Week of June 28, 2010
A dramatic reversal of a controversial regulatory decision in Massachusetts is shining a spotlight on the real driver of rising health insurance premiums -- skyrocketing prices for medical services. The Massachusetts Division of Insurance in April denied requests from a number of insurers for rate increases in the small group market that it deemed excessive. Insurers have maintained the increases were in line with increases in provider costs, and an Appeals Board last week agreed when it reversed the state's rejection of Harvard Pilgrim Health Care's rate hike request (for more detail see Massachusetts below). Three other insurer appeals are pending.
Specifically, the Appeals Board found that the reimbursement rate requests are "due primarily to the market power of certain providers" and that Harvard Pilgrim "has illustrated and proved that there are valid reasons that explain and justify its differential reimbursements to providers." The escalating cost of health care is frustrating to everyone, even in the era of health care reform. But the ruling makes clear that capping premiums while allowing the underlying costs of medical services to continue to soar is financially irresponsible and unsustainable.
Federal
Last week the Obama Administration issued yet another round of regulations on the mechanics of implementing health care reform. Topics addressed this time included no pre-existing condition exclusions for children; annual limits; lifetime limits; rescissions (fairly consistent with Aetna's current program); and expanded patient "rights" as to designating providers, in- and out-of-network providers or the use of emergency rooms. The new rules on the type of allowable annual limits is a victory for our employers/customers who maintain limited benefit plans and for insurers who issue such policies. The statute calls for the total elimination of annual limits starting this Fall but gives the Secretary the right to devise a "restricted annual limit" for three years. Under the regulation just issued, the "floor" for an allowable cap would eliminate the viability of any limited benefit plan. Aetna lobbied for an outright exemption from any such limit, pointing to the fact that 1.4 million Americans would lose coverage otherwise. The regulation reflects the essence of our position by granting plans the right to an exemption (through a "waiver" process) from the limits if they can demonstrate that without the waiver there would be either a significant loss of coverage or a significant increase in premium. In addition, the regulation did not extend these new limits to treatment (rather than dollar) limits, such as day or visit limits. Aetna has already begun determining just how the waiver process will operate and what must be assembled to make the case on behalf of customers.
At the end of the week it became clear that the Senate would be unable to pass a Jobs & Extenders bill that (depending on the version being considered) would have addressed uninsured benefits, such as the 65 percent COBRA subsidy, added Medicaid money through the FMAP formula or provided a six-month fix in physician reimbursement rates. The measure did not get the 60 required votes and failed 57 to 41. In light of the impasse in the Senate on the broader measure, the House on Thursday relented and approved (417 to 1) a more narrow provision -- the same six-month “doc fix” provision passed by the Senate the week before. On Friday, the President signed this bill essentially wiping out a 21 percent cut to doctors and replacing it with a 2.2 percent increase retroactive to June 1. This messy process means Medicare doctors will not suffer a 21 percent reimbursement cut for 2010 until the end of November, and health plans will have to scramble to retroactively handle those claims from early June.
Early last week the Federal District Court in Washington, D.C., dismissed a lawsuit by a handful of mental health vendors (not including Aetna) who challenged the legality of the February 2, 2010 Mental Health Parity Interim Final Regulations (IFR) claiming that the government was obligated to provide a notice and comment period under the Administrative Procedures Act, rather than issuing "final" regulations. The court was rather dismissive in its decision by agreeing with the government that it had "good cause" to issue the regulations in final form because the law was effective for plan years beginning in October 2009, and the public needed guidance. Although Aetna would have benefited from a contrary ruling as it would have allowed more time to implement the law, we have been proceeding as if the lawsuit did not exist in the first place.
States
CALIFORNIA: Aetna-backed legislation aimed at eliminating hospital gag clauses passed the Senate Health Policy Committee on a bipartisan 5-1 vote and is headed to the Senate floor for a vote. Aetna and Safeway testified in support of the bill, along with other coalition partners. The California Hospital Association continues to testify in opposition, but some individual hospitals are beginning to peel away. Some concerns raised by the University of California have been addressed, and Aetna is working with them on one last item pertaining to a formal process for UC to review and comment on the cost comparison for its facilities.
DISTRICT OF COLUMBIA: The District Council met last week to mark up the permanent bill for dependent coverage under age 26. Aetna, working with the D.C. trade association, raised concerns about inconsistencies with the new federal requirements. In response, the Council amended the bill to 1) eliminate the unmarried requirement, and 2) eliminate the District residency requirement. These changes now would allow the D.C. bill to be consistent with the new federal requirement. The permanent bill will be voted on by the Council in the next few weeks, with passage likely. Mayor Fenty has indicated that he will sign the bill.
ILLINOIS: The state Department of Insurance (DOI) has issued new PPACA filing endorsement templates in an effort to expedite the filing of amendments to current policy language. Currently DOI has a 12-month backlog on filings. The endorsement template contains the PPACA standards required in health policies including: limited annual and lifetime dollar limits; restrictions on rescissions; first-dollar coverage for preventive services; extension of coverage to dependents; internal and external appeal rights; coverage for emergency services; direct access to obstetricians and gynecologists; selection of primary care provider; and limitations on preexisting condition exclusions. Companies may elect to file under the standard filing process and refrain from using the PPACA endorsement template. It is expected that the templates will reduce timeframes for policy approvals related to PPACA.
LOUISIANA: The 2010 legislative session ended last week, and for the second year Aetna and the industry's trade organizations were able to fend off so-called "network adequacy" legislation. The bill would have placed onerous requirements on health plans regarding payments to out-of-network providers.
MASSACHUSETTS: An Appeals Panel has issued a ruling reversing the Massachusetts Division of Insurance’s earlier decision rejecting rate requests submitted by Harvard Pilgrim Health Care (HPHC) for the small group health insurance market. Several other Massachusetts-based plans also have hearings pending before the Appeals Panel. In its recent decision, the Appeals Panel found that the higher rates Harvard Pilgrim sought earlier this year for plans covering individuals and small businesses were in line with what it must pay to the hospitals and doctors who provide medical care; that the plan faces both legal and practical barriers to reopening its existing provider contracts and that marketplace realities limit its ability to do so; that using the New England Regional Medical CPI as the sole criterion for deciding whether to disapprove the rate requests is incorrect; and that the plan proved that its cost containment programs, including its utilization programs, are adequate in organizational structure, commitment by senior staff, scale, effectiveness, and responsiveness.
MICHIGAN: Senator Tom George has introduced bills that would establish a new Michigan Health Board to oversee implementation of federal health care reform efforts and provide information on opportunities for the state to maintain control over health care in Michigan. Specifically, the bills allow the newly established Board to make recommendations to the legislature regarding items that require legislation in order to implement health reforms in the state; develop recommendations for the smooth and effective implementation of the state insurance exchanges; provide analysis and critique of federal health reform actions that will impact the state; and provide an annual cost analysis of federal health reform on the state, businesses, and individuals, among other items. The bills also provide that the Board review the status of Blue Cross Blue Shield of Michigan (BCBSM) under federal health care reform and provide a report back to the legislature prior to January 1, 2014. BCBSM serves as the insurer of last resort in the state.
NEW HAMPSHIRE: The 2010 session of the General Court adjourned earlier this month after addressing a significant shortfall in the state’s biennial budget. Bills passed and signed by the Governor include:
* Establishment of Basic Wellness Plan, requiring small employers with at least 1,000 covered lives at the end of the prior calendar year, to offer the basic wellness plan in addition to the standard wellness plan to small employers.
* Mandated Benefits Review, providing for a review of mandated benefits by the insurance department.
* Health Insurance Premium Only Cafeteria Plans, requiring small employers with two or more workers but not offering employer-sponsored health insurance to all employees, to establish and maintain a health coverage premium-only cafeteria plan. An employee who works over 15 hours per week and who is not eligible for an employer-sponsored plan may elect to purchase small group health coverage on an individual basis through a payroll deduction.
Bills that passed the General Court but not yet signed include:
* Insurance Coverage for Persons Having Deafness and Hearing Loss, requiring coverage of hearing evaluations, hearing aids, and the dispensing and fitting of hearing aids, with a maximum for the hearing aid and related services of no less than $1,500 per hearing aid every 60 months.
* Insurance Coverage for Diagnosis and Treatment of Autism Spectrum Disorders, clarifying insurance coverage for the diagnosis and treatment of pervasive developmental disorder or autism. The bill allows an insurer to require submission of a treatment plan, and the mandate is limited to coverage for applied behavior analysis to $36,000 per year for children 0 to 12 years of age, and $27,000 from ages 13 to 21.
* Subrogation Claims and Liens in Civil Actions, providing that the court in which the action is pending shall order such division of expenses and costs of the action, including attorneys’ fees, between the plaintiff and the insurance carrier and the medical provider.
* Price for Filling Prescriptions, providing that once it has settled a claim for filling a prescription for an enrollee or insured person and notified the pharmacy of the amount, the pharmacy benefits manager or insurer shall not lower the amount to be paid to the pharmacy by the pharmacy benefits manager or the insurer for such settled claim.
* Student Health Insurance, clarifying the definition of blanket accident and health insurance. No coverage other than student major medical expense coverage shall be issued as student large group coverage.
* Public Hearings Concerning Health Insurance Cost Increases in Health Care Services, requiring the insurance commissioner to hold an annual public hearing concerning health insurance costs. The requirement is repealed on July 1, 2014. This bill also requires hospitals, when billing self-pay patients, to accept as payment in full an amount no greater than the amount generally billed and received by the hospital for that service.
* Purchasing Alliances, establishing a law governing purchasing alliances that may be formed for the purposes of purchasing health insurance.
* Federal Health Care Reform, authorizing the insurance commissioner to implement the insurance reforms required under federal law.
NEW JERSEY: Governor Christie and the legislature reached agreement on a state budget despite a failed attempt by Democrats controlling the legislature to override the governor’s veto on a millionaires’ tax. By brokering a budget deal, legislators will avert a shut down of state government operations. Included in the nearly finalized budget is an assessment increase on insurance carriers to fund administrative costs at the Department of Banking and Insurance. The department will also be restructured to assume greater investigative and prosecutorial authority through a newly established Bureau of Fraud Deterrence. The governor is required to sign the budget by June 30. In other news, the Senate took action on a resolution urging that the governor not join the lawsuit to enjoin enforcement of the Patient Protection and Affordability Act (PPACA). Governor Christie has publicly stated his administration is reviewing the federal law to determine whether to join a multi-state lawsuit.
NEW YORK: It is anticipated that the legislative session will adjourn in the next week, with the final budget expected roughly three months late on June 28th. In the meantime, several new benefit mandates have passed both houses and are expected to be signed by the Governor. They are: Out-of-network dialysis, requiring comprehensive medical insurance policies to include coverage for regular, non-emergency, out-of-network dialysis, with proper medical authorization, notice and no increase in cost to insurers; Cancer Drugs Reference Compendium, updating the established reference compendia used in the determination of off-label drugs and biologicals used as part of an anticancer chemotherapeutic regimen, and a autism mandate, requiring that individual accident and health insurance policies provide coverage for screening, diagnosis and evidenced-based, clinically proven, peer-reviewed treatment of autism spectrum disorders.
OHIO: The Department of Insurance has announced that the state plans to designate Medical Mutual of Ohio (MMO) as the non-profit entity that will operate the temporary high-risk pool program for Ohio residents. Created through PPACA, the program will provide uninsured residents with pre-existing conditions the opportunity to purchase more affordable health insurance. Ohio will receive $152 million from the federal government to operate the program beginning in August. MMO has estimated that with available funding it could cover about 5,000 residents through the duration of the program, with individuals paying a standard rate premium for their coverage. No state funds will be used to provide this coverage. Initially, the Insurance Department looked at opening up the guaranteed issue program in order to comply with the federal risk pool program requirements, but when it did not receive a waiver from the federal government, the state issued a solicitation to have a not-for-profit entity administer the program.
OKLAHOMA: Last week Oklahoma House Speaker Chris Benge approved 68 interim studies to be conducted prior to the start of the 2011 legislative session in February. Issues of interest to Aetna include a study regarding the feasibility of enacting a hospital provider fee to provide stable funding for Medicaid reimbursement rates, a home health study, a study on the feasibility of a collaborative information technology health care model, and voluntary online medical records access. Interim studies give lawmakers an opportunity to investigate and flesh out potential legislative proposals before drafting bills. Similarly, the Senate should have its own list of approved interim studies out next week. Public hearings to support each issue may be held by the committees studying these issues between now and January.
PENNSYLVANIA: The Insurance Department has released materials for certification of compliance with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (PPACA). The department's notice provides guidance to insurers seeking to demonstrate compliance with the PPACA regarding policies offered, issued, or renewed in Pennsylvania. This is limited to policy forms for insurers not seeking to make changes other than as needed to make the policy form comply with the PPACA. The notice includes the following information: If an insurer is ordinarily required to file one or more policy forms for prior approval, and the insurer is making changes solely to comply with the PPACA, Pennsylvania will accept a “Certification” to be submitted on or before September 10, 2010, executed by an authorized representative of the insurer; copies of the policy forms need not be filed; and policy form filings submitted with the “Certification” will be exempt from the prior approval and presumed to comply with the immediate PPACA market reform requirements.
TEXAS: Last week federal marshals arrested a state representative who is one of six South Texas dentists indicted on federal charges of taking kickbacks for Medicaid referrals. The allegations include accepting three payments worth more than $12,000 in kickbacks for referring three patients to another dentist who paid kickbacks of 15 percent for the referrals and then billed Medicaid for services that were never rendered or were performed by unlicensed employees. This development could have an impact on the 2011 legislative session as one of the hot topics to be debated is whether to repeal an existing ban on Medicaid managed care plans in several counties in the South Texas valley.
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