Health Affairs

Affordable Care Act guidance is now literally arriving on a daily basis from the implementing agencies, particularly HHS. Major rules remain to be finalized, including a lengthy eligibility and appeals rule, a rule on wellness, the employer and individual responsibility rules, and a number of shorter rules. More proposed rules or amendments to rules are also promised. These could arrive any day. But in the meantime there is the steady flow of frequently asked questions (FAQs) and other guidances, which often appear unannounced.

This post deals with three sets of FAQS released by HHS on May 13 and 14. (It may be updated on May 15 or May 16 to note further guidance released over the course of those days.) Two of the FAQs concern the use of section 1311 funding, one dealing with section 1311 funding in state partnership marketplaces and in states with federally facilitated marketplaces, the other addressing the use of such funding in consumer partnership marketplaces. The third FAQ is simply titled “Frequently Asked Questions on Health Insurance Marketplaces,” but primarily deals with enforcement, reporting, and administration requirements. (Since HHS seems irrevocably committed to the unfortunate term “marketplace,” I am going to try to use the term from now on, rather than “exchange,” in these posts.)

Section 1311 of the ACA establishes the marketplaces. It also appropriates an unspecified amount of funding, to be determined by the Secretary of HHS, to make awards to the states as necessary to establish the exchanges. HHS has issued more than $3.5 billion in establishment grants to date. Section 1311 is one of the few uncapped sources of implementation funding available to the agencies, which are otherwise being starved by Congress of necessary ACA appropriations.

New regulatory issuances and guidances are appearing on a daily basis from the federal agencies responsible for implementing the Affordable Care Act. In order to keep up, my posts are likely to appear even more frequently for the immediate future. This post addresses three issuances: an HHS proposed rule on Medicaid disproportionate share hospital payment reductions; an IRS notice of proposed rulemaking on medical loss ratios for Blue Cross and Blue Shield plans that receive certain tax preferences; and a set of frequently asked questions on the Utah SHOP exchange.

Medicaid DSH payments. The Department of Health and Human Services issued a proposed rule for cuts in disproportionate share hospital payments on May 13, 2013. The DSH program has since 1981 provided federal funding to state Medicaid programs to allow those programs to offer additional support to hospitals that serve a disproportionate share of low-income patients with special needs. The Medicaid DSH program, together with a similar Medicare program, has provided essential support to hospitals that have often borne the brunt of providing services to the uninsured.

With the Affordable Care Act’s expansion of coverage of the uninsured through the expanded Medicaid program and premium tax credits and cost-reduction payments, Congress concluded that DSH payments would be less necessary and cut both the Medicaid and Medicare programs. Since 1998, Medicaid DSH payments to each state have been limited to an annual allotment. The ACA requires reductions in these allotments, beginning with $500,000 for 2014 and increasing to $5.6 million for 2019, before dropping to $4 million of 2020. It also lists five factors that HHS must consider in reducing the state allotments. It does not specify, however, how those factors should be applied or weighted. The proposed rule addresses this question.

As Affordable Care Act implementation inexorably moves into place, guidance continues to issue forth from the implementing agencies — now almost on a daily basis — shoring up the edifice that is becoming the reality of health care reform. On May 8, the Department of Labor’s Employee Benefits Security Administration released a guidance detailing the notices that employers must give to their employees concerning the employee’s coverage options under the ACA, as well as an updated model election notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The ACA amends the Fair Labor Standards Act (FLSA) to require employers to give their employees notice of the coverage options that are available to them under the marketplace (formerly known as the exchange).

This provision requires employers to notify new employees, as well as current employees no later than March 1, 2013:
.

1. of the existence of the marketplace, the services it offers, and how employees can contact it;
2. that if the employer’s share of total allowed costs of benefit provided by the benefits plan is less that 60 percent of total costs (that is, it does not meet minimum value requirements), the employee may be eligible for a premium tax credit through the marketplace; and
3. that if the employee obtains coverage through the marketplace, the employee will lose the employer’s contribution and corresponding tax benefits.

The torrent of Affordable Care Act guidance that marked the end of April has continued into May, as the Centers for Medicare and Medicaid Services (CMS) released on May 1, 2013, a Health Insurance Marketplace Guidance on the role of agents, brokers, and web brokers in the health insurance marketplaces, formerly known—and still referred to here—as the exchanges.

Agents and brokers are the traditional channel through which most Americans and their employers have purchased health insurance coverage. The ACA and implementing guidance offer new forms of assistance to help consumers enroll in insurance coverage, including navigators, in-person assisters, enrollment counselors, and the exchange itself with its call center and web portal. Nevertheless, if the exchanges are to fulfill expectations by signing up millions of Americans for health insurance coverage, agents and brokers, including web-based brokers, will pay a vital role. They will play a particularly important role in assisting small employers in signing up for the SHOP exchanges. This guidance describes their role.

Although most of the major rules necessary to implement the 2014 Affordable Care Act reforms are now in proposed or final form, gaps still remain to be filled. On April 30, 2013, the Internal Revenue Service released a notice of proposed rulemaking intended to answer some of the questions that remained open in the wake of May 2012 final regulations implementing the premium tax credit program.

Premium tax credits are not normally available to individuals who are offered health insurance coverage by their employer. Such individuals may, however, be eligible for premium tax credits if the employer coverage does not provide “minimum value” (MV) or if the employer coverage is “unaffordable” An employer that offers a health plan that fails to provide MV or that is unaffordable may also be assessed a penalty if one or more of its employees turns to the exchange for premium tax credits.

The primary focus of the proposed rule is defining the concept of MV, although it addresses several other issues as well. The proposed regulation follows up on an earlier notice requesting comment on MV and complements Health and Human Services regulations published in February of 2013 that also address MV.

So far, late April 2013 has brought little in the way of formal rulemaking under the private insurance reform and Medicaid titles of the Affordable Care Act. The implementing agencies, however, (the Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services (HHS), the Department of Labor, and the Department of Treasury) have been issuing a steady stream of guidance in the form of Frequently Asked Questions (FAQs) illuminating issues that have arisen under both titles.

On April 29, 2013, the agencies issued ACA Implementation FAQs-Set 15 addressing a range of these issue. The first FAQ answers the question of whether a health plan that was granted a waiver from the annual dollar limit prohibition under the “mini-med” waiver program can extend the expiration date of the waiver by changing its plan year (or, in the individual market, policy year) before the expiration of the waiver. Since the 2014 insurance reforms do not take effect until the beginning of the first plan (or policy) year after January 1, 2014, some insurers have been amending their plans or policies to push the expiration date deeper into 2014 and delay the effective date of the 2014 changes. The FAQ clarifies that a plan cannot delay the effective date of the annual dollar limit prohibition through this strategy. When the current waiver expires, an insurer or self-insured plan must eliminate dollar limits (although it can, of course, do so earlier).

Discrimination against providers based on licensure. The second FAQ of Set 15 asks whether regulations can be expected to implement the provision of the ACA prohibiting licensure-status-based discrimination, by non-grandfathered insurers or plans, against health providers acting within their scope of practice under state law. The FAQ states that the provision is self-executing and regulations will not be issued in the near future. Pending further guidance, insurers must implement the provision pursuant to a reasonable, good faith interpretation of the law. The law does not require plans or issuers to accept all types of providers into a network nor does it necessarily require equal provider reimbursement rates, but an insurer cannot refuse, for example, to cover the services of a nurse practitioner or anesthetist simply because he or she is not a medical doctor.

April 2013 has been a quiet month for new Affordable Care Act rules and guidance. Activity to implement the ACA, of course, is moving full speed ahead at the federal level as efforts continue to implement the federal exchange and to gear up for federal enforcement of the market reforms in a number of states. The Centers for Medicare and Medicaid Services (CMS) is in the process of holding stakeholder calls in every state where a federal exchange (now called a “marketplace”) will be established. It is also locating navigator programs, signing up insurers, and preparing for the October 1, 2013 beginning of open enrollment. The states have also been very active, either trying to implement their own state exchanges and the 2014 ACA market reforms or doing everything they can dream up to keep implementation from moving ahead.

Final rules have been issued governing the exchanges, the 2014 market reforms, the premium tax credits, and the premium stabilization programs, while guidance has been issued on the federal exchanges and the navigator program. Final rules on Medicaid eligibility and appeals are expected shortly. A public hearing was held on April 23, 2013 regarding the proposed employer responsibility regulations, while another will be held on May 29, 2013 reviewing proposed individual responsibility regulations. Final rules will follow in due course. In sum, implementation is progressing, although a lot of ground must be covered between now and 2014.

On April 9, 2013, the Centers for Medicare and Medicaid Services of the Department of Health and Human Services announced the availability of $54 million to fund navigator programs in states that have federally facilitated or partnership exchanges. This funding is not available for states that operate their own exchanges, which must pay for their own navigator programs.

Since federal establishment grants cannot be used to fund state navigator programs, it is possible that some states with state exchanges will not have navigator programs up and running until after their exchanges open and begin to generate their own revenue. It is hoped, however, that the gap in these states will be filled by consumer in-person assisters, who can be paid from establishment grants and should become available this year.

Each state will qualify for at least $600,000 in funds, with states with larger uninsured populations qualifying for larger amounts. Texas, for example, will qualify for $8,181.185 in grants; Florida for $5,851,072. Thirteen states will qualify for the minimum $600,000. (Curiously, the list of federal exchanges includes Utah, which earlier received contingent approval to establish a state exchange). If all the funds allocated to any state are not awarded within that state, any remaining funds will be awarded to grant applicants from other states based on their meeting the funding criteria. Applications are due June 7, 2013, and awards will be made on August 15, 2013. Funds will be provided through cooperative agreements rather than grants, the distinction turning on the greater federal programmatic involvement under cooperative agreements.

On April 5, 2013, the Department of Health and Human Services released its final Letter to Issuers on Federally Facilitated and State Partnership Exchanges. This letter lays down guidelines for insurers that will sell qualified health plans on the federal exchanges in 2014. A proposed version of this letter was published for comment on March 1, 2013, which I blogged about here. The final issuer letter tracks the proposed letter with few significant changes. In part because I am supposed to be on vacation in France and in part because of limited access to technology, I am not going to review the issuer letter in depth, but rather refer the reader to my earlier post, providing here only a brief overview of the final letter that highlights the respects in which it differs from the proposed rule discussed in my earlier post.

On April 3, 2013, the Department of Health and Human Services released proposed regulations establishing standards to govern navigators and non-navigator assisters in the federally facilitated exchange as well as clarifying standards on the role of navigators and on who can serve as a navigator in all exchanges.

On Good Friday, March 29, 2013, the Department of Health and Human Services released a final rule regarding increased federal Medicaid percentage changes under the Affordable Care Act for covering adults who are newly eligible under the ACA’s Medicaid expansions. HHS published the original proposed rule on this topic in August of 2011 as part of a larger rule on the ACA’s Medicaid changes. Other parts of this rule dealing with Medicaid eligibility were finalized in March of 2012, but the parts of the proposed rule dealing with federal financial assistance were not included at that time. Because the final rule contains significantly more detail than the proposed rule, HHS is publishing the rule as final, but soliciting further comment on parts of the rule. HHS also released on March 29, 2013, a series of Frequently Asked Questions, explaining its approach to the expansion of Medicaid through the use of Medicaid funds to purchase private insurance for Medicaid recipients in the exchange, the approach that Arkansas and possibly other states are proposing. This FAQ is discussed at the end of this post.

On March 18, 2013, Gary Cohen, the Director of the Office of Consumer Information and Insurance Oversight, stated on a national stakeholder call that most of the final rules needed to implement the Affordable Care Act 2014 insurance reforms are now in place. HHS is now in the final stages of ACA implementation, and it is moving forward.

Cohen, joined by Cindy Mann, Director of the Center for Medicaid and CHIP Services, and Julie Bataille, Director of the Office of Communications, laid out the final steps that must be taken before the exchanges open their doors on October 1. They also introduced two new HHS websites that join HealthCare.gov, the HHS consumer information portal that has been in operation for nearly three years. These are Marketplace.cms.gov, where tools and resources are available to assist those who will help Americans apply, enroll, and get coverage through the exchanges, and the Open Door Forum Page, where the states and other stakeholders can engage with HHS with respect to health care reform. A call center will also go live in June to respond to questions about the 2014 reforms.

While most of the major rules are now out, there are still odds and ends to tidy up. On March 18, 2013, the implementing agencies (Labor, Treasury, and HHS) issued a proposed regulation that will implement ACA’s ninety-day waiting period limitation and make technical amendments to other regulations. The proposed regulation also fixes older regulations implementing the 1996 Health Insurance Portability and Accountability Act, which had limited the use of pre-existing conditions clauses. With a total ban on pre-existing condition clauses effective January 1, 2014, these regulations have become obsolete.

On Marcy 23, 2013, the United States will observe the third anniversary of the Affordable Care Act. On March 15, 2013, the Departments of Health and Human Services, Labor, and Treasury issued a joint technical release extending until January 1, 2106, the time states have to bring their external review procedures into compliance with the National Association of Insurance Commissioner’s External Review Model Act. While this release is not a major event in its own right, its history offers an excellent example of the course that the administration has taken over the past three years as it has implemented the ACA.

Section 2719 of the Affordable Care Act requires non-grandfathered insured health plans to comply with state external review processes that at a minimum conform to the NAIC Uniform External Model Review Act. Insurers in states that have not adopted the NAIC Model Act and self-insured employee health plans must, under section 2719, offer their enrollees an external review process that meets minimum standards established by HHS through Guidance.

The external review process is one of the ACA’s most important consumer protections. Group health plans deny the claims of almost two million plan members each year. Participants and beneficiaries of group health plans covered by the Employee Retirement Income Security Act (ERISA) can sue in federal court to challenge claim denials, while members of nongroup plans can sue in state court. But lawsuits are costly and time-consuming. External review by an independent review organization promises an inexpensive and expeditious alternatives means to obtaining an unbiased review of negative plan decisions.

As I have already noted in several previous posts, March 1, 2103 was a banner day for Affordable Care Act implementation. In the midst of all of the other regulatory issuances publicly released by the implementing agencies on March 1, 2013, one seems to have slipped by particularly quietly. It is entitled “Letter to Issuers on Federally-facilitated and State Partnership Exchanges” and contains the most detailed information to date as to how the federal exchanges are going to work and what they will ask of qualified health plan (QHP) issuers. It is only a proposal, with comments due by March 15, but it is a clear indication of where the Department of Health and Human Services is heading.

Much of the information in this guidance can be found in already-released regulations or guidances, but the level of operational detail found in this letter — including in particular implementation timelines — is unprecedented. It is perhaps the clearest sign to date that the FFE is in fact going to happen, and will arrive on time.

As the title states, this guidance takes the form of a letter to insurance issuers. It covers both the federally facilitated exchanges (FFEs) and state partnership exchanges, which are effectively FFEs in which the states agree to perform certain plan management or consumer-assistance functions. The guidance describes how the FFE will work, but also notes areas where partnership states have discretion to follow a different approach. The policies described in the letter apply for 2014. HHS promises similar letters covering operational updates on an annual basis going forward.

On March 1, 2013, the Department of Health and Human Services released its final Notice of Benefit and Payment Parameters for 2014 rule. The rule addresses a grab bag of issues: the risk-adjustment, reinsurance, and risk-corridors premium stabilization programs; advance payments of the premium tax credit; cost-sharing reductions; user fees for Federally-facilitated Exchanges; participation in the Federally-facilitated Small Business Health Option Program; and changes in the medical loss ratio program. There will presumably be a benefit and payment parameters rule for each future year that the Affordable Care Act remains in place, but this final rule establishes policy not only for 2014 but for the future well beyond 2014.

HHS also released on March 1 an interim final amendment to the benefit and payment parameters final rule, authorizing alternative approaches to the risk-corridor and cost-sharing reduction payment methodologies adopted in the final rule. These changes had been suggested in comments on the proposed benefit and payment parameters rule and are significant enough that HHS is seeking further comment on them, but they will go into effect along with the final rule.

The final rule versus the proposed rule. This is the longest (483 pages) and by far the most complex rule yet issued by HHS for implementing the ACA insurance reforms. Much of the preamble is taken up with a highly technical discussion of the methodologies applied by the risk-adjustment, reinsurance, and cost-sharing reduction programs that will hold little interest for, and indeed may not be comprehensible to, a general audience. My post on the proposed rule explored these methodologies in some detail. The methodologies were adopted with only technical amendments, and will not be discussed in as much detail here.

Perhaps the most controversial issue raised by the entire health reform debate in the fall and winter of 2009 to 2010 was whether the final legislation would include a “public plan.” In part, the issue was whether or not Americans would be denied the choice of purchasing health insurance from the government rather than from private insurers, but in part the issue was simply one of increasing competition and ensuring choice in insurance markets that often offer few private insurer choices and are essentially noncompetitive.

Although the final legislation did not include a public option, it did contain two provisions to increase competition and choice in local market, one creating a consumer cooperative program and the other creating multi-state plans.The multi-state plan program (MSPP) provision of the ACA requires the Office of Personnel Management (OPM), which operates the Federal Employee Health Benefits Program (FEHBP), to contract with at least two insurers (one of which must be non-profit) to offer health plans in every state in the country.

Although the ACA specifies that plans that meet OPM requirements must be certified as qualified health plans in every exchange in which they are available, the ACA also contains a level-playing field requirement; this provides that, if multi-state plans are not required to abide by certain federal or state law requirements, no other insurance plan will be bound by those requirements, either. OPM has faced a difficult task, therefore: creating a program that will offer enough regulatory advantages to attract participation by private plans on the one hand, but that will also not undermine the regulatory authority of the states on the other.

A proposed rule to this end was published earlier and analyzed here. On March 1, 2013, OPM released the final MSPP rule.

The final days of February and the first day of March 2013 have seen a landslide of new Affordable Care Act implementation issuances. Perhaps the agencies decided to get all of their work done before sequester furloughs begin, or perhaps they have awakened to the sober realization that a lot of details need to be worked out before January 1, 2014. In any event, they have given us over 700 pages of regulatory and guidance material to dig through.

On March 1, 2013, the Department of Health and Human Services issued a final rule setting out the benefit and payment parameters that will be used for the risk-adjustment, reinsurance, and risk-corridor programs; cost-sharing reductions; user fees for the federal exchanges; advance premium tax credit payments; the federal exchange; and the medical-loss ratio program. HHS also issued an interim final rule adjusting final risk-corridor calculations and offering qualified health plans an alternative methodology for calculating cost-sharing reductions.

A third HHS issuance is a proposed rule amending existing Small Business Health Options Program (SHOP) regulations. Finally, on February 27, HHS published a Federal Marketplace Progress Fact Sheet offering a few more details about the federal exchange (now called the marketplace). A particularly useful feature of this fact sheet is a timeline for implementation of the federal exchange.

The time is quickly approaching when health insurers must file the rates and forms they will need to put in place for 2014. The Department of Health and Human Services is rapidly releasing the final rules that insurers will need to determine the coverage and price of those plans, and that the states and exchanges will need to approve or disapprove them. On February 22, 2013, HHS released the final market reform regulations, which establish the ground rules under which insurers will market their products in the reformed health insurance market. (The fact sheet is here.)

Whereas health insurance underwriting in the individual and small group market is currently based heavily on health status and gender, health insurers in the reformed market will only be able to consider age, tobacco use, geographic area, and family unit size in setting premiums. Insurers will also have to guarantee the availability and renewability of coverage. Proposed rules implementing these reforms were published on November 26, 2012 and were covered by this blog. This post discusses the final version of these rules.

On February 22, 2014, the Department of Labor also issued interim final regulations on procedures for addressing complaints by employees that they have suffered retaliation from their employers because they reported violations of the ACA’s consumer protections, or because they have received advance premium tax credits. (See the press release here.)

The march toward 2014 continues, as the Department of Health and Human Services issued on February 20, 2013 a final regulation covering the essential health benefits, actuarial value, and accreditation requirements of the Affordable Care Act. (See a fact sheet on the rule here.)

The ACA requires non-grandfathered health plans in the individual and small group market to cover ten categories of essential health benefits (EHBs). The EHB requirement is intended both to ensure that consumers in these markets have adequate coverage and to improve competition among health plans by standardizing coverage choices. Most of the EHBs are services already covered by most health plans, such as hospitalization or pharmaceuticals, but some, such as habilitative services or pediatric oral and dental care, are not commonly covered and thus represent a coverage expansion. The EHB requirement will also improve mental health coverage in the individual and small group market, as noted in a separate issue brief released with the final rule.

The proposed regulation now finalized was published on November 26, 2012, and was discussed in an earlier post.

Although we seem to be in a relatively quiet period between the issuance of a host of proposed 2014 reform regulations and their reappearance in final form, HHS continues to issue subregulatory guidance on a regular basis. (The quiet may not last long — the final 2014 market reform rule is at the Office of Management and Budget and is expected to be published shortly.) On February 6, 2013, HHS issued two guidance documents worthy of note.

The first is a “Notice to Establish a New System of Records” to support the Affordable Care Act’s health insurance exchange system. The Privacy Act requires federal agencies that create a new record system to issue a notice that specifies the categories of persons covered by the system; the categories of records the system will contain; the legal authority for maintaining the system; the system’s purpose; the routine uses of the records, including specification of entities that may receive disclosures under routine use; and policies and practices for storing, retrieving, safeguarding, accessing, retaining, and disposing of records in the system. The Notice covers these issues for records that will be created, used, and maintained by the health insurance exchange program. It includes procedures that individuals can follow for identifying, accessing and contesting records about themselves. There is little new in the notice, but it provides a comprehensive overview of the information that exchanges will collect and who will have access to it.

The second issuance,”Questions and Answers: Medicaid and the Affordable Care Act,” seems more immediately consequential. The headline is that the ACA’s Basic Health Program will not become operational until 2015. The Basic Health Program offers states the option of using federal premium tax subsidy dollars — which would otherwise be available to households with incomes between 139 and 200 percent of the federal poverty level — to reduce the cost of health insurance for this population and to ensure greater continuity of care for individuals who “churn” between Medicaid and premium tax credit coverage. Although some states had indicated interest in the Basic Health Care Program, HHS has yet to issue regulations governing the program and getting the program up and running by January 1, 2014 is probably no longer possible. In the FAQ, HHS promises to get rules out for comment in 2013 and final rules in 2014 for implementation beginning in 2015.