Aetna slashes exchange presence; administration cries foul

Aetna, one of the nation’s largest health insurance companies, is slashing its marketplace participation by removing its current offerings from 536 counties. For plan year 2017, it will only offer marketplace plans in 242—as opposed to 778—counties in Delaware, Iowa, Nebraska, and Virginia. The company publicly stated that it based its decision on financial losses that it contends result from an unbalanced risk pool. The Obama Administration, however, argues that Aetna is following through on threats it made in a recent letter to the Department of Justice (DOJ) related to actions the DOJ has taken to block Aetna’s merger with Humana, indicating that Aetna would “immediately take action to reduce [its] 2017 exchange footprint” if the merger were “challenged and/or blocked.”

Reduction in presence

The insurer stated on its website that it suffered a “second-quarter pretax loss of $200 million and total pretax losses of more than $430 million since January 2014” in its individual products. Aetna maintains that marketplace insurers nationwide are struggling financially due to an unbalanced risk pool. It noted that its 2016 exchange membership increased by 55 percent in 2016 and that individuals requiring high-cost care now represent “an even larger share” of the exchange population. It also faulted “an inadequate risk adjustment mechanism” for the financial strain insurers face. The company promised to communicate options to those affected by its decision prior to the 2017 open enrollment period and reminded the public that it will continue to offer off-exchange plans in most affected counties.

Following through on a threat?

The announcement comes on the heels of a CMS analysis suggesting that higher enrollment has actually led to a more balanced risk pool and a decrease in costs (see Higher enrollment leads to lower costs, reflects healthier risk pool, Health Reform WK-EDGE, August 17, 2016). Obama administration officials, have suggested that Aetna’s move is retaliation for the government’s recent efforts to block the company’s desired merger with Humana (see DOJ lawsuit steps in between Aetna-Humana and Anthem-Cigna mergers, Health Reform WK-EDGE, July 27, 2016).

In a July 5, 2016, letter signed by Aetna Chairman & CEO Mark Bertollini and obtained by the Huffington Post, Aetna told the DOJ that the company’s ability to withstand losses incurred under the ACA “is dependent on . . . . achieving anticipated synergies in the Humana acquisition.” After explaining that challenges to the merger would force it to reduce or eliminate its exchange presence, it noted that if the merger were to proceed, “without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies (which are larger than we had planned for when announcing the deal) to supporting even more public exchange coverage over the next few years.”

Senator Elizabeth Warren (D-Mass) noted in a Facebook post that Aetna recently referred to exchange participation as a “good investment.” She lambasted the insurer, stating, “The health of the American people should not be used as bargaining chips to force the government to bend to one giant company’s will.”

Highlight on Kentucky: Bevin’s proposed Medicaid waiver hits snags

Kentucky Governor Matt Bevin’s (R) administration will be making some changes to its Section 1115 waiver, known as the Kentucky Helping to Engage and Achieve Long Term Health (HEALTH) demonstration project. The proposal, which was published in June, saw pushback from the federal government and health advocacy organizations for Bevin’s plan to undo Medicaid expansion under the Affordable Care Act and for some of the HEALTH project’s provisions that would add work or volunteer requirements for some Medicaid recipients.

Kentucky HEALTH proposal

If CMS approves the Section 1115 waiver for Kentucky HEALTH, the state’s Medicaid program would include a work requirement and the payment of premiums. The state sees Kentucky HEALTH as temporary coverage for able-bodied adults without health coverage through an employer. It would require such beneficiaries participate in “community engagement” activities, which include employment or job training, job searching, and volunteer work, for five hours per week after three months of program participation. This requirement ramps up to 20 hours per week after 12 months. All beneficiaries, excluding pregnant women and children, would be subject to a flat monthly premium, established on a sliding scale based on the individual’s income level. For more on the proposal, see Kentucky Medicaid proposal includes community engagement, employer program, premium requirements, Health Reform WK-EDGE, June 29, 2016.

Criticism of plan

The Kentucky HEALTH plan has faced criticism from multiple sources. In June, HHS Secretary Sylvia Burwell responded to an open letter from Bevin’s predecessor, former governor Steve Beshear (D), saying that CMS evaluates Section 1115 waiver proposals based on access to coverage and affordability of care. Burwell wrote, “states may not impose premiums or cost sharing that prevent low-income individuals from accessing coverage and care, nor may they limit access to coverage or benefits based on work or other activities.” She explained that the waiver proposal had not yet been submitted, but that the agency was committed to working with Kentucky to reach a solution.

The Kentucky Equal Justice Center submitted extensive comments on the HEALTH plan, calling the proposals in the plan “at least a step removed” from the state’s goals with the plan, and wrote, “We suggest that the framers of the waiver consider a different premise: health coverage and care are work supports rather than work substitutes.” The Center also pointed out the logistical challenges of the community service requirements in the proposal, by doing some quick mathematical calculations. In its hypothetical, the Center laid out a scenario where 100,000 Kentuckians statewide are covered for a year and have a 20-hour work requirement–creating 2,000,000 hours of work activity in a single week to arrange, track, and enforce. Even on a much smaller scale, such as 10,000 individuals with the 20-hour requirement, the state would need to find 10,000 nonprofits to take one volunteer each, or 1,000 nonprofits to take 10 volunteers.

The Kentucky Nonprofit Network raised similar concerns in its comments, writing that “supervising, training and managing volunteers requires nonprofit resources of staff, time, funding and expertise.” The Network shared a sampling of comments received from its member organizations regarding the costs and burdens that would be put on nonprofits as a result of the proposed requirement.

State response

Originally, Kentucky planned to accept comments through July 22, 2016. It later extended the comment period through August 14, giving the public an additional three weeks to submit its views on the proposal. Soon after the extended comment period ended, state Cabinet for Health and Family Services Secretary Vickie Yates Brown Glisson told the Kentucky legislature’s Medicaid Oversight and Advisory Committee that, based on the comments received, the Bevin Administration would be making changes to the HEALTH proposal, but that it was too early to detail what those changes would be.

Based on Burwell’s statement in her letter to Beshear that most Section 1115 waivers take six to 12 months to implement after submission to CMS, it is unlikely that Kentucky’s Medicaid expansion coverage will be changing in January 2017.

Medicare readmission penalties exceed $500M for FY 2017

A Kaiser Health News (KHN) analysis of CMS data indicates that Medicare plans to apply reimbursement penalties of $528 million to a total of 2,597 U.S. hospitals during fiscal year (FY) 2017 (October 1, 2016, through September 30, 2017) based on the readmission rate for patients with six common conditions. KHN reports that this aggregate penalty is about $108 million more than the $420 million assessed against hospitals in FY 2016, due to the addition of coronary bypass graft surgery to the list of common conditions for FY 2017.

Section 3025 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program (HRRP), which requires CMS to reduce payments to inpatient prospective payment system (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The HRRP is designed to support the national goals of improving the quality of care and saving taxpayer dollars by incentivizing hospitals to reduce excess readmissions. The HRRP program began in FY 2013. FY 2017 is the fifth year of the program.

In FY 2013-2014, the HRRP measured readmissions for three conditions, acute myocardial infarction (heart attacks), heart failure, and pneumonia. In FY 2015, the HRRP added the measurement of readmissions for chronic obstructive pulmonary disease (COPD) and total hip and knee replacements. For 2017, the HRRP has added readmissions for coronary artery bypass graft surgery.

As finalized in the FY 2013 IPPS Final rule (77 FR 53397, August 31, 2012), readmissions for the following hospitals and hospital units are exempt from the HRRP:

  • long-term care hospitals;
  • critical access hospitals;
  • rehabilitation hospitals and units;
  • psychiatric hospitals and units;
  • children’s hospitals; and
  • PPS-exempt cancer hospitals.

According to KHN, the maximum reimbursement reduction for FY 2017 is 3 percent and it does not affect special Medicare payments for hospitals that treat large numbers of low-income patients or train residents. Forty-nine hospitals received the maximum fine, according to KHN. The average penalty was 0.73 percent of each Medicare payment, which is the highest to date. In 2016, KHN reported that the average penalty was 0.61 percent.

Hospitals will receive information on their FY 2017 HRRP results from Medicare in their Hospital-Specific Reports (HSRs). The HSRs will include a summary of the hospital’s results along with national observed readmission rates, detailed discharge-level data, and risk factor information. CMS will provide hospitals with their HSRs via QualityNet secure portal accounts at the beginning of the Review and Corrections period.

Hospitals will have 30 days to review their HSR data to ensure that excess readmission ratios were calculated correctly. CMS will notify hospitals of the exact dates of this Review and Corrections period, and will post these dates on QualityNet once they are finalized. Hospitals are cautioned that the Review and Corrections period is a time for them to review their HSR data and submit questions about their result calculations, as needed. The Review and Corrections process is not designed to allow hospitals to submit additional corrections related to the underlying claims data or to add new claims to the data extract used to calculate the rates.

A KHN chart lists the hospitals penalized in FY 2017. The chart notes that in addition to exempt hospitals and hospital units, Maryland hospitals were not penalized because the state has federal permission to set its own Medicare payment rules. CMS also did not levy penalties against hospitals that had too few cases to be fairly evaluated.

Health centers encouraged to become medical homes, receive HHS grants

Nearly 250 health centers are the proud recipients of grants that will allow them to reform the way they provide care by shifting to the Patient-Centered Medical Home (PCMH) model. These centers are located in 41 states, D.C., the Northern Mariana Islands, and the Federation of Micronesia, and will share in the $8.6 million in funding provided by HHS.


Medical homes offer patients an opportunity to have additional input in their care, as well as a central location for care coordination. Primary care providers are able to better coordinate with specialists through this model, and patients are encouraged to participate in the decision-making process along with the providers. The PCMH model also encourages providers to take into account each patient’s unique conditions, circumstances, and preferences when coordinating care (see Medical homes change primary care, but reimbursement questions remain, Health Law Daily, May 3, 2016).


This grant funding is provided through the Community Health Center (CHC) fund, established by section 10503 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and extended in the Medicare Access and CHIP Reauthorization Act (MACRA) (P.L. 114-10). HHS Secretary Burwell stated that these grants will allow better coordination of a broad range of health care services, including dental services and behavioral health care along with primary care. Although 65 percent of health centers are recognized as having some PCMH qualities, the Health Resources and Services Administration (HRSA) believes that this funding will allow more health centers to better focus on coordinating care. Health centers provide care for about 23 million patients across the country and territories.