Health Care Committee Update

October 7, 2011

Affordable Care Act Update:  Essential Benefits,  Health Exchanges, Employer Pay or Play Guidance, & More

Exchange Update

The long awaited IOM report on essential health benefits (EHB) recommendations was released today. The report details how the Health and Human Services Department should decide which benefits get covered on insurance exchanges and recommends HHS pick benefits to fit within a certain price range. The IOM report recommends that Secretary Kathleen Sebelius aim to have premiums for a “silver” plan on the exchange that match plans with comparable benefits for small businesses. The report also said HHS did not need to establish a national definition of “medical necessity.” Among the criteria used to guide the recommendations:  “budgetary constraints are necessary to keep the EHB affordable” and “to be accountable to taxpayers and plan members, the covered service must provide a meaningful health benefit.”

NAIC submitted written comments to HHS in August urging federal officials to require multi-state insurance plans to operate under the same rules as other plans sold through insurance exchanges to avert their possible competitive advantage over local plans. 

While HHS has awarded $185 million to 13 states, including a $10.7 million grant to  New York, to implement health insurance exchanges, progress across the country is being bogged down by both practical and political hurdles. Senator Jim Seward confirmed what was widely rumored – that the NYS Senate will not take up health exchange legislation until it returns in 2012. Why rush you might ask, when HHS has extended the comment period on the draft health exchange regulations issued in July? It’s very clear the slow pace at which states are approaching the health exchange implementation, along with the lack of clarity from HHS on numerous aspects, that most states which choose to operate a state-run exchange will have a hard time meeting the 2014 operational due date.

The New York Health Exchange legislation which was passed by the Assembly prior to the end of session called for at least 23 different studies to be undertaken with recommendations from the Exchange Board based on the results of those studies offered to the Governor and Legislature.  Even if the bill had passed and been signed into law, 22 of those studies were to be completed with recommendations handed up by April 1, 2012.  While the legislation remains under consideration, the Health & Insurance Departments continue working on putting in place various aspects of an exchange, including ordering of studies called for in the legislation.

Over the last several months several exchange-related studies referenced in the legislation have been released:

IRS Guidance To Help Employers Estimate Play or Pay Penalty

The IRS issued recent guidance and request for comments intended to allow employers to better design their plans to avoid a penalty, or calculate and predict their potential tax liability starting in 2014, when the employer mandates begins.        

The new proposed regulations provide a favorable interpretation of the affordability test, clarifying that the “affordability” test for the purposes of the tax credit will be calculated by determining whether the premium contribution for self-only coverage, as oppose to family or other coverage, exceeds 9.5% of the taxpayer’s household income.  This means employers can avoid the play or pay penalty by charging a self-only premium that is less than 9.5% of an employee’s household income, even if the family premium exceeds 9.5% of household income.  

The preamble indicates that future proposed regulations will provide an affordability safe harbor for employers, such that an employer will not be subject to the play or pay penalty if it offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage and the employee portion of the self-only premium for the employer’s lowest-cost coverage does not exceed 9.5% of the employee’s W-2 wages, as opposed to the employee’s household income.  

Data Dumps & Surveys: Similar Conclusions (Who’s Listening?)

A recent study published in Health Affairs study showed that although a median income US family of four with employer based health insurance saw its gross annual income increase from $76,000 in 1999 to $99,000 in 2009, this gain was largely offset by increased spending to pay for health care.  The study argues that the burdens imposed on all payers by steadily rising health care spending can no longer be ignored.

The Kaiser Family Foundation’s (KFF) annual employer survey reached similar conclusions:  Premiums for employer-provided health insurance, where 150 million Americans get their coverage, jumped 9% in 2011 while workers’ wages grew just 2%.  The average family policy now costs more than $15,000 per year, more than the cost of a Chevy Aveo or a Ford Fiesta.  Since KFF began doing this survey thirteen years ago, worker contributions to premiums have increased 168%, wages 50%, and inflation 38%.

The Archives of Internal Medicine published “Too Little? Too Much? Primary Care Physicians’ Views on US Health Care: A Brief Report” with findings that nearly half of doctors believe their patients are getting too much medical attention, but they’d love to compare notes with other physicians.  Just over half say they are giving their patients the right amount of care, but the doctors also believe the US health system is set up to encourage over-treatment and over-testing. 

The United Hospital Fund has recently released its annual Health Insurance Coverage in New York analysis.  Among its findings rates of employer-sponsored insurance in New York State (excluding New York City) ranged from a high of 72.3 percent in the Nassau/Suffolk County region to a low of 61.7 percent in the northernmost region (Clinton, Essex, Franklin, Hamilton, Jefferson, Lewis, and St. Lawrence Counties). Rates of employer-sponsored insurance in New York City were lower on average, but wider ranging - from 38.0 percent in the Bronx to 68.4 percent in Staten Island.

Driving Change….

The inescapable tension between cost management and quality improvement leaves one wondering who is in the better position to drive systemic change which will result in a health care delivery system that is effective, efficient, and accessible. Some believe employers can drive that change along with the 160 million lives covered through employer-sponsored health insurance; others hold out hope that the federal government, with 100 million covered lives through Medicare, Medicaid, the military and federal employees. States which jointly administer Medicaid are also in a position to drive change. Numerous efforts are underway to better utilize data to inform change and to see if bending the cost curve can be attained.

A new health care research initiative undertaken by four major national insurance companies, including Business Council member UnitedHealthcare, will give researchers a significant new pot of data to study health care costs and how people use health care. The data from these four insurers represents about $1 trillion in health care spending from 5,000 hospitals since 2010, with the newly formed Health Care Cost Institute (HCCI) expected to update the records at least twice a year. The HCCI will publish periodic scorecards and will share the data with scholars and analysts who submit research proposals.

New York’s Medicaid Redesign Team was provided with a mid-fiscal year update on the implementation of redesign elements approved as part of the state budget, as well as updates on the work of teams designing implementation strategies for those proposals which required further refinement. According to the state Medicaid director’s report to the Team, $596.35 million in Medicaid savings has been achieved thus far even with increased enrollments. A new Medicaid Visual Data Mining system was also demonstrated which “allows us to track and analyze Medicaid in a very sophisticated way. It has changed how we view the program.”

The Urban Institute earlier this week released a study noting that slowing the growth of health care spending will take lots of little changes, not one big one. The report looks at several popular and not-so-popular proposals for constraining spending through financing and coverage changes. It finds that a package of reforms could slow growth by 5 to 10 percent but no one measure would save more than 3.5 percent. Ideas the authors considered included capping the tax exclusion for employer-sponsored coverage, enacting medical malpractice efforts, expanding proven prevention programs, and rate-setting in Medicare and Medicaid.

The Blue Cross Blue Shield Association wants the federal government to move faster when it comes to changing how Americans pay for health care, and released a plan Tuesday that shows how to do it - by adopting pilot programs that are working. The Association says its plan will improve quality of care and save $319 billion over 10 years by helping move the health care system away from paying for everything doctors and hospitals do to patients, otherwise known as fee-for-service care, to paying for safe, effective, quality care.

Chapters, No Vetoes, and Still Waiting

We’re three months past the end of the legislative session and numerous health care/health insurance related bills have yet to be sent to the Governor for his action. Included in the “still waiting” bucket are the autism coverage mandate bill; the chapter amendment to the autism bill which sets an annual dollar cap on applied behavioral analysis; legislation which would require prescriptions filled at retail stores to be reimbursed comparable to those filled by mail order pharmacies; and a similar bill which requires coverage for prescription fertility drugs purchased at non-mail order pharmacies to be the same as for prescription fertility drugs purchased at mail order pharmacies.

The Governor has signed into law several health care/insurance related bills including Chapter 559 which requires oral chemotherapy drugs to be covered at no out-of-pocket cost difference to the insured from intravenous or injected chemotherapy drugs; and Chapter 219 which conforms a number of provisions of state insurance law to align with requirements in the federal Affordable Care Act.