Health Reform Weekly


A weekly compilation from Aetna of health care-related developments in Washington, D.C. and state legislatures across the country


Week of March 4, 2013

An analysis released last week by the consulting firm Oliver Wyman forecasts higher premiums, reduced benefits and a possible loss of coverage options for seniors enrolled in Medicare Advantage plans if proposed payment cuts are enacted. The analysis estimates that new payment cuts proposed by the Centers for Medicare and Medicaid Services (CMS) combined with payment cuts and taxes under the Affordable Care Act (ACA) will result in benefit cuts and premium increases averaging $50 to $90 per month for a typical Medicare Advantage beneficiary starting next year. The report goes on to say that the proposed changes could result in significant upheaval in the Medicare Advantage market, including potential plan exits from some local markets. In addition, if the automatic cuts known as “sequestration” are not averted, the Medicare program’s physician and hospital reimbursement rates will be reduced by an additional 2 percent. 


With no deal on reducing the debt reached in advance of the March 1, 2013 sequestration deadline, $85 billion in automatic cuts are scheduled to be implemented in the final seven months of fiscal year 2013, under the Budget Control Act of 2011. A meeting Friday between President Obama and congressional leaders on budget-related issues yielded no progress, but further discussions about the sequester and its impact on services funded by the federal government are expected in the coming weeks. Competing Democratic and Republican sequestration measures in the Senate last week failed to advance. Early last week, the White House released state-by-state data on the impact the sequestration cuts. With respect to health care, the White House predicted an impact on: mental health and substance abuse services; AIDS and HIV treatment and prevention services; health care provided through the Indian Health Service and Tribal hospitals and clinics; research supported by the National Institutes of Health (NIH); new drug approvals by the Food and Drug Administration (FDA); and the ability of states to respond to public health threats.

The Senate Commerce, Science, and Transportation Committee held a hearing last week to evaluate progress in the implementation of the Summary of Benefits and Coverage (SBC) provisions of the ACA. A diverse panel of witnesses representing consumers, behavioral economic analysts, employers, and quality advocates testified on how to improve the SBC tool. Overall, the panel agreed that consumers will find value in the SBC document. But Sen. Ted Cruz (R-TX) questioned Neil Trautwein, who testified on behalf of the National Retail Federation, about the likely impact of age-band compression on the cost of group coverage for small employers. Trautwein noted the potential for “rate shock” to be a substantial issue in 2014. He encouraged Congress to pursue a five-year plan to give states flexibility in implementing this provision.


ARKANSAS: Governor Mike Beebe met with Health and Human Services (HHS) Secretary Kathleen Sebelius last week to request that state residents who will receive new coverage as a result of Medicaid expansion, up to 138 percent of the federal poverty level (FPL), be permitted to purchase their coverage through the insurance exchange.  Though paid for fully with federal Medicaid dollars, these residents would actually be covered by an exchange product.  Medicaid allows states to purchase insurance coverage on behalf of beneficiaries.

CALIFORNIA: The final standard benefit designs have been posted on the state’s exchange website. Some small changes were made to the designs as a result of regulations released by HHS last week. The AV calculator inputs were also posted. State law requires that all health plans selling in the individual or small group markets offer at least one standardized plan in each metallic tier.  This requirement applies to plans regardless of their participation on the state exchange.

CONNECTICUT: HHS has awarded a $2.85 million State Innovation Model (SIM) grant to the State of Connecticut to develop a health care innovation plan that will focus on making delivery system reforms to Medicare, Medicaid and the State Children’s Health Insurance Program (SCHIP).  Connecticut was one of 19 states to be awarded a SIM grant and is expected to use the funds over the next six months to cover staffing, consulting and other expenses related to developing an innovation plan, which HHS will then evaluate for a possible award of up to $50 million.  Meanwhile, the state recently launched a rebranded exchange, Access Health CT, and continues to plan for the October 1 start of open enrollment.

GEORGIA: Legislation was introduced last week requiring health plans to provide detailed information on ACA-related increases as part of premium notices.  Aetna and other health plans are urging that the language be amended to allow health plans greater flexibility on how and where the information is disclosed.

NEW JERSEY: Governor Chris Christie surprised many with his budget address last week when he announced the state would pursue Medicaid expansion.  Despite pressure in the past several months from Democratic legislators, health advocates, and health policy experts in support of a Medicaid expansion, there was little to no indication that he would go in this direction.  Expanded eligibility is likely to result in 177,000 to 240,000 new Medicaid recipients in the state, according to independent external reports.  The governor’s proposed budget recognizes $227 million in savings to the state by accepting federal financial support for Medicaid expansion.

OREGON: The Office of the Insurance Division (OID) has clarified rules prohibiting payers from making coverage decisions based on gender identity disorder. The OID memorandum is the latest in extensive communications between the OID and health plans on this issue. Regulators have yet to issue standard policy or contract language.  Last year, the California Department of Insurance issued a similar decision.

VIRGINIA: The 2013 General Assembly has adjourned a session that saw nearly 2,500 pieces of legislation introduced. Among the most significant was a bill that gives the Bureau of Insurance rulemaking authority over health insurance rates, allowing Virginia to become an “effective” rate review state.  Additionally, legislation passed that will permit the Bureau of Insurance to conduct plan management functions for qualified health plans sold on a federal exchange in the state.  The governor has 30 days to sign, amend or veto each bill. The General Assembly will then return on April 3. 2013 to take action on the governor’s recommendations, including the budget.  As part of the final budget compromise, legislators created the Medicaid Innovation and Reform Commission, a 12-member panel that includes five members each from the House and Senate. The panel will review, recommend and approve Medicaid reform proposals. Once all Medicaid reforms are enacted, the Commission can approve Medicaid expansion.


Health Reform Connection
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Aetna 2011 Annual Report 

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