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?