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CMS administrator Marilyn Tavenner apologized to consumers who have tried to navigate HealthCare.gov since it launched October 1 at a hearing before the House Ways and Committee on October 29. Tavenner faced sharp questioning from Republican members of the committee, most of whom challenged Tavenner over statements that President Obama has repeatedly made that people could keep their current individual health insurance policies even after the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) was enacted. Republican committee members related anecdotes of constituents who had received letters from their health insurance providers notifying them that their existing policies would be cancelled as of January 1, 2014, because the policies did not qualify under PPACA’s new rules for qualified health plans.
At least one committee member mentioned media reports that the Obama administration has known since PPACA was enacted that a significant number of people in the individual health insurance market would lose their existing coverage as the law was implemented.
Grandfathered plans. In a Final rule issued July 19, 2010, in which HHS and other federal agencies set out regulations for preventive health services that were to be provided with no cost-sharing for qualified health plans offered through the health insurance marketplace, the agencies noted that individuals could remain in the insurance plans they had as of March 23, 2010 (when PPACA was enacted). “Group health plans, and group and individual health insurance coverage, that are grandfathered health plans do not have to meet the requirements of these interim final regulations. Therefore, only plans and issuers offering group and individual health insurance coverage that are not grandfathered health plans will be affected by these interim final regulations.”
HHS concluded that, over time, health plans would make changes to their plans that would cause them to relinquish their grandfathered status. At the time, HHS estimated that 18 percent of large employer plans (100 or more employees) and 30 percent of small employer plans (less than 100 employees) would relinquish grandfather status in 2011, increasing over time to 45 percent and 66 percent, respectively, by 2013.
HHS also cited a study that estimated that 40 percent to 67 percent of individual policies terminate each year. Because all newly purchased individual policies are not grandfathered, HHS expected that a large proportion of individual policies sold through the exchanges would not be grandfathered, covering up to and perhaps exceeding 10 million individuals.
In her testimony, Tavenner echoed this statement in the 2010 Final rule, noting that “churning,” i.e., companies or individuals changing policies in the individual health insurance market, traditionally averages 50 percent per year. She also noted that if health insurance companies are dropping existing policies, that the replacement policies offered to individuals likely will have benefits that didn’t exist before, such as coverage for more preventive care, and with no cap on total insurance benefits.
Website performance. At the beginning of her testimony, Tavenner said, "I want to apologize to you that the website does not work as well as it should." She defended the rollout of HealthCare.gov, noting that the website was tested throughout its development, including end-to-end testing to make sure that all parts of the website communicated with each other, as well as stress testing and load testing. The biggest surprise was the number of people who accessed the site in its first days.
Tavenner said that the testing included simulations of three times the traffic that goes to Medicare.gov each year during its annual enrollment period; instead, HealthCare.gov received five times the amount of traffic that Medicare.gov receives.
Tavenner said that since October 1 over 700,000 applications for insurance have been submitted either through HealthCare.gov or the 18 state marketplaces for insurance. CMS later said that HealthCare.gov is registering 17,000 people per hour. (Registration is the first step before actually enrolling in a health plan.) CMS also noted that they have added more servers to make the registration process more stable.
Tavenner also said that CMS will be issuing more complete numbers on how many people have enrolled in insurance coverage in mid-November.
There was partisan sniping about the health reform law among members of the committee, with more than one Democratic representative referring to “sanding the edges” of the law to make it work better, and more than one Republican representative talking about “taking a buzzsaw” to the law.
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The Department of Health and Human Services (HHS) has issued a final rule that implements provisions of the Patient Protection and Affordable Care Act (ACA), with respect to the health insurance exchanges, or marketplaces. Specifically, the final rule outlines financial integrity and oversight standards with respect to the exchanges, qualified health plan (QHP) issuers in federally-facilitated exchanges (FFEs), and states with regard to the operation of risk adjustment and reinsurance programs. It also establishes additional standards for special enrollment periods, survey vendors that may conduct enrollee satisfaction surveys on behalf of QHP issuers, and issuer participation in an FFE, and makes certain amendments to definitions and standards related to the market reform rules. The final rule was published in the October 30 Federal Register.
The HHS noted that the final rule is largely unchanged from previous proposed rules and guidance documents. Proposed rules were issued in June 2013. Here are some highlights from the final rule:
Oversight of state-operated premium stabilization programs. The risk adjustment and reinsurance programs help guarantee affordable health insurance to consumers by helping to ensure a level playing field and the stabilization of premiums. To protect the financial integrity of these programs, the final rule establishes standards for the oversight of states that operate risk adjustment or reinsurance programs. The rule requires that states keep an accurate accounting for the programs, submit to the HHS and make public reports on operations, and take other steps to ensure the soundness and transparency of the programs.
Program integrity for advance payments of the premium tax credit and cost-sharing reductions. To ensure that eligible enrollees receive the correct tax credit and cost-sharing reductions, the HHS has established timeframes for refunds to eligible enrollees and providers when an issuer or marketplace incorrectly applies advance payments of the premium tax credit or cost-sharing reductions, or incorrectly assigns an individual to a plan variation (or a standard plan without cost-sharing reductions). The final rule also establishes general standards necessary for the oversight of these payments, including standards governing the maintenance of records, annual reporting of summary statistics, and audits.
Program integrity of state marketplaces. The final rule establishes standards for the oversight of state marketplaces through monitoring, reporting, and oversight of financial activities and marketplace activities. These mechanisms ensure that consumers are properly given their choices of coverage available, that consumers receive the full amount of advance payments of the premium tax credit and cost-sharing reductions for which they qualify, and that marketplaces are meeting the standards of the ACA in a transparent manner.
Oversight of QHP issuers in federally-facilitated marketplaces. To protect consumers and the financial integrity of FFMs, the final rule provides for oversight of health insurance issuers. This includes ensuring compliance with marketplace requirements, such as the maintenance of records requirement and participation in investigations and compliance reviews.
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The Obama administration filed three documents with the Supreme Court on October 21 in response to various Patient Protection and Affordable Care Act (ACA) petitions, making it likely that the Supreme Court will hear at least one new case against the law during the next term. Two of the documents focused on the birth control mandate, asking the court to hold back on its review of the Conestoga Wood case until a decision is made in the Hobby Lobby case. And on another side of ACA, the Obama administration has asked the Supreme Court to deny review of Liberty University’s challenge to the individual and employer mandates in the ACA, maintaining that no conflict exists with any of the issues raised in that petition. These filings complete the government’s responses to ACA cases currently in front of the Supreme Court.
Birth control mandate. The Hobby Lobby case offers two very different views on the birth control mandate and freedom of religion. According to Hobby Lobby’s attorneys, the ACA violates the religious freedom of business owners that object to contraception. Because it is a Christian-owned chain, Hobby Lobby argued it should not be required to include drugs they object to in their employee health plans. The owners stated that they believe human life begins at conception, and thus, on the basis of their religious beliefs decided to exclude contraceptives that prevented the implantation of a fertilized egg, such as intrauterine devices (IUDs), Plan B, and Ella. They argued that this requirement violates the Religious Freedom Restoration Act (RFRA), which provides that the government “shall not substantially burden a person’s exercise of religion” unless it is the least restrictive means to further a compelling government interest, and the Free Exercise Clause of the First Amendment. The Tenth Circuit agreed with Hobby Lobby’s owners.
The government disagreed and requested review, claiming in part that the Tenth Circuit’s holding conflicts with recent decisions of other appeals courts, and that the companies are not entitled to raise individual rights to raise religious exemptions when they chose to create a corporate entity. At the end of September, the U.S. government filed a Petition of a Writ of Certiorari with the Supreme Court for the case of Hobby Lobby Stores, Inc. v Sebelius. The government argued that a secular company should not have the ability to impose the religious beliefs of the owners on its employees. According to the government, the mandate was created to ensure that most working women have access to free birth control through their employer-provided health care plans.
To date, the Supreme Court has three petitions on this constitutional issue dividing the federal appeals courts, and more are expected to be filed soon. The Hobby Lobby case (Sebelius v. Hobby Lobby Stores, 13-354) from the Tenth Circuit and a case from the Third Circuit (Conestoga Wood Specialties v. Sebelius, 13-356) may be ready for court review as early as next month. The third case (Autocam Corp. v. Sebelius, 13-482), from the Sixth Circuit was just filed last week. In Monday’s filing, the government asked the court not to take the Autocam case and to put off Conestoga until it reached a decision in Hobby Lobby.
Individual and employer mandate challenge. Liberty University also has filed a petition for review in the Supreme Court focusing on the individual and employer mandates to provide health insurance coverage. Liberty University and several individuals originally filed a complaint against the Secretary of the Treasury and other officials (collectively, the Secretary) seeking a declaration that the individual and employer mandates are invalid. They alleged that the mandates exceeded Congress’s Article I powers and violated the Tenth Amendment, the Establishment and Free Exercise Clauses of the First Amendment, RFRA, the right to free speech and free association under the First Amendment, the Article I, Section 9 prohibition against unapportioned capitation or direct taxes, and the Guarantee Clause. A prior petition by Liberty was already denied a hearing by the high court, then referred to a lower court for hearing in the wake of the Supreme Court’s major ACA decision in 2012.
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CMS has issued formal guidance that individuals who purchase health insurance through a new health insurance marketplace by March 31, 2014, will not face a penalty for not being insured the first three months of 2014.
Short coverage gap. Starting in 2014, under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) each individual is required to maintain health insurance, or pay a penalty, unless they qualify for an exemption. The “short coverage gap” exemption allows a person to go without insurance for no more than three months.
PPACA established an initial open enrollment period from October 1, 2013, until March 31, 2014, for individuals to purchase insurance through the new health insurance marketplaces. For plan selections made between the first and fifteenth day of a given month, the coverage effective date is the first day of the immediately following month; for plan selections made between the sixteenth day and the end of a given month, the coverage effective date is the first day of the second following month. So, individuals who signed up for insurance after mid-February 2014 would not be covered until April 1, 2014, and thus exposed to the noncoverage penalty.
New guidance. Last week, an HHS spokesperson said that “some have asked whether consumers could face a tax penalty if they don’t enroll in coverage by Feb. 15th of next year. This is not the case. If you sign up for insurance by the end of March, you will not face a penalty.”
The new guidance from CMS states that “if an individual enrolls in a plan through the marketplace prior to the close of the initial open enrollment period, when filing a federal income tax return in 2015 the individual will be able to claim a hardship exemption from the shared responsibility payment for the months prior to the effective date of the individual’s coverage.” Further guidance on this exemption will be released in 2014.
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Four individuals will pursue their lawsuit challenging a provision of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) that defines who is eligible for subsidies and the constitutionality of the tax penalties associated with federally funded insurance exchanges. D.C. District Judge Paul Friedman allowed the case to go proceed, but he denied a request for a preliminary injunction to block the subsidies from flowing. Friedman denied the government's motion to dismiss the case, holding that four individual plaintiffs in Halbig v. Sebelius have standing to sue over the IRS rule allowing insurance subsidies to be awarded.
The lawsuit focuses on whether PPACA allows for insurance subsidies in all states or only in states that have set up their own exchanges. Because only16 states and the District of Columbia chose to set up the online health insurance exchange marketplaces, the federal government created the exchanges in the remaining 34 states. The subsidies at issue are in the form of tax credits, and are available to people with annual incomes of up to 400 percent of the federal poverty level, or $94,200 for a family of four. The Internal Revenue Service ruled that the law's subsidies are available nationwide, and the government maintains that Congress made clear that an exchange established by the federal government stands in the shoes of the exchange that a state chooses not to establish.
Halbig’s argument. Brought by a mix of individuals and businesses from Texas, Kansas, Missouri, Tennessee, West Virginia and Virginia, the lawsuit claims that these subsidies in federally funded exchange states are unlawful and impose a burden on the individuals by forcing them to purchase the insurance or else pay a penalty. In their motion for an injunction filed in September, the individuals claimed that the IRS is violating federal law, and that the court must resolve the issue before January 1, 2014. The individuals claimed that, if a resolution comes after that date, they will be irreparably injured because they “will be forced either to comply with the ACA’s individual mandate or risk incurring a penalty, and…will further be entirely and forever precluded from purchasing catastrophic coverage for 2014.” Agreeing with the individuals, District Judge Paul Friedman allowed the case to proceed.
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Despite an overall lack of familiarity with the Patient Protection and Affordable Care Act (ACA), the majority of U.S. workers believe the health care reform law will ultimately increase how much they pay for health care insurance over the next several years, according to research from the National Business Group on Health (NBGH). The survey, Employer Perspectives on the Future of Health Benefits and Health Care Delivery, also found an increasing number of employees who are confident in their ability to shop for health insurance on their own, and that many workers would use a private health insurance exchange to buy insurance if offered by their employer.
NBGH found that 54 percent of respondents believe that their health insurance premiums will rise over the next 12 months because of the ACA, and 56 percent expect costs to jump over the next three to five years. Additionally, 32 percent believe that the quality of their health care benefits will decline over the next three to five years. Just 15 percent think they will not be able to afford coverage through their employer or union over the next three to five years, and only 10 percent believe their employer or union will not offer coverage in the future.
According to the survey, only four in ten respondents are familiar with the ACA itself, although respondents are familiar with some of the law’s specific provisions. For example, NBGH noted that 69 percent are at least somewhat familiar with the requirement that individuals must have or must purchase insurance; 63 percent know that large- and mid-sized employers must offer insurance to full-time employees. However, just 38 percent are aware of the creation of public health insurance exchanges.
“While employees have some knowledge about the ACA, they need to recognize that health reform brings with it additional costs for their employers and that, ultimately, they will be sharing in these costs,” said Helen Darling, NBGH president and CEO. “Neither employers nor the government can bear these added costs alone. At the same time, it’s encouraging that relatively few employees are concerned that their employer won’t provide health insurance benefits in the future. Additionally, employees are gaining confidence in their ability to shop for insurance and many are open to new and potentially cost effective ways to buy insurance through exchanges.”
Indeed, only 28 percent of respondents said they are not confident they can shop for health insurance on their own, compared with 37 percent who responded to a similar question last year. However, 47 percent are not confident in their ability to purchase the same or better quality health insurance on their own.
Exchanges. The survey found that even though 66 percent have not heard of a private exchange, when given an explanation of how it works, 52 percent said that they would be somewhat or very interested in purchasing health insurance through a private exchange if offered by their employer. And, 66 percent would shop through a public exchange if offered as a less expensive option. However, more employees would stick with their employer plan if the costs were the same and even if there were more choices offered in a public exchange.
“Employees have clearly gained confidence in the last year when it comes to purchasing health care on their own. This confidence probably arises from the opening of the public marketplaces. However, many employees are not confident in their ability to purchase the same or higher quality care. Employers will need to educate employees about the value of all their benefits, especially health benefits so that employees understand the total rewards they are receiving as part of their compensation,” said Darling.
The survey contains responses from 1,520 employees at organizations with 2,000 or more employees. For more information, visit http://www.businessgrouphealth.org.
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Fifty-six percent of small business owners who currently provide their employees with health benefits are interested in being able to offer a choice of health plans while paying a fixed cost, with the employee paying extra for choosing a more expensive plan, according to recent research from NORC and The Commonwealth Fund. This type of coverage option is an important feature of 17 of 18 state-run Small Business Health Insurance Options (SHOP) marketplaces through which employers can buy health insurance policies for their workers, and that were created by the Patient Protection and Affordable Care Act (ACA). Federally run marketplaces also will offer these options beginning in 2015.
The study, Small Employer Perspectives on the Affordable Care Act’s Premiums, SHOP Exchanges, and Self-Insurance, also found that many small business owners and their employees have already been affected by the ACA. Twenty-two percent of firms surveyed have extended health insurance coverage to their employees’ adult children as a result of the law, providing coverage for an estimated 725,000 young adults, and 16 percent had received rebates from insurance companies that spent too much money on administrative costs.
“Most small business owners want to provide good health insurance to their employees, but many simply have not been able to afford it,” said Sara Collins, vice president for health care coverage and access at The Commonwealth Fund. “The ACA has already taken steps, like tax credits, to lower the cost of coverage for small employers. The launch of the SHOP marketplaces, coupled with extensive insurance market reforms that ban insurers from charging companies with sick employees more, may further reduce costs and allow business to make informed health plan choices.”
The survey found that 80 percent of small businesses offering coverage use health insurance brokers or agents. Brokers act as benefit managers for many firms, carrying out a range of functions, including choosing health plans. Because insurance brokers play a considerable role in this market, the degree to which they view the marketplaces as options for employers may affect small-business participation. Low participation will make it difficult to spread out risk and keep premiums affordable. If premiums for plans offered in the marketplaces become too high, more potential enrollees could be lost, the study noted.
Self-insurance. The SHOP marketplaces also might become unaffordable and lose potential enrollees if substantial numbers of small businesses decide to self-insure—provide insurance to their employees themselves, by setting money aside to pay employees’ health claims. Self-insured firms do not have to provide essential health benefits under the ACA, nor do they pay taxes on their premiums, thus providing incentives for small firms to self-insure. The report finds that among firms using an insurance broker, 26 percent reported that their broker discussed the possibility of self-insuring in 2014.
“If SHOP exchanges are to succeed in fulfilling their goal of providing affordable coverage, small businesses need to be educated about exchanges and discouraged from self-insuring,” said Jon Gabel, senior fellow at NORC at the University of Chicago. He added that “small business owners find the features of the SHOP exchanges attractive, which means there is a real potential for them to be successful, and even encourage those who aren’t currently providing coverage to their employees to do so.”
Small businesses want to cover workers. The study found that in 2013, 60 percent of small businesses offered health insurance to their workers and 41 percent of employees chose to enroll in some of this coverage. When business owners who did not offer insurance were asked why they did not, 75 percent cited costs as the most important reason. The study also found that 37 percent of firms not currently offering coverage had shopped for it in the past five years. Firms located in the East and Midwest were more likely to have shopped than those in the South and West.
When firms that currently offer health insurance were asked what would make health benefits easier, less expensive, and a better value, the survey found that:
- Sixty-eight percent said it would be very important to be able to compare plans, costs, benefits, physicians in the network, and other features.
- Sixty-six percent said that having a broader choice of plans mattered more than being able to buy coverage from the dominant carrier in their state.
- Eighty-two percent said they would select a narrow-network plan that contracted with 25 percent of the doctors and hospitals in the community, if it would provide premium savings of 20 percent over a broad network plan.
“Until now, the small-group health insurance market has worked poorly, or not at all, for many businesses,” said David Blumenthal, Commonwealth Fund president. “The ACA’s SHOP exchanges and market reforms have the potential to level the playing field for small-business owners so that, like large companies, they will be able to purchase affordable, comprehensive health insurance for their employees.”
The study contains responses from 604 employers with three to 50 employees. For more information, visit http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Oct/Small-Employer-Perspectives-on-the-Affordable-Care-Act.aspx.
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For-profit hospitals will continue a strategy of consolidation into larger entities as well as diversification into care provided in non-hospital settings in reaction to changes in the health care marketplace brought about by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), according to a report from Moody’s prepared by lead analyst the Dean Diaz.
Consolidation. PPACA offers at least one significant financial benefit to hospitals, but also a few changes that will put downward pressure on revenues, according to Moody’s. Because the health reform law expands the number of Americans with health insurance, either through the expansion of Medicaid eligibility in some states or an increase in the number of people with private insurance purchased through a health insurance exchange or marketplace, hospitals are likely to see declining levels of bad debt attributed to uninsured people who receive hospital services. Because bad debt will likely decline (which will improve the bottom lines for some hospitals), the federal government under PPACA is also reducing disproportionate share hospital (DSH) payments. An increasing number of insured patients, according to Moody’s, may offset the revenue hit attributed to lower DSH payments, penalties for high readmission rates for patients, and overall declining patient volumes.
Still, revenue uncertainties attributed to changes in reimbursement will help fuel further consolidation, according to the Moody’s report, because “increased scale provides [for-profit hospital] with a number of benefits, including the ability to leverage administrative functions and investments in infrastructure and to pool purchasing and negotiating power with suppliers and payors, respectively.” Three areas where consolidation creates efficiencies that will help reduce overall costs are billing, collections and volume purchasing.
Diversification. Moody’s notes that because the reform law, changes in Medicare and Medicaid reimbursement, and other changes in the hospital market will continue to focus on reducing inpatient spending, hospitals will seek other revenue streams. The report notes, “we expect hospitals to continue to invest in outpatient settings, including ambulatory surgery centers, urgent care centers and clinics, diagnostic and imaging centers and physician practices.” Investing in non-hospital entities better prepare hospital systems to operate in an environment of new payments systems, such as accountable care organizations and bundled payments, which are focuses of the health reform law.
Moody’s also sees a move towards “for-profit hospital companies building insurance-like capabilities that would allow for the management of patient populations and the assumption of risk for the cost of patient care.” While diversifying into the health insurance arena provides hospital systems with another revenue stream, Moody’s warns that this move could “increase volatility in both revenue and cash flows and lower margins.”
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