Health Care Reform: Eye on Implementation

Regular updates from Aetna on the implementation of health care reform.


Seizing Opportunities to Help Shape ACA Regulations
While the debate over the efficacy and constitutionality of the Affordable Care Act (ACA) persists, Aetna’s work related to ACA implementation and compliance continues. Eye on Implementation features a number of examples of Aetna’s efforts to provide helpful feedback to government agencies overseeing the process.

Fate of Affordable Care Act in Supreme Court’s Hands

For three days in late March, the Affordable Care Act (ACA) took center stage in Washington as the U.S. Supreme Court heard arguments on the constitutionality of the law. Justices fired off question after question on the most contentious aspects of the case, fueling much speculation about the outcome. The justices have since held deliberations on the case, but written opinions are not likely to emerge until close to the end of the current term in June.

The arguments and questions, however interesting, do not provide a clear road map. It seems likely that the court will rule promptly on the constitutionality of the law, but the future of the individual mandate, as well as the requirements linked to the mandate and Medicaid expansion, remains unclear.

Lawsuits challenging the constitutionality of the law were filed by 26 states and various private organizations beginning in 2010 and have resulted in differing verdicts at the District and Appellate Court levels. During its hearing in March, the Supreme Court focused on several key questions stemming from the suits: Is the penalty for not purchasing insurance a tax that can’t be challenged before it is effective? This question pertains to the individual mandate, which takes effect in 2014. Can all Americans be required by the federal government to purchase health insurance or pay a penalty? Can the coverage mandate be separated from the rest of the law? Can states be required to expand Medicaid eligibility within their states in order to continue receiving federal funding?

HHS Issues Final Rules Implementing the ‘Three Rs’

In March, the Department of Health and Human Services (HHS) issued final rules implementing the ACA’s premium risk mitigation programs, which include risk adjustment, reinsurance and risk corridor programs (the three Rs). Effective in 2014, these programs are designed to shift funds from plans with the lowest risk individuals to plans that attract the highest risk individuals. The goal is to help mitigate the potential impact of adverse selection and promote premium stability in the individual and small group markets.

If a state does not establish its own risk adjustment program, HHS will establish the program and perform the risk adjustment functions for that state.

A federally-developed risk adjustment methodology will be proposed in the fall of 2012 and published in the Federal Register with a comment period.  States operating risk adjustment programs may propose an alternative methodology for approval by HHS. The final rule is designed to afford states flexibility in how they collect data for risk adjustment.

Final Rule for Student Health  Plans is Set

HHS has issued a final rule for student health plans that, for the most part, incorporates the provisions of the proposed rule issued on February 11, 2011. For student plans taking effect on or after July 1, 2012 but before September 23, 2012, the final rules prohibit the imposition of lifetime limits, restrict annual limits to no less than $100,000, require preventive care coverage with no cost sharing, and prohibit pre-existing condition limitations on those younger than 19. The key provisions of the final rule include:

  • The phase-in for full compliance with restricted annual limits has been revised to $100,000 for plan years from July 1, 2012 to Sept. 23, 2012, $500,000 for plan years on or after Sept. 23, 2012, and no limit for plan years as of January 1, 2014.
  • For the 2013 calendar year, the application of medical loss ratio (MLR) requirements will use a modification similar to that for limited benefit “mini-med” plans and ex-patriot plans, which adjust for unusual expense and premium structure.  For subsequent years MLR will be measured using national aggregation of the student business only with no adjustment factor.
  • Student plans may coordinate required preventive services with student health centers and may designate providers as in-network.
  • Plans must disclose to students coverage that does not meet annual limit requirements, and they must notify students that they may be eligible for coverage as a dependent if they are under age 26.

The rule also provides that non-profit colleges or universities with religious objections to covering contraceptive services will be subject to the same one-year enforcement safe harbor applicable to employers and their group health plans.

Medicaid  Eligibility Rules Implemented

The Centers for Medicare and Medicaid Services (CMS) in March issued final rules implementing changes to Medicaid eligibility under the ACA. Three key issues affected by the changes made to the proposed rules include:

  • Individuals whose financial eligibility for Medicaid is determined by modified adjusted gross income are to be renewed once every 12 months and no more frequently than once a year. Other individuals must be re-determined at least once every 12 months.
  • Individuals with disabilities or who are in need of long-term services who have incomes that would otherwise entitle them to Medicaid benefits may enroll in an existing Medicaid eligibility category pending review of their eligibility for special Medicaid programs.
  • With regard to individuals losing their Medicaid eligibility, the final rule allows individuals to enroll in an exchange plan, regardless of what point in the prior month they were terminated. The final Medicaid eligibility rule essentially rescinds a requirement that states provide Medicaid coverage until the end of the month in such cases. CMS notes, however, that states are encouraged to fill the gap by providing coverage through the end of the month in which an individual is terminated from coverage.

Advanced Proposed Rules Announced for Coverage of Contraceptives

The Departments of Labor, Treasury and HHS have announced an advanced notice of proposed rulemaking that proposes changes to the ACA’s preventive-service coverage requirements affecting objecting religious organizations.  The notice outlines a series of alternative ways to provide contraception directly to participants and beneficiaries of the plan when health coverage is sponsored or arranged by a religious organization that objects to the contraceptive coverage requirement and is not exempt under the final regulations published on February 15, 2012. The separate contraceptive coverage would be provided without cost-sharing and premium.

Released in March, the notice seeks comments on how to pay for contraceptive coverage in situations where religious organizations are not required to provide the coverage themselves. The comment period ends June 19, 2012.

Options under consideration include having third-party administrators separately arrange for contraceptive coverage. The Departments are considering having the Office of Personnel Management identify a private insurer to provide the coverage. Another option under consideration would have the TPA receive a credit or rebate on the amount that it pays under the reinsurance program in order to fund contraceptive coverage under a religious organization’s self-insured plan.

Aetna Submits Recommendations Concerning Essential Health Benefits Bulletin

Aetna has submitted a letter to the U.S. Department of Health and Human Services (HHS) that notes concerns over the essential health benefits (EHB) bulletin released December 16, 2011. The bulletin provides a clearer picture of how HHS intends to approach the high-profile challenge of defining essential health benefits under the ACA, which will likely have a significant impact on the cost and quality of health care under the ACA – particularly in the individual and small group markets.

On February 23, 2012, Aetna submitted a letter expressing its support for certain parts of the HHS bulletin, including the flexibility of the outlined approach in allowing plan issuers to offer plans comparable to but not necessarily identical to a prescribed EHB package. But Aetna also notes concerns in three important respects:

  • Affordability: The suggested EHB approach could put access to affordable care beyond the reach of many.  Aetna recommends states be directed to carve out of EHBs any state-mandated benefits not otherwise included in the ACA’s statutory list of 10 benefit categories. Aetna also recommends states be required to draw benchmarks from a more representative and affordable selection of plans, rather than using plans offered to state or federal employees, which are typically much more expensive.
  • Simplicity: Larger employers or multi-state employers will be squeezed if HHS delegates the definition of EHBs to the states rather than establishing nationally consistent standards. This approach further decreases standardization because of state nuances and adds risk by worsening the health care system’s current complexity, Aetna recommends that large employers be allowed to apply a consistent nationwide approach to annual limits because an EHB definition that varies by state is unworkable for large employers who would have to vary their benefit design on a state-by-state basis.
  • Competition: For health care reform to be a success, consumers will need to see a larger selection of insurers and coverage options than they have today. Transferring EHB determinations to the states will increase the challenges faced by plan issuers and the states and could drive some issuers out of the market. Many health plans simply may not have time enough to design, file, market and otherwise prepare products for Jan. 1 2014 launch unless adequate implementation time is assured. Aetna projects it needs to know the expected EHBs no later than July 1, 2012 to be ready for October 1, 2013.

A CCIIO bulletin released in December indicated that states would play a key role in determining EHBs in their respective states. The ACA spells out 10 categories of care (emergency care, hospitalization, maternity care, etc.) that must be included as essential benefits, but other essential benefits may be determined by the states based on the coverage offered through an existing “benchmark” health plan. States will be able to choose a benchmark health plan from among the following:

  • The largest plan by enrollment in any of the three largest small group insurance products in the state’s small group market
  • Any of the largest three state employee  health benefit plans by enrollment
  • Any of the largest three FEHBP plan options by enrollment
  • The largest insured commercial non-Medicaid HMO operating in the state

Additional guidance released on January 25 complements the December bulletin by providing an illustrative list of the largest three small group products in each state ranked by enrollment as well as the three largest FEHBP plan options.

As of 2014, non-grandfathered plans must offer benefits deemed essential in order to be qualified to offer consumers and small businesses coverage through state and regional health insurance exchanges under the law. HHS is still collecting and reviewing public comments on the essential benefits bulletin and is expected to release final regulations later this year.

The Essential Health Benefits Coalition has launched a website located at http://ehbcoalition.org related to the development of an essential health benefits package.  The Essential Health Benefits Coalition is a broad-based organization representing large and small employers, pharmacy benefit managers and health plans that is committed to the adoption of an essential health benefits package that is affordable and flexible.

Final Rule on Medical Loss Ratio Released
Health and Human Services (HHS) has released final regulations for the ACA’s medical loss ratio (MLR) requirements that resolve a number of questions about how the new requirements should be implemented. The MLR provision requires health plan issuers to meet new minimum medical spending requirements – 85 percent in the large group market and 80 percent in the small group and individual markets – or pay rebates to policyholders and members.

Released on December 2, the final regulations address some of the concerns raised by Aetna and others, including employers, about the interim final rule. For example, the regulations enhance consumers’ ability to access specialty health insurance products, such as those designed to meet the needs of part-time and temporary workers who are looking for basic, affordable health plans. The final rule addresses the rebate administration process and simplifies the process of calculating and distributing rebates to policyholders and subscribers.

Amendments made in the final rule generally apply beginning January 1, 2012. Comments on certain provisions are due by January 6, 2012. Some of the key requirements adopted in the final rule include:

  • Insurers/plan issuers will be able to issue rebates to policyholders rather than directly to subscribers. There are several exceptions to this approach, including non-ERISA plans and terminated plans. In order to issue rebates directly to the policyholder of a non-ERISA plan, health insurers must collect written assurance that policyholders will use the rebates according to the requirements of the final rule.
  • Plan Issuers must provide a notice of rebate to policyholders and subscribers no later than August 1 following the end of an MLR reporting year (ex. Aug 1, 2012 for the 2011 experience year).  HHS is seeking comments on whether this notice requirement should be expanded to all policyholders and subscribers regardless of whether a rebate is owed.  Aetna is actively reviewing and intends to provide comments to HHS on this issue.
  • Amendments to the final rule preserved the deduction of federal and state taxes and licensing or regulatory fees.
  • Limited benefit or “mini-med” health plans will continue to receive MLR adjustments (reduced each year) through 2014, and health plan issuers of expatriate policies will receive a permanent adjustment beginning in 2012. Issuers of both mini-med and expatriate plans must report plan experience on an annual basis rather than quarterly.
  • The final  regulations provide for a “special circumstances adjustment” that should result in issuers' adjusted MLRs for  expatriate (international) health plans satisfying such MLR requirement now and in the future. This adjustment is specific recognition that expatriate plans are truly unique and must be able to account for the higher administrative costs that that are necessary to run plans across the globe.
  • Quality initiatives that count as valid medical expenses under the law include case management, care coordination, chronic disease management, identifying and addressing racial and ethnic disparities in health care, quality reporting, and information technology to support these efforts.
  • Other quality initiatives regarded as acceptable medical expenses include improving patient safety and reducing medical errors, promoting wellness and health activities, and preventing hospital readmissions. Activities designed primarily to control or contain costs are excluded as medical quality expenses.
  • With health care organizations working to transition from ICD-9 to ICD-10 code sets, insurers/plan issuers will be allowed to count a certain percentage of their ICD-10 conversion costs as a quality improvement activity. Under the final MLR rule, ICD-10 conversion costs that account for up to 0.3 percent of an insurer's premium revenue can be counted as quality improvement activities for the 2012 and 2013 reporting years.
  • A health plan issuer must aggregate data by state and by individual, small group and large group markets. For aggregating data, group coverage that covers employees in multiple states must be attributed to a state based on the situs of the contract.

Having delivered extensive comments and suggestions to HHS in response to the draft MLR rules from November 2010, Aetna anticipated the final rules and is prepared to meet the requirements, as amended. However, more work is needed  to ensure that implementation of the MLR rules does not disrupt the marketplace. We will continue to analyze the new rules and respond to regulators with insights regarding the implementation.

HHS is soliciting further comments on modified provisions within the final rule. For example, HHS is seeking input on the appropriateness of including ICD-10 costs as quality improvement expenses. The final rule also solicits comments on whether the changes allowing the distribution of rebates to group policyholders meaningfully reduces the logistical challenges of providing rebates to both policyholders and their subscribers.

Coordinated Care Can Improve Care for Dual Eligibles and Reduce Costs
Health insurers recently submitted a proposal to Congress urging that it empower states to better integrate health care coverage for beneficiaries eligible for both Medicare and Medicaid. Submitted by the industry trade organization, AHIP, the proposal outlines a menu of options for integrating Medicare and Medicaid benefits for dually eligible beneficiaries that can improve both the quality and cost effectiveness of care.

Although they comprise only 15 percent of all Medicaid beneficiaries, dual eligibles account for nearly 40 percent of all Medicaid expenditures because of their higher prevalence of multiple chronic conditions and complex health care needs. A recent study suggests significant cost savings and care improvement can be achieved by using private health plans' programs to coordinate care for dual eligibles.

The AHIP proposal identifies key building blocks that states can use to make progress toward increased care coordination and program integration, including: early stakeholder engagement, enhanced data sharing, streamlined enrollment processes, consistent network adequacy requirements, uniform quality measurement and reporting requirements, an integrated appeals process, and coordinated program administration with clearly defined roles for the federal government and states to avoid duplication.

HHS Releases Accountable Care Organization Rules
HHS released a final ruling on October 20 regarding Accountable Care Organizations (ACOs), a new, collaborative model for health care delivery and payment. The ACA calls for the implementation of ACOs as part of two important initiatives: the Medicare Shared Savings Program and the Advance Payment Model.  ACOs are designed to encourage doctors and hospitals to form networks that deliver more efficient quality care, while allowing them to share in the savings they produce.

Several changes were made in the final rule to make the program more attractive to providers, many of whom have criticized  the proposed rule earlier this year. The final rule drops a requirement that all ACOs be at risk for losing money if they fail to meet savings targets, sharply reduces the number of quality measures for evaluating ACOs and modifies the way beneficiaries are assigned to ACOs.  The Shared Savings Program will launch in January 2012.

AHIP issued a statement on behalf of the industry that lauded the ACO program as an important step toward greater accountability and better quality of care for patients. But insurers remain concerned about the trend of provider consolidation driving up medical prices and ultimately the cost of health care coverage. According to AHIP, “The initial regulation created an antitrust screening mechanism that would have protected consumers with a mandatory up-front antitrust review and exclusion from the program for those ACOs facing a legal challenge.  Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers.”

As a leader in the development in ACOs (our first ACO started in 2007 with Medicare Advantage), Aetna in June filed comments with HHS that noted concerns over the proposed rules for implementing ACOs. Aetna expressed concern that the regulations released in April would result in a significant increase in costs for providers while creating barriers to implementing the program successfully.

Under the Medicare Shared Savings Program (MSSP), ACOs are intended to help correct key shortcomings of the health care delivery system, such as high-cost care delivered without regard to outcomes. The public and private sectors alike are trying to encourage the spread of effective ACOs as a more efficient delivery system in the private insurance market.

To learn more about the accountable care approach, visit our Accountable Care Strategies website.

Rules Released on Appeals and External Review
The Departments of HHS, Labor and Treasury released an amended Interim Final Rule (IFR) for Internal Claims and Appeals and External Review Processes on June 22. Specifically, this IFR amends interim final regulations released in July 2010, updating compliance standards for internal claims appeals processes, revising the minimum standards for external review processes, and modifying the transition period for states to implement external review processes so that health plans and issuers now have more time to adapt to the new process standards.

Some of the more significant changes include:

  • The amended interim final regulation reverts back to the original timeframe under the DOL claims regulation, requiring decision-making for urgent care claims to be made as soon as possible but no later than 72 hours.  The plan or issuer must defer to the attending provider with respect to the decision on whether a claim constitutes “urgent care.”
  • Claimants are allowed to immediately seek review if a plan or issuer failed to “strictly adhere” to all of the requirements for internal claims and appeals processes, regardless of whether the plan or issuer asserted that it “substantially” complied. Exceptions to the strict compliance standard are allowed for errors that are minor.
  • The amended interim final regulation no longer requires disclosure of treatment and diagnosis codes and their meanings on all adverse determinations, but rather a statement of the availability of such codes, upon request, is now required.
  • The amendments simplify the requirement that notices be provided in a culturally and linguistically appropriate manner. For example, issuers/plans are required to provide notice of language services if 10 percent or more of population residing in the claimant's county are literate only in the same non-English language.
  • For external review, a transition period has been granted in states with an existing state external review process through December 31, 2011.  HHS will determine has reviewed and made determinations about whether or not state laws meets the minimum standards for external review by July 31, 2011.  States will behave been afforded a 30-day appeal period. For states that fail to meet the standard, insured plans will be required to follow the federal external review process.
  • The regulation requires plans to contract with three independent review organizations (IROs) to satisfy the federal external review requirements.  A safe harbor standard also exists for self funded plans that have contracted with at least two IROs by January 1, 2012 and with at least three by July 1, 2012 as long as they are rotating claims the assignment of appeals among them.

Resources

You can learn more about the health care reform law by exploring other sections of our Health Reform Connection website. The site offers you access to easy-to-understand information on the law and perspectives on what still needs to be done to realize the vision of providing access to affordable quality health care for all Americans.

Other useful resources include:

The Facts About Rising Health Care Premiums  (PDF, 1.8 MB)
HealthCare.Gov
AHIP Latest News and Information on Health Reform 
American Benefits Council: Health Care Reform