Health Care/Insurance Committee Update
August 5, 2011
- Health Exchange: Which Comes First, The Chicken or The Egg?
- Will Exchanges Work? Tales & Observations From the Trenches
- First Wave of Exchange Federal Rulemaking Released; More to Follow
- Health Care Spending …..
The State Senate concluded its session in late June without taking action on legislation to set the implementation of a NY Health Exchange in motion. They are not set to return to Albany until late September at the earliest. The absence of a governance structure and statutory authority has not stopped planners from proceeding with design elements which will have significant influence on the ultimate look and functionality of a health exchange. The Department of Health released a Health Benefit Funding Availability Solicitation on July 15, seeking to award a 4 year contract for the delivery of an operational system. The FAS also notes that it is the Department’s intent to award the successful bidder of this FAS the operational phase for the exchange. The initial 30 day timeframe for interested parties to submit a bid to this 162 page document has been extended through September 6, 2011. The bid observes that “As an Early Innovator state, the target date for “Operational Readiness” of the NY-HX Solution is October 10, 2012, to facilitate re-use by other states.” NYS is not the only Early Innovator grantee to not pass authorizing exchange legislation; Kansas and Wisconsin legislative sessions ended without agreement on a bill and Oklahoma returned its EI grant to the federal government. Maryland has become a leader among states on exchange implementation – passing its legislation in April, appointing its 9 member board in May which held its first meeting in early June.
With an aggressive timeframe, and with state budget-provided authority to award without competitive bid, the Department of Health will proceed with designing and “building” a health exchange system that will likely anticipate policy decisions, rather than being informed by policy decisions related to the functionality needed for this customer interface.
As states and regulators grapple with various aspects of the exchanges, others are looking back and looking forward:
Paul Keckley, at Deloitte’s Center for Health Solutions, modeled several different scenarios for national enrollment through exchanges. Per Keckley, the Congressional Budget Office (CBO) assessment of enrollment, released last year, calculated that exchanges will support 23 million users, including some from employer-sponsored programs. Keckley, however, notes a number of factors might push the number to 65 million in 2020, based on their scenario analysis. This higher level might be realized: (1) if 25 percent of large companies above 5,000 employees and 50 percent of small companies drop coverage altogether, (2) if state health exchanges operate effectively starting in 2014, and (3) if the employer penalty of $2,000 per employee for coverage is not increased via an amendment to ACA. See his modeling in his August 1 memo, “Implementation Update”.
Meanwhile, the Pacific Business Group on Health – often referenced by New York health care reform implementers as a source for employer-based information – released a new issue brief with 5 key lessons from California’s small group exchanges. Among their findings: meaningful customer choice is key and the SHOP must be attractive for health plans if they are to succeed.
And costing out plans is on the minds of many, especially as activity on expanding the list of preventive services continues to roll out. The National Health Council – an advocacy entity providing a voice for individuals with chronic diseases and disabilities – retained an independent actuarial group to score the essential benefits plans. The design and cost of the essential health benefits package is still one of health reform’s greatest mysteries, so the National Health Council took a crack at what the packages could end up looking like. The NHC came up with actuarial models for the platinum, gold, silver and bronze benefit packages, using the Blue Cross Blue Shield Standard Option offered under the Federal Employee Health Benefits Plan as a baseline. It’s worth noting that the analysts couldn’t create a bronze plan — the barest plan — to meet the 60 percent actuarial requirement because the benefit package is too rich. See the results of their work here.
HHS formally published two proposed rules on July 15 which provide the minimum standards for health insurance exchanges per the Affordable Care Act. The 347 pages over two sets of rules address exchange regulation and reinsurance and risk regulation and closely mirror the language in the ACA, providing states a high degree of flexibility in overseeing the development and operation of their exchanges, within the constraints found in the law. The proposed regulation provides for “conditional” approval in 2013 of state exchanges that are making progress toward operational readiness but are not yet fully ready for operation and leaves the door open to states to elect after 2014 to begin operation of an exchange or cease to operate their exchange and cede responsibility to the federal government.
The preamble to the regulations seeks comments on some of the more contentious issues which remain not addressed in the proposed rulemaking. A 75 day comment period on the rules closes September 28, 2011.
Key observations on the exchange regulations:
- States may operate two exchanges: one for individual purchasers, and a second for small businesses. States can elect to have these exchanges governed by one board composed of knowledgeable health industry representatives, but the voting majority cannot be made up of individuals licensed to sell health insurance. Otherwise the two exchanges must be governed by separate boards and the state must ensure that the SHOP will coordinate and share relevant information with the exchange. The preamble to the regulations, however stresses the operational advantages of having a single board.
- The proposed rule provides that a majority of voting governing board members must not have a financial conflict of interest, but the rule also requires that a majority of voting members must have experience relevant to health care financing or delivery or public health or health policy. Exchange boards must meet in public with public notice and opportunity for public comment.
- The proposed rule detailing the general functions of the exchange track the requirements in the ACA. Future rulemaking will address issues with premium assistance application and eligibility determination, enrollee satisfaction surveys, and plan assessment and rating requirements. The proposed rule does require exchanges to handle eligibility appeals, a function assigned to the federal agencies under the ACA.
- The rule clarifies that states must permit at least one category of entities to serve as navigators in addition to agents and brokers. It requires that navigators “may not have a conflict of interest during the term as Navigator” which would seem to preclude brokers and agents from serving as navigators if they independently market the products of QHP issuers. The preamble, however, states that although navigators cannot receive consideration from issuers for enrolling individuals or employers in QHPs, they can receive compensation for enrolling individuals and employers outside of the exchange. This appears to be a contradiction that will need to be resolved.
- Federal funding may not be used to pay navigators for their exchange functions, but if navigators assist with Medicaid or CHIP functions, federal administrative funding may be available.
- The proposed rule requires exchanges to aggregate premium bills for employers and allows employers to make a single payment to the exchange.
- A single streamlined application will be developed for exchanges to use for collecting information for QHP enrollment, premium and cost-sharing reduction payment eligibility and Medicaid and CHP. Exchanges will not enroll individuals in QHPs, but will accept applications and transmit the information to QHPs for enrollment in a “timely” process.
- Proposed rule permits an open enrollment period between October 1, 2013 and February 28, 2014, and thereafter during an annual open enrollment period between October 15 and December 7. Sixty day special enrollment periods will be provided under a number of specified circumstances.
- SHOP exchanges may permit an employer to pick the plan tier and the employee to pick the QHP or the exchange may make available alternative models including one in which an employer picks a single plan, all0w employees to choose from multiple tiers, or pick specific plans in each of several tiers. The rule does not address minimum participation requirements but the preamble request comments on this issue.
- Employers must have at least one employee to qualify for the SHOP exchange; sole proprietors do not qualify under this definition.
- Qualified employers can either offer coverage to their employees only through the SHOP exchange that covers their principle place of business or through multiple SHOP exchanges covering the primary workplaces of their employees. Detailed proposed rules provide for enrollment of employers and employees in the SHOP. Employers enroll for a plan year, which need not be a calendar year.
Key observations on the risk mitigation regulations:
- An “issuer” under the regulations is an insurer or carrier; a “health plan” is a discrete combination of benefits and cost sharing offered by an issuer; and a Qualified Health Plan (QHP) is a health plan certified by an exchange as compliant with statutory, regulatory, and exchange requirements.
- QHPs must meet the specific certification requirements found in the ACA and in the exchange regulations. Note that the ACA provides that exchanges may only certify plans if “the Exchange determines that making available such health plan through such Exchange is in the interest of qualified individuals and qualified employers.”
- The regulation does not resolve the debate on whether exchanges must accept “any willing insurer”, it merely repeats the statutory language. The preamble to the regulation, however, asserts that exchanges can make a blanket determination that all plans that meet the other certification requirements are qualified – thus “endorsing” the “any willing insurer” model as a permissible option. The preamble also notes that exchanges can be active purchasers, engage in selective contraction, competitive bidding or negotiation with plans.
- The proposed rule does not address whether exchanges can standardize plan offerings as is done in Massachusetts, but a broad interpretation of the “in the interests” determination in the preamble would seem to permit this.
- The ACA requires QHPs to be accredited. As this can be a lengthy process, the regulation requires an exchange to allow unaccredited QHPs a time period after certification to achieve accreditation.
- QHPs must cover at least a county or group of counties unless the exchange determines that “serving a smaller geographic area is necessary, nondiscriminatory, and in the best interest of the qualified individuals and employers.”
- The proposed rule provides for specific provisions for coordination of enrollment between QHP issuers and the exchange. Coverage may only be terminated for reasons identified in the rule. Termination for non-payment of premiums of a person who is receiving premium tax credits and who has paid at least one premium payment may only occur on notice and after a three-month grace period. The preamble states that the grace period only applies to persons receiving premium tax credits, but that QHPs must apply nonpayment of premium policies uniformly to all enrollees.
And in case that rulemaking wasn’t enough to keep you busy with your beach reading, a much lighter read coming in at 6 pages of rulemaking was formally issued on August 3 to implement the much-reported additions to preventive services with no cost sharing in various aspects of women’s health.
Health care spending continues to be the “elephant in the room.” That doesn’t stop any number of entities continuing to provide the data.
The latest National Institute for Health Care Management (NICHM) Foundation Data Brief on U.S. health care found that between 2005 and 2009, total national health spending rose 23 percent from $2.021 trillion to $2.486 trillion. Over the same time period, national spending on premiums for private health insurance rose nearly 15 percent.
And a recent article in Health Affairs on health spending projections to 2020, notes “In 2010, US health spending is estimated to have grown at a historic low of 3.9 percent, due in part to the effects of the recently ended recession. In 2014, national health spending growth is expected to reach 8.3 percent when major coverage expansions from the Affordable Care Act of 2010 begin. The expanded Medicaid and private insurance coverage are expected to increase demand for health care significantly, particularly for prescription drugs and physician and clinical services. Robust growth in Medicare enrollment, expanded Medicaid coverage, and premium and cost-sharing subsidies for exchange plans are projected to increase the federal government share of health spending from 27 percent in 2009 to 31 percent by 2020. This article provides perspective on how the nation’s health care dollar will be spent over the coming decade as the health sector moves quickly toward its new paradigm of expanded insurance coverage.”