the
need for State flexibility to reflect local preferences and
practices.
Essential Health Benefits
HHS Bulletin (Trial Balloon Proposal)
• On December 16, HHS proposed that EHB be defined
by a benchmark plan selected by each State.
• The benchmark would serve as a reference plan,
reflecting both the scope of services and limits offered
by a typical employer plan in that State.
• Issuers would be required to offer plans that are
“substantially equal” to the benchmark, with
flexibility to adjust benefits as long as they
covered all 10 statutory EHB categories.
Essential Health Benefits
Four Benchmark Plan Types—Glossary
• “Product” refers to the package of services covered by
an issuer, which may have several cost-sharing
options and riders.
• “Plan” refers to the specific benefits and cost-sharing
provisions available to an enrolled consumer.
• Thus, there are multiple “plans” (cost-sharing and
rider options) within a single “product”.
Essential Health Benefits
Four Benchmark Plan Types
States may choose their benchmark from:
• Largest plan by enrollment in any of the three largest
products in the State’s SE market;
• Any of the three largest State employee health benefit
plans by enrollment;
• Any of the largest three national FEHBP options, by
enrollment; or
• Largest insured commercial HMO in the State.
Essential Health Benefits
Default Benchmark Plan
If a State does not exercise the option to select a
benchmark, the default benchmark for that State would
be the largest plan by enrollment in the largest product
in the State’s SE market.
Essential Health Benefits
Impact on States/Mandated Benefits
• The ACA requires States to defray the cost of any
benefits required by State law to be covered by
qualified health plans beyond the EHB.
Essential Health Benefits
2014-2015 Transition
The proposal allows States a “transition period” for 2014
and 2015, to coordinate their benefit mandates while
minimizing the likelihood that they will be required to
defray costs of additional benefits beyond EHB.
State can avoid the cost by choosing as its benchmark
an SE plan subject to State mandates.
Essential Health Benefits
Kudos to HHS!
• Provides remarkable State flexibility
• Recognizes that sponsors and issuers make “a holistic
decision” in constructing plans, balancing the
competing needs for comprehensiveness and
affordability.
Essential Health Benefits
Still Coming
• The Bulletin clarifies it only relates to covered services
and that future guidance will address cost-sharing and
actuarial value (i.e., the “metals”, gold, silver, etc.).
• HHS is still tinkering with the most problematic
areas, “habilitative” services and pediatric dental
and vision, and requests input on several aspects
of these areas.
Is the Affordable Care Act
Constitutional?
Florida et al. v. Dept of HHS
• Utah is a plaintiff, along with 25 other states.
• The District Court finds standing based in part on
Utah’s HB 67 and a similar law in Idaho.
• The Court rejects a challenge to the ACA’s
expansion of Medicaid as a violation of the
Spending Clause (Art. I, Sect. 8, Cl. 1).
• But finds that the individual mandate exceeds
Congress’ power under the Commerce Clause.
The Commerce Clause
To regulate Commerce with foreign
Nations, and among the several States,
and with the Indian tribes.
US. Constitution, Article I, Section 8, Clause 3
Wickard
Court ruled that Congress had the power to
regulate a small farmer’s local production of wheat
intended for personal consumption.
“That the appellee’s own contribution to the
demand for wheat may be trivial by itself is not
enough to remove him from the scope of federal
regulation where, as here, his contribution, taken
together with that of many others. . .is far from
trivial.”
The Commerce Clause
Modest Restraint
U.S. v. Lopez, 514 U.S. 549 (1995) (possession
of guns near schools).
U.S. v. Morrison, 529 U.S. 598 (2000) (gendermotivated violence).
Q: Does Congress have the authority
under the Commerce Clause to mandate
that individuals purchase insurance?
A: Judge Vinson’s answer focuses on
two questions:
1. Is activity required under the
Commerce Clause?
2. Is the failure to purchase health
insurance activity?
Constitutionality of the ACA
Florida et al. v. Dept. of HHS et al.
“I conclude that the individual mandate seeks to
regulate economic inactivity, which is the very
opposite of economic activity. And because
activity is required under the Commerce Clause,
the individual mandate exceeds Congress’
commerce power, as it is understood, defined,
and applied in the existing Supreme Court case
law.”
Constitutionality of the ACA
Virginia v. Sebelius
“While this case raises a host of complex constitutional
issues, all seem to distill to the single question of whether or
not Congress has the power to regulate – and tax – a
citizen’s decision not to participate in interstate commerce.
Neither the U.S. Supreme Court nor any circuit court of
appeals has squarely addressed the issue. No reported
case from any federal appellate court has extended the
Commerce Clause or Tax Clause to include the regulation
of a person’s decision not to purchase a product,
notwithstanding its effect on interstate commerce.”
Federalism
Florida et al. v. Dept. of HHS et al.
“This case is not about whether the Act is wise or
unwise legislation, or whether it will solve or
exacerbate the myriad problems in our health
care system. In fact, it is not really about our
health care system at all. It is principally about our
federalist system, and it raises very important
issues regarding the Constitutional role of the
federal government.”
Florida: Mandate not Severable
“I must conclude that the individual mandate
and the remaining provisions are all inextricably
bound together in purpose and must stand or
fall as a single unit. The individual mandate
cannot be severed.”
A tax by any other name . . .
• Review under the taxation power of the General
Welfare Clause of Article I is more liberal.
• HHS argued after the fact that the individual
mandate falls under the taxing power.
• But there are a host of executive and legislative
pre-passage comments to the contrary in the
record.
• And Section 1501 on its face does not purport to
be a tax.
Round II: The Circuit Courts
• In July, the 11th Circuit upheld the Florida
decision, on a split, 2-1 decision along political
lines.
• Note, however that the 11th Circuit overruled
Judge Vinson on severability.
• Earlier in the summer, the 6th Circuit upheld the
individual mandate as a permissible exercise of
Commerce Clause power, finding the mandate to
be an essential part of a broader economic
regulatory scheme.
Round II: The Circuit Courts
• In August, the 4th Circuit weighed in, dismissing
two Virginia cases on procedural grounds
(although two of the judges indicated they would
have upheld the constitutionality of the individual
mandate under the Commerce Clause);
• The D.C. Circuit upheld the individual mandate in
November.
The Supremes
• In November, the Supreme Court agreed
to hear appeals stemming from the 11th
Circuit (Florida) case.
• Five and a half hours of oral argument is
scheduled for March, 2012
The Supremes
• They will decide:
• The constitutionality of the individual mandate;
• Whether the individual mandate can be
severed from the remainder of the ACA;
• ACA's provisions concerning expansion of the
Medicaid program; and
• Procedural questions regarding application of
the Anti-Injunction Act to challenges against
the ACA (stems from the Fourth Circuit's ruling
in September 2011).
The Supremes
• Each side is calling for one of the justices to
recuse themselves (Clarence Thomas, Elena
Kagan).
• Neither one probably will.
• Many experts predict a 5-4 decision, along
political lines, with Justice Kennedy casting the
all-important swing vote.
• A decision is expected in June, 2012.
Public Health/Quality of Care
Public Health/Quality of Care
• The Affordable Care Act established dozens of
programs, pilots and other initiatives aimed at
improving health and the quality of care.
Public Health/Quality of Care
The ACA:
•
Established the Prevention and Public Health
Investment Fund funded at:
$500M for FY 2010
$750M for FY 2011
$1B for FY 2012
$1.25B for FY 2013
$1.5B for FY 2014, and
$2B for FY 2015 and beyond.
Public Health/Quality of Care
Prevention and Public Health Investment Fund
Example:
• In June, 2011, HHS released $10M to establish and
evaluate comprehensive workplace health promotion
programs.
• Estimated 70-100 employers from across the country to
participate.
• Intended to “capture best practices and models for
implementing core workplace health programs”
• Application deadline was August 8.
Public Health/Quality of Care
The ACA:
•
Established a National Prevention, Health
Promotion and Public Health Council
•
Provides coordination and leadership among 17
executive departments and agencies with respect
to prevention, wellness, and health promotion
activities.
Public Health/Quality of Care
National Prevention, Health Promotion and Public
Health Council
•
Tasked with developing a National Prevention
Strategy to “present a vision, goal, strategic
directions, priorities, recommendations, and
actions to help guide the nation and improve the
health of Americans” and “lead to a preventionoriented society where all sectors work together to
improve the health of Americans.”
Public Health/Quality of Care
National Prevention, Health Promotion and Public
Health Council
•
National Prevention Strategy was released June
16, 2011
•
http://www.healthcare.gov/prevention/nphpphc/stra
tegy/report.html
Public Health/Quality of Care
The ACA:
•
Appropriates $200M for small business grants to
provide comprehensive wellness programs for
the period 2011-2015.
•
Eligible employers:
•
Must employ < 100 ee’s who work 25 or more
hours per week; and
•
Cannot have had a wellness program in place
on March 23, 2010
Public Health/Quality of Care
The ACA:
•
Directs the Centers for Disease Control (CDC) to
provide employers with technical assistance,
consultation, tools, and other resources in
evaluating employer-based wellness programs.
•
This is intended to expand the utilization of
evidence-based prevention and health promotion
activities in the workplace.
Payment Reform
Payment Reform
Fee for Service >>>> Fee for Value
Proposed Regulations Issued
• On March 31, 2011, HHS, FTC, DOJ, and
the IRS released detailed proposed
regulations for the Shared Savings
Program;
• In fact, regulations that were widely
criticized as too detailed and too
prescriptive.
Key Flaws
• Legal Structure/Governance
• Elevated one possible scenario to the
mandated structure
• Lack of Patient Engagement
• Retrospective assignment
• Open model—no directability
• Patients may opt out of data sharing
• Payment methodologies punish low-cost
providers
Key Flaws
• Unbalanced costs and risks vs. potential rewards
• Quality measures flawed and difficult to track
Final Regulations Issued
• On November 2, 2011, a final rule was
published that is definitely more flexible and
user-friendly, including the following
changes:
1) Retroactive assignment softened –(CMS)
will give ACOs a list of "probable
beneficiaries" eligible for care, with quarterly
updates
Final Regulations Issued
2) More attractive financially.
• Shared Savings. There is 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.
•Shared losses are removed from Track 1,
making it truly one-sided, as advertised.
Final Regulations Issued
3) Quality Metrics Improved
• The number of quality measures that ACOs
will have to meet to qualify for bonuses was
reduced by half (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.
Final Regulations Issued
4) Timeline Relaxed
• CMS has relaxed the timeline, allowing
healthcare organizations to apply for the launch
of ACOs throughout 2012
Final Regulations Issued
5) Participants Expanded
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.
Final Regulations Issued
It’s too early to tell whether or not the new,
liberalized rules will bring Medicare ACO’s
back from the dead and result in increased
participation in 2012.
Crystal Ball
2012: A Huge Public Policy Year
• Health Reform (Supreme Court)
• Medicare/Medicaid—potentially big
changes, with budget cutting on the
horizon
• State Medicaid Cuts
• Payment Reform is taking place either way
• Election
Crystal Ball
• The individual mandate will being upheld
by the Supreme Court.
• Even if it isn’t, it is less likely that the entire
ACA will be invalidated.
• Sea changes are coming whether or not
the ACA is judicially invalidated or
repealed because the current system is
unsustainable.
Crystal Ball
• Deceptively simple question: How do we
provide the highest quality healthcare at
the lowest sustainable cost?
• Much more than just payment reform. A
whole re-thinking of care delivery.
• We’re at the vanguard of an exciting
paradigm shift.
You must be
the change
you wish to
see in the
world.
Questions?