The Internal Revenue Service has issued proposed regulations that provide guidance to Blue Cross and Blue Shield organizations, and certain other health care organizations, on computing and applying the medical loss ratio (MLR) added to the tax code by the Patient Protection and Affordable Care Act (ACA. The regulations are proposed to apply to tax years beginning after Dec. 31, 2013. The proposed regulations were published in the May 13 Federal Register.
The IRS has concluded that the MLR numerator in Code Sec. 833(c)(5) does not include costs for “activities that improve health care quality.” The proposed regulations provide that the same exclusions that are permitted from total premium revenue under Sec. 2718(b) of the Public Health Services Act (PHSA) are permitted exclusions from total premium revenue under Code Sec. 833(c)(5) because both Code Sec. 833(c)(5) and Sec. 2718(b) of the PHSA use the term “total premium revenue.”
Accordingly, the proposed regulations provide that “total premium revenue” for purposes of Code Sec. 833(c)(5) means the total amount of premium revenue for purposes of Sec. 2718(b) of the PHSA and the regulations issued under that section.
The IRS also has concluded that it is appropriate to compute the MLR for a tax year under Code Sec. 833(c)(5) using the same three-year period used under Sec. 2718(b) of the PHSA. Therefore, beginning with the effective date of the rules, amounts used for purposes of Code Sec. 833(c)(5) (that is, total premium revenue and total premium revenue expended on reimbursement for clinical services provided to enrollees) for each tax year should be determined based on amounts reported under Sec. 2718(a) of the PHSA for that tax year and the two preceding tax years, subject to the same adjustments that apply for purposes of Sec. 2718 of the PHSA.
Comments requested. Comments, requests to speak and outlines of topics to be discussed at a public hearing must be received by August 13. Submissions should be mailed to CC:PA:LPD:PR (REG-126633-12), Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington D.C. 20044; or sent electronically via the federal eRulemaking portal at http://www.regulations.gov (IRS REG-126633-12).
Hearing. A public hearing has been scheduled for Tuesday, September 17, 2013, beginning at 10:00 a.m., in the IRS Auditorium of the Internal Revenue Building, 1111 Constitution Avenue NW., Washington, D.C. For more information about the hearing, contact Oluwafunmilayo Taylor at (202) 622-7180.
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CMS has proposed the Disproportionate Share Hospital Reduction Methodology (DHRM) to implement the reductions in allocations to states for Medicaid payments to disproportionate share hospitals (DSH) as required by Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) sec. 2551. The proposed DHRM would be effective for federal fiscal years (FFYs) 2014 and 2015; CMS would evaluate the available data generated during these first two years of the reductions in order to make adjustments to the formula for the remaining period of the reduction.
Because millions of previously uninsured individuals will become eligible for Medicaid on January 1, 2014, the costs to hospitals of furnishing uncompensated care to these individuals is expected to drop dramatically. Therefore, section 2551 of PPACA amended Soc. Sec. Act sec. 1923 by adding paragraph (f)(7), which requires CMS to reduce the allocations to states for DSH payments each year from FY 2014 through FY 2020. The statute specifies the aggregate amount of the cuts for each year and directs CMS to consider certain factors as it calculates the reductions to each state’s allotment. Smaller cuts should be made to the allocations of low DSH states, states with populations that include higher percentages of uninsured individuals, and those that target their DSH payments to hospitals with higher rates of Medicaid inpatient care utilization and uncompensated care costs.
First, CMS would divide the states into two groups, low and “non-low” DSH states. The statute defines low DSH states as those that reported in 2003 that they spent more than zero but less than 3 percent of their Medicaid expenditures on DSH payments in 2000. Then CMS would calculate each of the specified factors separately for each group. The low DSH factor (LDF) would be calculated by comparing each state’s DSH expenditures as a percentage of its total Medicaid expenditures, determining the average percentage for each group, and dividing the average percentage for the low DSH states by the average for the non-low states. The LDF would be multiplied by the aggregate reduction specified in the statute. That amount would be subtracted from the total reduction and distributed among the low DSH states; the remainder of the aggregate cuts would be distributed among the other states.
CMS would determine the uninsured percentage factor (UPF) for each state using data from the American Community Survey, which is more precise than other census data. The calculations would account for both the absolute numbers of uninsured and their percentage of the state population. The hospitals with high volumes of Medicaid inpatients would be determined by applying the statutory definition, i.e., those with percentages at least one standard deviation from the average for their group, the low or non-low DSH states. The methodology also would include the percentage of states’ DSH payments that were made to hospitals that did not have high Medicaid volume.
States already are required to calculate and report the hospitals’ costs of furnishing uncompensated care. CMS would use these reports, Medicare cost reports, and other information to calculate the uncompensated care factor, which will be used to mitigate the effects of the reduction of the states’ DSH allocations.
The proposed rule would apply an additional factor to states that were approved to use their DSH allotments to operate Medicaid expansion demonstrations under Soc. Sec. Act sec. 1115 to achieve the budget neutrality required by the statute. The portion of the allotment diverted to the Medicaid expansion demonstration would not be reduced.
CMS will accept comments on the proposed rule until 5:00 p.m. on July 12, 2013.
Proposed rule, 78 FR 28551, May 15, 2013
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The Centers for Medicaid and Medicaid Services (CMS) has issued a set of frequently asked questions (FAQs) on the health insurance marketplaces under the Patient Protection and Affordable Care Act (ACA). These FAQs address a variety of issues relating to marketplaces (also known as exchanges in ACA), including the oversight of premium stabilization programs, advance payments of the premium tax credit, and cost-sharing reductions; state-based marketplace reporting requirements; and eligibility and enrollment.
CMS oversight. The FAQs indicate that CMS intends to propose monitoring and oversight measures related to the premium stabilization programs applicable to both states and issuers. With respect to state-operated risk adjustment programs, CMS intends to propose a standard under which the state would maintain an accurate accounting for each benefit year of risk adjustment expenditures, receipts, and administrative expenses, and the state would provide to CMS and make public an annual summary of the program. CMS also intends to propose that each state-operated risk adjustment program provide for an annual external financial and programmatic audit, and maintain relevant records for ten years.
With respect to advance payments of the premium tax credit and cost-sharing reductions, CMS intends to propose standards for reimbursement to eligible enrollees, and providers as applicable, when a qualified health plan (QHP) issuer incorrectly applies cost-sharing reductions or advance payments of the premium tax credit with respect to an enrollee. CMS also intends to propose standards relating to record retention, annual reporting, and audits.
Issuer oversight. The FAQs indicate that CMS expects that state departments of insurance will continue to oversee issuers in the health insurance market pursuant to the respective states’ existing law and regulations. CMS will coordinate with state monitoring and oversight efforts to avoid duplicating such efforts, to the extent feasible and appropriate.
CMS will take an enforcement approach that would take into consideration various factors, including any past or concurrent state determinations and indications of the issuer’s good faith efforts in maintaining compliance with standards specific to the federally-facilitated marketplace. CMS will generally look to the states to enforce standards applicable to issuers in the federally-facilitated marketplace. Where a state has elected not to enforce a standard or lacks the regulatory or enforcement authority to do so, CMS intends to propose enforcement of federally-facilitated marketplace-specific standards through civil money penalties (CMPs) and decertification. Absent any extraordinary circumstances, decertification should be uncommon. Issuers will be able to appeal the issuance of CMPs or decertifications.
Reporting requirements. CMS will propose requiring state-based marketplaces to submit reports to CMS at least annually, including but not limited to financial statements and summary-level statistical reports regarding eligibility determinations, enrollments, appeals, eligibility determination errors, privacy and security safeguards, and fraud and abuse determinations. Additionally, state-based marketplaces will submit performance monitoring data including financial sustainability, operational efficiency, consumer satisfaction, and quality of care data.
The FAQs indicate that state-based marketplaces will be required to maintain—for a minimum of ten years—records related to external audits, annual financial reports, error rate testing, consumer complaints, and other data sources in anticipation of targeted audits. Also, state-based marketplaces will be required to engage an independent qualified auditing entity to perform an independent audit of their annual financial statements and a review of the process/internal controls associated with their eligibility determinations and enrollments. State-based marketplaces will be required to provide the results of this financial and programmatic audit to CMS.
Cost-sharing reductions and HSAs. If an issuer seeks to offer a QHP designed to be eligible for pairing with a health savings account (HSA) in 2014, the issuer must comply with the cost-sharing reduction standards described in applicable regulations.
The FAQs indicate that certain plan variations of a QHP may require a low or zero deductible, or that certain services be exempt from the deductible. This may result in the plan variation not meeting IRS standards for a high deductible health plan (HDHP) and therefore not being eligible to be offered in conjunction with an HSA. CMS recommends that issuers and marketplaces educate consumers about this issue, both during open enrollment and when an individual has a change in eligibility for cost-sharing reductions. An individual who would not be eligible for the tax advantages of an HSA because the plan variation to which he or she would be assigned does not qualify as an HDHP may purchase the plan without cost-sharing reductions.
Issuer withdrawal from the market. The FAQs indicate that issuers can elect to discontinue offering all products in the small group market in a state but continue to offer products in the large group market in that state (and vice versa).
Although the final rule implementing Public Health Service Act (PHSA) Sec. 2703 addressed the market withdrawal exception to guaranteed renewability only with reference to the individual and “group” market, CMS intends to propose amendments in future rulemaking that recognize the distinction between the large group and small group market segments for purposes of PHSA Sec. 2703. Accordingly, an issuer could, in accordance with applicable state law and subject to the other requirements of HHS Reg. Sec. 147.106(d), satisfy the requirement in that regulation to discontinue offering all coverage by doing so with respect to either the large group or small group market without being required to withdraw from both segments of the group market.
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Many part-time employees are confused about how the implementation of the Patient Protection and Affordable Care Act (ACA) will impact them, and they are not getting much help from their employers, according to a recent survey from workforce management solutions provider Kronos Incorporated. The study, 2013 Kronos Affordable Care Act Impact Survey, noted that 71 percent of part-time employees said that they had heard of the ACA, but 21 percent said they had not heard anything at all about it. In addition, 7 percent of part-time employees indicated that they had heard the name ACA, but they were not at all familiar with the changes associated with it.
The survey also found the following:
- Only 8 percent of part-time employees had heard about the ACA from their employer.
- When asked how they felt about the changes associated with the ACA, 27 percent said “confused,” 25 percent said “hopeful,” and 22 percent said “angry.”
- When asked how much better or worse they thought their quality of care would be under the ACA, 31 percent thought it would be worse; 30 percent were not sure; 23 percent thought it would not be impacted; and 16 percent thought it would be better.
- When asked if they thought their health care would cost more or less, 45 percent thought it would cost more; 30 percent were not sure; 17 percent thought it would not be impacted; and 9 percent thought it would cost less.
- Finally, 48 percent of part-time employees do not think that the ACA will have any impact on how many hours they are scheduled to work; 33 percent are not sure; 15 percent think they will be scheduled for less hours; and 4 percent think they will be scheduled for more hours.
The survey contains responses from 2,066 U.S. adults. For more information, visit http://www.kronos.com.
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Forty-eight percent of small businesses think that the Patient Protection and Affordable Care Act (ACA) is going to be bad for business, according to recent poll from Gallup. According to the poll, only 9 percent of small business owners believe the ACA will be good for business, and 39 percent said they expect no impact.
When asked if they had taken any of five specific actions in response to the ACA, 41 percent of small business owners said that they have held off on hiring new employees and 38 percent have pulled back on plans to grow their business. Nineteen percent have reduced their number of employees and 18 percent have cut employee hours in response to the ACA. In addition, 24 percent said that they have thought about eliminating health care coverage for their employees.
The poll also found the following:
- Health care quality. The majority (52 percent) of small business owners believe that the ACA is going to reduce the quality of care, while 13 percent believe it will increase quality. Thirty percent do not believe that health care quality will be impacted by the ACA.
- Increasing costs. Fifty-five percent of small business owners expect health care costs to increase. Only 5 percent believe their health care costs will decline, while 37 percent believe the ACA will have no impact on the cost of health care.
The poll contains responses from 603 small business owners. For more information, visit http://www.gallup.com/poll/162386/half-small-businesses-think-health-law-bad.aspx.
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In the seven years since Massachusetts enacted its universal health care law, the number of individuals covered through employer-sponsored health insurance increased, while the nationwide trend decreased, according to recent research from PriceWaterhouseCoopers’ (PwC) Health Research Institute (HRI). The study,
The Massachusetts Experience, found that employer-sponsored insurance increased about 1 percentage point in Massachusetts, while the national rate fell by 5.7 percentage points. HRI noted that the Massachusetts growth occurred in the midst of the recession and at a time when health insurance premiums in the state rose to the highest levels in the nation.
In 2006, Massachusetts passed the Health Care Reform Act, which requires individuals, businesses, and the government to take steps to ensure that every Massachusetts resident has health insurance coverage.
According to HRI’s analysis and interviews with experts in Massachusetts, two key factors shaped the Massachusetts experience: the individual mandate, which drove up demand for coverage, and the tax implications for both employers and employees. The analysis found that for Americans earning more than 400 percent of the federal poverty level, or about $45,960 for an individual, a combination of salary and health benefits obtained through an employer is likely to be a more efficient way to be compensated..
For more information, visit http://www.pwc.com/us/Massachusettshealthreform.
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