Implementing Health Reform (August 9 update). Health insurance premiums in the individual market, including qualified health plan (QHP) premiums in the marketplace, are age rated — the older you are, the more you pay. Obviously, each of us is one year older at the end of a calendar year than we were at the beginning. In general, however, individuals who remain in the same health plan throughout a year retain the age rating that they had when the plan year began. But what happens when QHP enrollment changes during the plan year?

On August 1, 2016, CMS released at its website a guidance on “re-rating in the FFM.” Generally, if new members are added to a QHP policy in the federally facilitated marketplace, they will be added at their current age, but existing members will retain their age rating under the existing policy. If the subscriber changes (for example, by death or divorce), however, the policy is a new policy and all members on the policy will be rerated (unless state law or an insurer’s rating policies do not permit rerating). If a different QHP is chosen or if there is a gap in coverage, ages for all policy members will be rerated because the policy is a new policy. If a subscriber stays on the same QHP but moves to a new geographic rating area, new geographic rates will be applied but age rates will remain the same.

Update on Public Use Files. CMS has also released public use files (PUFs) containing data concerning qualified health plans and standalone dental plans in the state-based marketplaces (SBMs). The PUF files can be used by researchers and other stakeholders for benefit and rate analysis. The six 2016 SBMs contain data on (1) Benefits and Cost Sharing, (2) Plan Attributes, (3) Rates, (4) Business Rules, (5) Service Areas, and (6) Networks. The 2016 SBM PUF are published as of the dates indicated in the individual files and will not be updated during the plan year.

Original Post. On August 4, 2016, Judge Reed O’Connor of the Northern District of Texas, Wichita Falls Division, refused to dismiss an action brought by the states of Texas, Indiana, Kansas, Louisiana, Nebraska, and Wisconsin which claimed that the requirement that Medicaid and CHIP managed care organizations pay the Affordable Care Act (ACA) Health Insurance Provider Fee, and that the states cover their costs of doing so as a condition of receiving federal Medicaid funds, violates the Constitution and federal law.

The health insurance provider fee (HIPF) is one of several fees imposed by the ACA to help finance the ACA’s benefits. It was supposed to collect $8 billion in 2014 increasing to $14.3 billion in 2018 (although the fee will not be collected in 2017 under a one-year moratorium). The fee does not apply to non-profit managed care organizations (MCOs) that receive more than 80 percent of their revenues from government programs serving Medicaid or Medicare populations and is reduced by 50 percent for other non-profit MCOs but applies in full to for-profit managed care organizations that provide Medicaid services.

Federal Medicaid law requires that capitation rates paid by state Medicaid and CHIP programs to MCOs must be actuarially sound. Federal regulations provide that for rates to be deemed actuarially sound, an actuary must certify that they are sufficient to cover a contracting MCO’s costs and insurance risk. In 2015 the Actuarial Standards Board (ASB) of the American Academy of Actuaries, which sets actuarial standards, determined that to ensure that rates are actuarially sound, states must cover in full taxes paid by Medicaid MCOs, including the HIPF. Texas claimed that it would have to pay $241 million over the next biennium to cover the fee.

The states claimed that they were not on “clear notice” of the requirement that they reimburse MCOs for the fee as arguably required under the Constitution’s spending clause; that the role of the private Actuarial Standards Board in determining state liability for covering the cost was an unconstitutional delegation of authority to a private entity and violated the Administrative Procedures Act (APA); that the requirement was promulgated without following APA procedural requirements; and that the requirement unconstitutionally coerced and taxed sovereign states. The complaint asked that the requirement be enjoined and that the states be refunded the amounts they have already paid for the provider fees. The government moved to dismiss all claims on the merits, and also claimed that the states lacked standing to sue and their claims were not timely raised.

Judge O’Connor denied the motion to dismiss on almost all counts. He held that the plaintiff states had suffered a concrete and particularized injury fairly traceable to the federal government’s action that could be redressed by the court and thus had standing to sue. He also held that their claims were timely. He did dismiss the state’s claim for a refund for taxes already paid, noting that the states had not actually paid the tax, which was paid by the MCOs, and thus could not claim a refund for the tax. He further held, however, that the tax Anti-Injunction Act and Declaratory Judgment Act did not prohibit a declaratory judgment and injunction against collection of the tax from MCOs for essentially the same reason — the states do not themselves pay the tax and thus are not barred by statutes that prohibit lawsuits by taxpayers to keep the government from collecting taxes from them.

The court turned then to the merits of the state’s complaint, denying the government’s motion to dismiss on every substantive claim. First, the court held that the plaintiffs properly stated a claim that the requirement that states reimburse MCOs for the HIPF was unconstitutionally coercive. The Supreme Court held in National Federation of Independent Business v. Sebelius that the Constitution’s Spending Clause did not permit Congress to coerce states to participate in what was essentially a new health care program (the Medicaid expansion) under the threat of losing all of their existing Medicaid funding. Judge O’Connor held that similarly the HIPF was a new program unrelated to existing Medicaid, and the states had properly alleged that requiring states to reimburse MCOs for the fee under threat of losing their Medicaid funding similarly violated the Spending Clause. Judge O’Connor further held that the plaintiffs’ claim that the requirement violated the “plain statement rule” which requires that Congress not impose “surprise” conditions on states for participating in Spending Clause programs.

In fact, the actuarial soundness regulation has been in effect for years and Medicaid payments to MCOs must obviously be actuarially sound if MCOs are to continue to provide services to Medicaid beneficiaries. States have long been required to cover the cost of MCOs, which include other federal and state taxes and fees that are not directly related to the Medicaid program. If the court’s judgment stands, it would seem that any tax or fee that the federal government imposed on MCOs that cost state Medicaid programs money could be challenged as unconstitutional. Indeed, the government’s ability to impose any new conditions on Medicaid programs would be continually subject to challenge.

The court next held that that the plaintiffs stated a cause of action under the Tenth Amendment and the Intergovernmental Tax Immunity doctrine which prohibit the federal government from imposing taxes directly on the states. The HIPF is imposed on MCOs, not directly on the states, and substantial authority cited by the judge holds that the federal government is not barred from imposing a tax on a private entity just because the tax is passed on to a state. Judge O’Connor held, however, that because of the actuarial standard the tax could be seen as imposed directly on the state in violation of the Tax Immunity Doctrine and Tenth Amendment.

The court then turned to the actuarial standard itself. The plaintiffs claimed that the federal government had improperly delegated legislative power to the ASB, a private entity. The nondelegation doctrine has been moribund for decades. In fact, governments at all levels routinely rely on standards created by private standard-setting bodies, including actuarial standards. Indeed Texas law relies on the standards of the ASB as authoritative. Relying on a concurring opinion by Justice Alito in a recent Supreme Court case decided on other grounds, in which Alito was joined by no other justice, Judge O’Connor held that the delegation claim could not be dismissed.

Finally, Judge O’Connor held that the plaintiffs had properly stated a claim that the delegation of standard setting authority to the actuarial standards board violated the Administrative Procedures Act requirement of notice and comment rulemaking and that the government’s action was sufficiently arbitrary and capricious as to be subject to challenge whether or not the court showed deference to the Department of Health and Human Services (HHS).

The ruling only addressed a motion to dismiss and only held that the plaintiffs could proceed on the claims they raised. It did not finally resolve those claims. Whatever Judge O’Connor decides will also certainly be appealed. But this is a remarkable decision, repeatedly stretching to the furthest bounds authority in support of the plaintiffs’ claims. It is quite obvious why the plaintiffs filed the case in Wichita Falls before a judge known for his willingness to strike down federal laws and regulations rather than in a multi-judge district court closer to home.

CMS Releases New Resources For Agents And Brokers

On August 5, 2016, CMS released at its website a series of resources for agents and brokers in the federally facilitated marketplace (FFM). These included Marketplace Learning Management Systems (MLMS) Frequently Asked Questions (FAQs), What’s New for Agents and Brokers for Plan Year 2017 FFM Registration, News for Agents and Brokers (August 2016 Edition), Myths and Facts FFM PY 2017 Registration for Agents and Brokers, and Quick Reference Guide Plan Year 2017 FFM Registration for Agents and Brokers. CMS also published at REGTAP a revised version of the 2017 Eligibility and Enrollment Manual.

On the whole, registration and training for agents and brokers in the FFM for 2017 is similar to training for 2016. Different features include:

  • CMS will post updates to the agent and broker registration and termination status list daily instead of twice monthly as it did in 2016;
  • An agent or broker must complete Identity proofing before being able to access the Marketplace Learning Management System (MLMS);
  • The MLMS profile will include a broker or agent’s hours of operation;
  • Per the Individual Marketplace General Agreement, agents and brokers must maintain licensure in at least one state;
  • Agents and brokers who successfully completed FFM registration for plan year 2016 are eligible to take a streamlined Refresher Training for the Individual Marketplace (estimated two hours for completion) via the MLMS or a CMS-approved vendor rather than taking the whole course over again;
  • The MLMS will receive verification directly from the CMS-approved vendors when an agent or broker completes training. Agents and brokers do not need to enter a code to verify their completion. The approved vendors are America’s Health Insurance Plans and the National Association of Health Underwriters; and,
  • Agent and broker information will automatically populate in the SHOP Marketplace Agent/Broker Portal. Agents and brokers may also edit this information through the MLMS.