Health Affairs

Editor’s Note: Other posts by Timothy Jost analyze regulations implementing provisions of the recently passed health reform legislation governing standards for tax-exempt hospitals, young adult coverage and the small employer tax credit.

Although the dust has hardly settled from the enactment of landmark health care reform legislation in late March, and dark mutterings of repeal or defunding continue, implementation of the legislation has already begun.  Although the most revolutionary provisions of the Patient Protection and Affordable Care Act (PPACA) do not go into effect until 2014, some provisions are effective immediately, others will go into effect for the first insurance plan year after September 23 (the six month anniversary of enactment), and yet others will roll out over the next several years.

HHS has moved quickly to staff up for implementation, creating a new Office of Consumer Information and Insurance Oversight (OCIIO), headed by Jay Angoff, the former insurance commissioner of Missouri and deputy insurance commissioner of New Jersey.  The new office will be divided into four suboffices, responsible for Oversight, Insurance Programs, Health Insurance Exchanges, and Consumer Support.  Implementation will also be overseen by the Department of Labor and Department of the Treasury, which have jurisdiction over group health insurance plans.

On April 14, 2010 the OCIIO published its first Federal Register issuances, requesting comments by May 14 for informing its medical loss ratio and rate review regulations.   The IRS also has posted on its web-page information regarding the small business tax credit, which is operational immediately, and the tax consequences of receiving coverage for adult children under age 27. (There are, basically, none.)   Although the rescission prohibition and the requirement that plans cover adult children up to age 26 do not go into effect formally until after the September 23 date, a number of major insurers have put them into effect immediately in response to a request from Secretary Sebelius.

HHS asked the states to decide by April 30, 2010 whether they would prefer to operate themselves PPACA’s high-risk pool for uninsured persons with preexisting conditions (which is supposed to become operational ninety days from enactment) or to let the federal government implement it.  Nineteen states chose to opt out, requesting the federal government to operate the program within their state.  Although this choice was largely reported as politically-driven, and it undoubtedly was in some states such as Georgia, in fact the complications of coordinating a federal high-risk pool with existing state high-risk pools and guaranteed-issue programs will be quite considerable in many states.  Members of the existing state high risk pool are by definition not immediately eligible for the new PPACA risk pool because they are not uninsured.  Some states will, it would seem, have to operate two risk pools, which will probably have different premiums, benefits, and cost-sharing structures.   Moreover, the statute only provides $5 billion in funding for the program, which the Centers for Medicare and Medicaid Services Actuary estimates will be exhausted within one to three years.  It is, therefore, impressive that three fifths of the states are willing to take responsibility for the risk pool. 

The Web Portal

The first interim-final regulations proposed for implementing the health reform program were issued on April 30.   These regulations address the operation of the web portal, one of key concepts of the reform legislation.  Section 1103 of the PPACA provides that   “Not later than July 1, 2010, the Secretary, in consultation with the States, shall establish a mechanism, including an Internet website, through which a resident of any State may identify affordable health insurance coverage options in that State.”  Section 1103, as amended by sec. 10102, provides that the internet portal is to provide information regarding health insurance coverage in the individual market, Medicaid, the Children’s Health Insurance Program (CHIP), state high risk pools, and the new high risk pool created by PPACA.  It is also supposed to include information on small group coverage, including information on assistance programs available to small groups under the PPACA.  

HHS is supposed to begin collecting information to populate this portal not later than 60 days after enactment and is required to develop a standardized format for presenting the information.  Section 1103 requires that the format include, at a minimum, information on medical loss ratios reported under the new section 2718(a) of the Public Health Services Act, as well as eligibility, availability, premium and cost sharing information with respect to coverage options.  The information must be consistent with the standards adopted for the uniform explanation of coverage provided for in the new section 2715 of the Public Health Service Act, which requires plans to provide a great deal of information concerning health insurance plans in a concise, standardized, understandable format.   Under section 1311, HHS is to continue to operate the web portal once the exchanges are established and to make it available to the states as a model template that the exchanges can use to provide enrollees with information about coverage options.  The web portal will, in a sense, become the informational backbone of the exchange. 

Developing a comprehensive web portal database is, of course, not possible between now and July 1.  HHS has proposed, therefore, a three-step approach. 

Step One. First, it is asking insurers to submit by May 21 certain basic information about their products to put up on a website by July 1.  The requested information includes issuer contact information; administrative information like enrollment codes; enrollment data by product; product names and types; whether enrollment is currently open for each product; product availability by zip code or county;  links for insurer websites, product brochures, and provider network information; and financial ratings. 

The portal will, by July 1, actually provide information about issuers of products, types of products, locations, summaries of services offered, links to provider networks, and contact information (including website links and customer service telephone contacts).  In addition, the website will offer basic consumer information about how the individual insurance market operates and how consumers should select plans.  Some of the collected information, such as tax identification numbers and enrollment counts, will not be disclosed; other collected information, such as financial ratings, will not be disclosed immediately but will be analyzed for future potential use.

The website will also include by July 1, eligibility, coverage, and premium information concerning existing high risk pools.   This information will be requested from the National Association of State Comprehensive Health Insurance Plans.  The portal will also include basic information about Medicaid and CHIP, including eligibility, service information, and contact links, as well as information on coverage options for small businesses, including the reinsurance for early retirees and small business tax credit programs contained in the bill. 

Step Two. More information will be collected by an October 1 release.  In particular, this release will include benefit and pricing information.  The regulation includes two definitions not found in the PPACA that become operative at this point.  The first is “health insurance product,” which is a benefit package that an insurer files with a state.   The second is “portal plan,” which is the pairing of a benefit package and cost-sharing package.  The October release will include manual rates for virtually all portal plans that are open to enrollment.  Insurers must thereafter report new or re-opened products or portal plans as they become available.   While all insurers must report portal plans that are available, insurers that offer multiple portal plans in a particular zip code need only report portal plans that make up at least one percent of their enrollment in that zip code.   

The information that will become available through the portal on October 1 will have interactive functionality that will account for geographic information such as zip code of residence as well as family composition, sex and other indicators, but it will not be able to provide specific individual rates for health-status underwritten plans.  It will allow searches based on parameters such as premium, deductible, out-of-pocket maximums, and provider networks.   Information will be updated at least annually, but insurers are also requested to provide updated information whenever they change pricing, coverage, cost-sharing, type of services covered, or limitations or exclusions for a small group or nongroup plan.

Step Three. Beginning in 2011, HHS will collect and make available additional information pertaining to the small group and nongroup market, such as the percent of policies that insurers rescind, percent of policies actually sold at the manual rate, percent of claims denied, and number and disposition of appeals.   Medical loss ratio information that becomes available from insurers under section 2718 will also be posted on the website.  Additional information on Medicaid and CHIP programs will be posted as it becomes available from the states.   As the exchanges become operational, additional information regarding, for example, the financial stability of insurers, enrollment and disenrollment or appeal trends, and customer satisfaction information may be posted. 

While the initial web portal will be operated by HHS, the operation of the portal will be contracted out to a private vendor through an open competition sometime after July 1, apparently by the October 1 date.   By 2014, many of the functions of the portal will be taken over by the exchanges.

The Early Retiree Reinsurance Program

On May 4, HHS issued a second set of interim final regulations.  These regulations are intended to implement the Early Retiree Reinsurance Program created by section 1102 of PPACA.  This program provides $5 billion to reinsure plan sponsors (employers or employee organizations) that offer health insurance coverage for early retirees for claims that exceed $15,000 and are less than $90,000  per retiree (to be adjusted annually for inflation).  The program reimburses the plan sponsor for 80 percent of the cost of claims between the $15,000 cost threshold and the $90,000 cost limit. 

The program is open both to sponsors that self-insure and those that are insured.  It is available to state and local governments as well as to private employers and employee organizations.  HHS projects that a third of the 4500 participants in the program will be state and local governments.  The statute requires HHS to implement the program within 90 days of enactment, but HHS is implementing the program early, effective June 1.

The program will only last until 2014 when the exchanges and public subsidy programs go into effect.  In fact, however, the program will only last until the $5 billion runs out, and the regulations make it very clear that applications and claims will be processed on a first come, first-served basis, and when the money runs out the program is over.  The CBO projects that this will occur sometime in 2012, while the CMS Actuary estimated that the funding would last between 1 and 3 years.

The interim regulation hews closely to the statutory language, and whenever possible attempts to simplify rather than complicate requirements and procedures.  The regulations also build on the existing Retiree Drug Subsidy program and borrow some regulatory language from that program. 

Sponsors who wish to receive the reinsurance payments must apply to participate. An application must be approved before the sponsor can begin receiving reinsurance payments.  The application must show that the plan will have in place “programs and procedures that have generated or have the potential to generate cost-savings with respect to plan participants with chronic and high-cost conditions”; and that the sponsor will:

• Make available required information, data, documents, and records;
• Have a written agreement with its insurer or plan to disclose information to HHS as necessary for the operation of the program; and
• Ensure that policies and procedures are in place to protect against fraud, waste and abuse.

The chronic and high-cost condition savings program requirement is interpreted very liberally.  As long as a plan “takes a reasonable approach” to identifying and generating  cost-savings with respect to conditions that result in more than $15,000 in costs per year, the plan will be in compliance. 

Early retirees must be at least 55 years of age, not eligible for Medicare, and not actively employed by an employer who maintains, contributes to, or has contributed to the retiree plan.  The term “retiree,” includes the spouse, surviving spouse, and dependents of a retiree.  Dependency status depends on the definition found in the plan and not on federal or state tax law.  

Claims, for reinsurance purposes include the total amount a plan pays for surgical, hospital, prescription drugs, or other claims as determined by HHS for the diagnosis, cure, mitigation, or prevention of physical or mental disease or condition with respect to any structure or function of the body for a single retiree and his or her spouse, surviving spouse, and dependents during a plan year.  Claim costs include cost-sharing payments by the retiree but do not include negotiated price concessions. 

A plan sponsor may begin submitting claims for reimbursement purposes as soon as the $15,000 threshold is exceeded during a plan year for any one retiree (including the claims of a spouse and dependents) and may continue to submit reinsurance claims until the $90,000 limit is reached.  For 2010, claims incurred before June 1 can be counted toward the claim threshold, but only claims incurred after June 1 will be reinsured.  The sponsor must document claims paid below the threshold amount to show that the threshold has actually been reached, and submit evidence that cost-sharing obligations have in fact been paid.  An appeal procedure is provided for denials of applications or claims.

Sponsors may not use the payments they receive under this program to increase general revenues, but must rather use the proceeds to reduce the sponsor’s health benefit costs or premiums or the health benefit premium contributions, copayments, deductibles, coinsurance, or other out-of-pocket costs, of plan participants.  Sponsors are required to maintain their current level of effort and to explain to HHS how they are doing so.  Nevertheless, it is likely that employers as well as employees will benefit from the reinsurance as it relieves the pressure employers face from premium increases.

More To Come. These are only the first of a series of new regulations expected to appear over the coming days, weeks, and months. They will be covered here as they appear.

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This entry was posted on Wednesday, May 5th, 2010 at 11:45 pm and is filed under All Categories, Consumers, Health Law, Health Reform, Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.