A weekly compilation from Aetna of health care-related developments in Washington, D.C. and state legislatures across the country
Week of July 6, 2010
With the first of many key health reform implementation dates arriving on July 1, the Obama Administration celebrated the launch of a new consumer web portal, with coverage option information available state by state, and the availability of a new federal Pre-Existing Condition Insurance Plan under the law's temporary high-risk pool program. On July 2, The New York Times noted that the health care overhaul's beginnings were earning high marks from some quarters.
But troubling signs are just as easy to find. For example, an Associated Press story last week pointed out that research shows health care reform may well mean longer emergency room waits because of an increase in the number of those covered by Medicaid, while a new consumer sentiment index from Thomson Reuters shows that Americans' confidence in their ability to access and pay for health care reached a new low in May. Last, but not least, the Congressional Budget Office's new Long-Term Budget Outlook concludes that federal health care spending, taking into account the expected impact of the new health reform law, is still on an unsustainable course. It is clear much more work remains to be done to fix the health care system.
Federal
Early last week the Supreme Court decided that it would not review the 2009 decision by the 9th Circuit (west coast) that allows the City of San Francisco’s "play or pay" mandate to continue. The Golden Gate Restaurant Association sued the City arguing that the City's mandate that employers provide and pay for health coverage or pay into a City fund violated ERISA's preemption provision. The suit argued the provision should not be enforced against employers because only the federal government (and not a state or local government) can regulate the administration of benefits under an employer's welfare benefit plan. Consistent with its protocol, the Supreme Court provided no insight as to the basis of its decision, but it is likely that the Court was influenced by a Department of Labor brief that argued no Supreme Court review was needed because the new health care reform law’s individual mandate and state-based exchanges would eliminate the need for state or local governments to follow in San Francisco’s footsteps. Aetna supported a Supreme Court review, hoping for a confirmation of the preeminence of ERISA preemption. While the 9th Circuit decision will continue as "the law" in that Circuit, it is likely that yet another ERISA preemption case will be needed to decide the issue that the Supreme Court has side-stepped.
Within its very same brief to the Court on the 9th Circuit Court case, the DOL announced that it was withdrawing a proposed regulation that would have eroded a piece of ERISA by allowing non-governmental (state, local) employees the right to join a governmental plan and thereby circumvent ERISA rules. This is a favorable development for ERISA plan sponsors, as the regulation was a direct attack on the sanctity of ERISA preemption. Both Aetna and the employer community argued against the regulation.
After listening to the strong case made by health plans, including Aetna, in the last week or so, the Administration issued favorable guidance in the area of outpatient cost sharing on July 1 -- the morning of the first day of the new mental-health parity regulations. Aetna teamed up with Blue Cross to argue to the Department of Labor, key Congressional players and the White House that in "testing" parity for outpatient benefits a plan may establish sub-classifications in which it compares financial requirements, e.g., a copayment for an office visit (psychologist or physician) and a coinsurance for other outpatient services (outpatient surgery, facility charges for treatment center). The newly issued guidance provides a safe harbor from Agency enforcement to allow such sub-classifications until final regulations (still years away) are issued.
States
CALIFORNIA: The Governor has signed legislation that will enable the state to obtain $761 million in federal subsidies by creating a high-risk pool for Californians who have been denied health insurance because of pre-existing medical conditions. Most Republicans opposed the measures during the legislative debate, saying the program would run out of federal funding in three years. The legislation takes effect immediately and will be managed by the Managed Risk Medical Insurance Board, which will have substantial authority in determining requirements pertaining to benefits, eligibility and insurer participation. All legislation must pass out of policy committee by this week to advance. Legislation dealing with rate regulation, preventing step therapy for pain medication, creating California’s exchange, dependent coverage and pre-existing conditions have passed their policy committee and now are headed to the fiscal committees. Aetna and industry trade associations continue to express concerns on these issues.
DELAWARE: The legislature adjourned session on July 1, but not before taking swift action to send a number of health insurance related bills to the governor’s desk. Included in the package are bills that would establish a regulatory system for medical discount plans, compress rate variations between high-risk and low-risk small employer insurance groups, prohibit rescission for enrolled members based on post claims underwriting, and lastly would prevent unreasonable copayment, coinsurance, and deductibles for chiropractor services. The governor has until July 31 to sign or veto these bills. In other news, Representative Short issued a press release indicating he would not seek to advance his legislation to prohibit denials by health insurers for medically necessary testing until the Department of Insurance has completed its market conduct review.
ILLINOIS: The board overseeing the Comprehensive Health Insurance Plan (CHIP) is considering a change in program premiums that would result in almost a doubling of assessments on health insurers. CHIP is a state health benefits program funded partly by premiums paid and, to the extent that premiums do not meet anticipated expenses, assessments on health insurers doing business in Illinois for federally eligible individuals covered under HIPAA. The premiums charged individuals are established by law at 125 percent to 150 percent of the average rates charged individuals for comparable major medical coverage by five or more of the largest insurance companies in the individual health insurance market. At an emergency meeting of the CHIP Board last week, the Director of Insurance proposed that the premium be reduced from 142.5 percent (which has been the rate for years) to 125 percent and that the CHIP Board vote on the change soon. The business and insurance industries are strongly opposed to this change, as the insurance industry was assessed $54 million for the HIPAA-CHIP plan in 2009, and actuaries estimated that the industry would be assessed $73 million in 2010. Another $30 million on top of $73 million would almost double the 2009 assessment. The Director's intent is to get the premium to be more equal to that charged for federally eligible individuals who will be accessing the PPACA high-risk pool, which will also be administered by CHIP.
MINNESOTA: In a letter to Human Services Commissioner Cal Ludeman, Governor Tim Pawlenty announced last week that he will not issue an executive order to enable Minnesota to participate in the early expansion of Medicaid called for in the federal Patient Protection and Affordable Care Act (PPACA). Under PPACA, by 2014, Medicaid will be expanded to cover non-elderly childless adults with incomes up to 133 percent of the federal poverty level. Minnesota was one of several states given the opportunity for early buy-in. The state's HHS budget provides for early expansion in the state but stipulates that for it to be enacted, the governor or the governor’s successor (Governor Pawlenty’s term expires January 3, 2011) must order its implementation through executive order by January 15, 2011. Governor Pawlenty has long stated his opposition to the early expansion proposal. His decision is based on the costs – an anticipated $430 million over the next three years -- and his doubts regarding the federal government’s ability to fulfill the spending obligations in the program going forward. Governor Pawlenty advocates using the money instead for funding an overhaul of the state’s General Assistance Medical Care (GAMC) program. The modified program would provide coverage initially through hospital-based Coordinate Care Delivery Systems and through an uncompensated care pool for hospitals.
NEVADA: As part of follow-up efforts related to the passage of federal health care reform, the Nevada Division of Insurance has released a list of frequently asked questions for consumers and provided information regarding the state's participation in the federal temporary high-risk pool, the Pre-Existing Condition Insurance Plan (PCIP). The DOI released an information sheet providing information on the federal high-risk pool for Nevada consumers. The notice informs Nevadans that the PPACA temporary high-risk pool began accepting applications on July 1, 2010, to provide coverage to uninsured individuals with pre-existing conditions. Since the state declined to administer the risk pool at the state level, applications will be processed by the U.S. Department of Agriculture's National Finance Center and made available online at www.healthcare.gov. Nevada is one of 22 states that have declined to administer a risk pool.
NEW JERSEY: The Legislature met its constitutional obligation by passing a balanced budget by the June 30 deadline after making significant cuts in spending across all government operations and programs to make up for a projected $11 billion deficit. Absent in this budget were any new broad base taxes, but a number of fees and assessments were added or increased. Most notable is the one-half of 1 percent increase in the Special Purposes Assessment, which applies to insurance companies. This assessment is calculated on prior year net premiums received. Effective July 1, employers will be taxed an average of $130 per employee to address the more than $1 billion deficit in the NJ Unemployment Insurance Fund. This tax was automatically triggered due to the Fund’s deficit; however the governor and legislature took legislative action to mitigate the first year impact on employers. A task force has been created to look for systemic reform to bring the fund back to solvency. Also, this budget will see the expiration of a 4 percent surtax on Corporation Business Tax, which had previously been renewed for one year. In other business, an amended bill passed the General Assembly that requires pharmacists to dispense epilepsy drugs from the same manufacturer as previously dispensed to a patient. Aetna, along with the other health plans, opposed this legislation. The Senate has yet to take up the bill.
NEW YORK: Health plans met last week with the Department of Insurance (DOI) to discuss the rollout of the new prior approval law with its implications on plan rates and rate filings for the upcoming months. The law has new requirements relating to notice provisions to policyholders, significant procedural modifications for approval of rate changes and increased minimum loss ratios. In addition, a considerable workload is in store for both the plans and DOI to address the rate and policy form changes required under federal reform by September 23. In addition to the normal calculations required to address medical cost trends in filing rates for 2011, health plans must also calculate the impact of the loss of the Timothy's Law (state mental-health parity) subsidy, the impact of federal mental-health parity and the potential impact of changes to usual and customary rates. Plans repeatedly emphasized the need for the DOI to make definitive guidance available immediately.
Assembly members went home late last week, but the Senate adjourned without taking up the revenue bill of the state budget and is expected to come back sometime after the July 4th weekend. Democratic Leader Sampson only committed to calling members back when a contingency plan for the federal Medicaid Assistance Program (FMAP) is negotiated. Governor Paterson asserted that he was done negotiating, turning his attention to the task of signing vetoes for some 6,900 lines representing just over $500 million worth of spending. Included in the end of session rush were numerous bills of interest to plans, such as Ian's Law, requiring certain notices and approvals for small group product discontinuance; prohibition on Tier IV drug formularies; and mandated coverage of out-of-network dialysis for members traveling out of their plan's service area. Numerous other mandate bills that had passed one of the houses were ultimately held in committees.
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