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Implementing Health Reform: What Makes A State Exchange? (Updated)


July 28th, 2014

One question that has arisen in the wake of the Halbig/King decisions is what exactly is a state exchange? The D.C. Circuit in Halbig and the Fourth Circuit in King seemed unclear as to the answer to this question. The D.C. Circuit counted 14 state exchanges, the Fourth Circuit 16.

A great deal, however, may turn on the answer. Two of the eight federal judges that have ruled on the question so far have held that only state exchanges and not federally facilitated exchanges can issue premium tax credits. Were this conclusion to be adopted in the end by the Supreme Court, which exchanges would count? In other words, how exactly does a state establish an exchange?

A careful reading of the law suggests that a state “establishes” an exchange when, exercising the legal powers of the executive or legislative branch, the state government takes certain actions, discussed below. Establishing the exchange – that is, using the power of state government to enable the exchange to operate and fulfill its responsibilities – is different from the carrying out the day-to-day operations, of the exchange, which might be carried out by public officials, private contractors, or even the federal government.

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Implementing Health Reform: IRS Releases Premium Tax Credit Rules And Draft Forms


July 25th, 2014

Although the focus of activity the week of July 21 was in the courts, the agencies were not totally silent. On July 24, 2014 the Internal Revenue Service released final and temporary and proposed regulations addressing issues that are presented by the premium tax credit program. The IRS also released drafts of the forms that individuals, insurers, and employers will use for reporting information to the IRS necessary for reconciliation of premium tax credits and for the enforcement of the individual and employer mandate programs. Finally, the IRS set the maximum individual mandate penalty for individuals whose income is high enough that they pay the penalty as a percentage of income rather than a flat dollar amount. This amount is established by the statute as the average cost of a bronze level plan for the applicable family size for 2014 and was set by the IRS at $2,448 per individual annually, up to $12,240 for families of five or more.

The draft forms operationalize the reporting requirements established by rules published earlier. Insurers and self-insured health plans will provide a Form 1095-B to each of their enrollees and members, and file these forms, together with a transmittal form 1094-B with the IRS. Large employers must provide a form 1095-C to each employee, and transmit these, together with a transmittal form 1095-B to the IRS. Exchanges will provide their enrollees a form 1095-A. Individuals who receive premium tax credits will file a form 8962 with the IRS, while individuals claiming an exemption from the individual mandate will file a form 8965. Though the forms are not accompanied by instructions, they are quite straightforward and track closely the earlier released rules.

The final and temporary rules address several situations that will arise under the premium tax credit program that have not yet been addressed by the premium tax credit rules. The temporary rules are identical to the proposed rules and will cease to apply once the proposed rules are finalized.

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Implementing Health Reform: Senator Rebuffed In Challenge To Congressional Participation In ACA Exchanges


July 23rd, 2014

The Halbig and King cases released on July 22, 2014 dramatically overshadowed another court decision released the previous day. That case, Johnson v. U.S. Office of Personnel Management, was important in its own right, however, and is covered here.

On July 21, 2014, Judge William C. Griesbach of the United States District Court for the Eastern District of Wisconsin dismissed a case brought by Wisconsin Republican Senator Ron Johnson and one of his staff members. The plaintiffs claimed that the rule promulgated by the Office of Personnel Management that allows members of Congress and their official staff to purchase health insurance through the exchanges with federal subsidies violates the Affordable Care Act and is unconstitutional. Judge Griesbach held that the plaintiffs had not been injured by the rule and thus had no standing to challenge it. This decision not only disposes of one more ACA challenge, it also calls further into question Congressman John Boehner’s proposed lawsuit challenging other ACA implementation decisions.

The ACA provides that “the only health plans that the Federal Government may make available to Members of Congress and congressional staff” are qualified health plans and plans sold through the exchange. This provision was adopted as an amendment offered by Senator Charles Grassley (R-IA), apparently to challenge the Democrats’ willingness to participate in the same program they were creating for other Americans. This challenge was embraced by the Democrats, however, resulting in the current law.

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Implementing Health Reform: Appellate Decisions Split On Tax Credits In ACA Federal Exchange


July 23rd, 2014

July 22, 2014 was arguably the most important day in the history of the implementation of the Affordable Care Act since the Supreme Court issued its ruling in the National Federation of Independent Business case in June of 2012. As no doubt most readers of this blog know by now, shortly after 10 a.m. the United States Court of Appeals for the District of Columbia Circuit handed down its decision in Halbig v. Burwell. Two judges ruled over a strong dissent that an Internal Revenue Service rule allowing federally facilitated exchanges to issue premium tax credits to low and moderate income Americans is invalid.

Approximately two hours later the Fourth Circuit Court of Appeals in Richmond, Virginia, unanimously upheld the IRS rule in King v. Burwell. Combined, the cases contain five judicial opinions, three in the Halbig case and two in King. Four of the six judges voted to uphold the rule, two to strike it down.

The Controversy

The issue in the cases is this: The ACA authorizes the IRS to provide premium tax credits to individuals with household incomes between 100 and 400 percent of the federal poverty level who are not eligible for other minimum essential coverage (such as affordable and adequate employer coverage, Medicaid, or Medicare). Premium tax credits are, however, only available to individuals who purchase coverage through the exchanges.

The ACA requests that the states establish exchanges, and sixteen states and the District of Columbia have done so. The ACA also, however, authorizes the federal government to establish exchanges in states that fail to set up their own exchanges. The federal government has done so in 34 states and is operating the individual exchange for two more. The IRS regulation allows premium tax credits to be awarded to eligible individuals in both states with state-operated exchanges and states with federal exchanges.

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Health Policy Brief Updates


July 22nd, 2014

In the first half of 2014 Health Affairs has released seven new Health Policy Briefs and also has provided updates of five previously released briefs, in order to reflect continuously changing and evolving health policy issues and perspectives.

The following Health Policy Briefs were updated in 2014:

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Implementing Health Reform: Hobby Lobby Response, The ACA In The Territories, And More


July 18th, 2014

July 17, 2014 was a remarkably active day in an otherwise quiet week for Affordable Care Act implementation. First, the Departments of Labor, Treasury, and Health and Human Services issued their first response to the Supreme Court’s Hobby Lobby decision —a Frequently Asked Question (FAQ) guidance requiring ERISA plans to provide notice to their participants and beneficiaries if they do not intend to cover contraceptives. Second, the Department of Health and Human Services sent letters to the territories (the Virgin Islands, Northern Mariana Islands, Guam, American Samoa, and Puerto Rico) informing them that insurers that market individual insurance policies in the territories are no longer required to comply with the ACA’s insurance market reforms.

Third, HHS released an enrollment bulletin at its REGTAP website describing how insurers in the federally facilitated exchange should handle enrollment for 2015 for individuals whose coverage was terminated in 2014 for non-payment. This post describes these issuances, as well as the May Medicaid enrollment report released on July 11, 2014 by HHS

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The Medicaid Boom And State Budgets: How Federal Waivers Are Advancing State Flexibility


July 18th, 2014

Note: The authors would like to thank Erica Socker, Senior Research Associate, and Michelle Shaljian, Associate Director of Communications, for their review and editorial assistance.

According to data released by the Department of Health and Human Services, one in five Americans now receive their health insurance through a state Medicaid program. Despite this increase in enrollment, it is estimated that 6 million Americans will likely remain uninsured because 20 states have decided not to expand Medicaid as the Affordable Care Act (ACA) envisioned. There are at least four states that are considering expanding Medicaid but have yet to do so.

Medicaid expansion continues to be one of the most politically charged directives of the health care law, mainly because the Supreme Court decision left the choice to states. This decision has generated an ongoing debate about whether and how states should expand their Medicaid programs. For example, an intense debate has been underway in Virginia, over the decision to include Medicaid expansion in the state budget; putting Democratic Governor Terry McAuliffe at odds with the Republican State Legislature. Similar debates are occurring in states across the country, and are further complicated by states’ option to pursue alternative expansion approaches under a Medicaid waiver. For states that have not yet expanded the program, the success of these alternative expansion models may influence whether they can find a politically feasible path forward.

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ACO Results And Treating Hepatitis C Most-Read Health Affairs Blog Posts For June


July 15th, 2014

In June, Matthew Petersen and David Muhlestein’s post on the cost and quality implications of the accountable care organization (ACO) model on the health care system was the most-read Health Affairs Blog post. Not too far behind was a post on Medicare’s role in treating Hepatitis C from Tricia Neuman, Jack Hoadley, and Juliette Cubanski.

Next was Tim Jost’s examination of the employer mandate and why it should be repealed and replaced, followed by Jon Gabel’s response to a Health Affairs Web First on cancelled non-group plans.

Here’s the full list:

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Income Verification On The Exchanges: The Broader Policy Picture


July 14th, 2014

The Affordable Care Act scandal de jour (or at least one of them) is the difficulty the exchanges have faced in verifying the eligibility of many premium tax credit applicants. Two Department of Health and Human Services Office of Inspector General Reports in early July documented the existence of these problems. One reported that as of the first quarter of 2014, the federal exchange alone had been unable to resolve 2.6 or 2.9 million data inconsistencies. Another reported that internal controls at the federal and two state exchanges were not fully effective in ensuring that individuals enrolled in exchanges were in fact eligible.

House Republicans claim that in fact there are 4 million data inconsistencies affecting half of all enrollments. In House Energy and Commerce hearings on June 10, 2014, Republican Representative Charles Bustany Jr. claimed that $44 billion in improper payments would be made over the next 10 years. Douglas Holtz-Eakin, a former Bush Administration official, who testified at the hearings claims that improper payments may equal $152 billion. The House Energy and Commerce Health Subcommittee is holding further hearings on data inconsistencies on July 16.

The seriousness of verification issues should not be overestimated. The administration has been put in place procedures to verify carefully premium tax credit applications. Many of the discrepancies CMS is attempting to resolve do not relate to income eligibility, and those that do may result ultimately in a finding of eligibility for increased, rather than decreased, premium tax credits. A discrepancy that could result in the need for additional documentation may be as trivial as a hyphen left out of a name or a digit transposed on a Social Security number.

Unfortunately, programs proposed by Republicans and other ACA opponents that in fact make a serious attempt to cover the uninsured will require income reporting and face similar difficulties. Current reform proposals that avoid coverage eligibility determinations will not in fact cover the uninsured. While the administration could have perhaps done a better job in making eligibility determinations, any means-tested program faces a similar challenge. It is possible to design a system that does not rely on means testing and could cover low-income and high-cost uninsured Americans, as I describe below. But it would be a very different system than the ACA or alternatives currently being proposed.

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ACAView: New Findings On The Effect Of Coverage Expansion Since January 2014


July 9th, 2014

Editor’s note: In addition to Josh Gray, Iyue Sung also coauthored this post. 

Together, athenahealth and the Robert Wood Johnson Foundation (RWJF) have undertaken a new joint venture called ACAView, as part of the foundation’s Reform by the Numbers project, a source for timely and unique data on the impact of health reform.

The goal of ACAView is to provide current, non-partisan measurement and analysis on how coverage expansion under the Affordable Care Act (ACA) is affecting the day-to-day practice of medicine. athenahealth provides a single-instance, cloud-based software platform to a national provider base.

Any information that our clients enter using our software is immediately aggregated into centrally hosted databases, providing us with timely visibility into patient characteristics, clinical activities, and practice economics at medical groups around the country.

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Implementing Health Reform: Exchange Eligibility Redeterminations; Small Employer Tax Credit


June 27th, 2014

While it seems like the 2014 open enrollment period just ended, the 2015 open enrollment period, which begins on November 15, is in fact only four and a half months away. On June 26, 2014, the Department of Health and Human Services released a proposed rule addressing eligibility redeterminations for 2015. Together with the proposed rule, HHS issued a guidance describing how the federally facilitated exchange intends to redetermine eligibility, as well as draft standard notices for health plans to use when discontinuing or renewing plans in the individual and small group market and instructions for completing those notices.

On the same date, the Internal Revenue Service released final rules governing the small employer tax credit program. This post will discuss these rules and guidances, as well as another court decision rejecting a challenge to the individual mandate and another spate of FAQs on the SHOP exchange program.

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New Health Policy Brief: Risk Corridors


June 26th, 2014

The latest Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) describes the Affordable Care Act’s premium stabilization programs that encourage insurers to participate in the exchanges by eliminating some unpredictability around newly insured enrollees.

The ACA created health insurance Marketplaces and premium subsidies to make insurance more affordable, and the ACA completely changed the way insurance is priced and sold in the individual market. As of 2014, insurers (both those participating in the exchanges and those selling on the individual market outside the exchange) face a number of new restrictions.

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Do Insurance Marketplace Consumers Need More Doctor Choices In-Network, Or Just Better Information?


June 26th, 2014

Media outlets have focused extensively on consumer complaints about “limited networks” and not being able to find a doctor under qualified health plans (QHPs) offered through the Health Insurance Marketplaces (HIMs). In response, the Obama administration released new standards which will require all QHPs to contract with a larger proportion of essential community providers within its service area. This means that health plans will be forced to accept more health care providers within their network, which may potentially increase costs for consumers.

At the heart of the recent changes lies a fundamental question worth exploring: Is consumer satisfaction with, and perceptions of health plan “network adequacy” grounded in the number of choices for doctors within network, or is it something different?

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Health Affairs Web First: Shifting Open Enrollment Could Increase Participation


June 25th, 2014

On November 15, state and federal health Marketplaces will open their portals and phone lines for the 2015 open enrollment season, which runs through next February 15. While the end of the year is traditionally “open season” for health insurance, a new study being released today as a Web First by Health Affairs, recommends shifting open enrollment to the period between February 15 and April 15.

The suggestion from authors John Graves, Harvard School of Public Health and Katherine Swartz, Vanderbilt University’s School of Medicine, is based on insights from psychology and behavioral economics, which indicate that people make better decisions when they are not stressed by financial worries — as they often are during the end-of-year holiday season.

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Behind The Numbers: Slight Rise In Health Care Spending Growth Projected


June 24th, 2014

PwC’s Health Research Institute (HRI) released its ninth annual Medical Cost Trend: Behind the Numbers report today. This forward-looking report is based on interviews with industry executives, health policy experts, and health plan actuaries whose companies cover a combined 93 million members. Findings from PwC’s Health and Well-being Touchstone Survey of 1,200 employers from 35 industries are also included.

HRI projects that after a five-year contraction in spending growth in the employer-sponsored market, the growth rate will rise to 6.8 percent in 2015, up from the 6.5 percent projected last year.

What are the biggest drivers of the growth in health care costs? We identify four cost inflators in this report, and I would like to highlight two. First, the economy. More than five years after the end of the Great Recession, the improved economy is finally translating into greater medical spending. Consumers are now addressing health issues they ignored or postponed previously.

Secondly, the high cost of specialty drugs. While only four percent of patients use specialty drugs, those medications account for 25 percent of total U.S. drug spending. And estimates are that U.S. specialty drug spending will quadruple by 2020

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Implementing Health Reform: Employer Orientation Periods; Risk Corridor Payments


June 21st, 2014

It has long been apparent to those of us who follow Affordable Care Act regulatory activity that the implementing agencies have a penchant for releasing rules on Friday afternoons in the 4:15 Federal Register post. True to form, at 4:15 on June 20, the Departments of Labor, Treasury, and Health and Human Services released a final rule clarifying the effect of orientation periods on a provision of the ACA that prohibits employer-sponsored health plans from imposing a waiting period of more than 90 days before the beginning of coverage for full-time employees.

Section 2708 of the Public Health Services Act, enacted through the ACA, forbids group health plans and insurers that cover groups from imposing waiting periods on new enrollees that exceed 90 days. The provision, enforced by all three agencies, is incorporated by the ACA into ERISA and the Internal Revenue Code and thus applies to all employers; it does not apply to individual plans. The agencies had released a guidance on waiting periods in 2012 and and published a final rule in 2014 The penalty for violating this prohibition is $100 per employee per day of violation.

The earlier final rule clarified that a “waiting period” is the period that may elapse before an employer must cover an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan. To be otherwise eligible to enroll the employee must meet the plan’s substantive eligibility conditions (for example, being in an eligible job classification, achieving job-related licensure requirements specified in the plan’s terms, or being a full-time employee), but such requirements cannot be mere subterfuges for the passage of time. One such legitimate requirement specified in the final rule is completing a reasonable and bona fide employment-based orientation period.

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This Is Not Your Mother’s Payment Model: Reflections On The APM Pilot


June 18th, 2014

Editor’s note: This post is part of a periodic Health Affairs Blog series, which will run over the next year, looking at payment and delivery reforms in Arkansas and Oregon. The posts will be based on evaluations of these reforms performed with the support of the Robert Wood Johnson Foundation.

In early 1994, as I went about finding a practice to join after residency, every physician with whom I spoke discussed managed care at length. As a young family physician dedicated to prevention and early intervention, I was convinced that managed care answered many of the historical challenges faced by primary care physicians. At last we’d be able to pay for the social workers who could facilitate important mental health care and human services for our patients and for the group nutrition classes we wanted to run in our practices.

Yet just four years later, as I left private practice to return to academic medicine, managed care was virtually dead. All its promise had been undermined by a range of structural and environmental challenges.

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Implementing Health Reform: Premiums And Choice In The 2014 Health Insurance Marketplace (Updated)


June 18th, 2014

In the fall of 2013 the headlines were full of stories of individuals facing steep premium increases as the Affordable Care Act’s market reforms went into effect. The question was raised repeatedly whether Affordable Care Act premiums were really affordable. Commentators observed that major national commercial insurers were avoiding the exchanges and that in some states the ACA marketplace offered few choices and little competition.

On June 17, 2014, the Health and Human Services Assistant Secretary for Planning and Evaluation (ASPE) released a report surveying Premium Affordability, Competition, and Choice in the Health Insurance Marketplace, 2014. ASPE examined over 19,000 2014 marketplace plans within the four bronze, silver, gold, and platinum metal levels in each of the 501 geographic rating areas in the 50 states and the District of Columbia; the office analyzed premium levels, available choices, and market variables that might affect cost. It is always possible to find negative anecdotes (particularly if one is not too careful in checking their veracity), but when we look beyond anecdotes at the actual data, it is clear that the ACA was largely successful in achieving many of its goals for 2014.

One of the primary goals of the ACA is to make health insurance affordable to lower-income Americans. During the 2014 open enrollment period, 5.4 million individuals selected a plan in the 36 states served by the federal exchange (which are the states primarily covered by the report since state exchange data is still being assembled and analyzed). According to the report, 87 percent of these individuals qualified for a premium tax credit. They paid a premium that was, on average, 76 percent less than the full premium that they would have owed before the premium tax credit was applied.

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Cancelled Non-Group Plans: What We Know Now That We Did Not Know In October


June 17th, 2014

In October of 2013 President Obama faced a political firestorm over the cancellation of millions of individual insurance plans — plans not compliant with the requirements of the Affordable Care Act (ACA). The Associated Press (AP) estimated that 4.8 million persons with non-group coverage had their policies cancelled, and this estimate was widely quoted in the media and the Congress. In headline stories, the media also reported that policyholders of the canceled plans were now offered alternative plans, often at premiums more than double of their current plans.

When the controversy over cancelled policies broke, no surveys were available to estimate the number and the cost of cancelled policies. In October, HealthCare.gov and many state-based marketplace websites were virtually non-functional, so assessing comparative cost and benefits of cancelled and Marketplace plans largely was precluded. In this post I highlight information from subsequent surveys and analyses conducted in late 2013 and 2014 that measure the number of cancelled plans and the comparative cost of coverage in the pre-ACA and post ACA-Markets. The next two paragraphs summarize findings.

Recent survey data indicates the number of persons affected by cancelled policies was about 1.9 million persons, less than the often cited 4.8 million estimate. When persons with group health insurance are included in the denominator, these cancellations affected less than one percent of persons holding comprehensive private insurance. The number of people with non-group policies who became uninsured following last October’s cancellation of policies is similar to what occurs in the normal churn of the non-group market.

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How Much Market Power Do Hospital Systems Have?


June 12th, 2014

Sometimes big game hunters find frustration when their prey moves by the time they’ve lined up to blast it. That certainly appears to be the case with the health policy target de jour: whether providers, hospital systems in particular, exert too much market power. A recent cluster of papers in Health Affairs and policy conferences this spring have targeted the question of whether hospital mergers have contributed to inflation in health costs, and what to do about them.

Hospitals’ market power appears to be one of those frustrating moving targets. The past eighteen months have seen a spate of hospital industry layoffs by market-leading institutions, and also a string of terrible earnings releases from some of the most powerful hospital systems and “integrated delivery networks” in the country. These mediocre operating results raise questions about how much market power big hospital systems and IDNs do, in fact, exert.

The two systems everyone points to as poster children for excessive market power-California-based Sutter Health and Boston’s Partners Healthcare, both released abysmal operating results in April. Mighty Partners reported a paltry $3 million in operating income on $2.7 billion in revenues in their second (winter) quarter of FY14. Partners cited a 4.5 percent reduction in admissions and a 1.6 percent decline in outpatient visits as main drivers. Captive health insurance losses dragged down Partners’ patient care results.

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