Monday, October 20, 2014

What's “reasonable” for reference-based pricing is clarified by IRS, HHS, and Labor Department

The Departments of Labor, Health and Human Services and the Treasury have issued guidance setting forth factors that they will consider when determining if a non-grandfathered group health plan has met its obligations under PHS Act Sec. 2707(b). This latest in a series of frequently-asked questions (FAQs) addresses obligations with regard to reference-based pricing. Under reference-based pricing, a plan pays only a fixed amount for a particular procedure, which certain providers then accept as payment in full.

Reference-based pricing must stay within MOOP costs. PHS Act 2707(b), as added by the ACA, provides that annual cost-sharing imposed by a non-grandfathered group health plan may not exceed the limitations under ACA(c)(1), which limits enrollees’ out-of-pocket costs. The maximum out-of-pocket (MOOP) costs for plan or policy years beginning in 2015 is $6,600 for self-only coverage, and $13,200 for other coverage.

Previously, the Departments have expressed concerns that reference-based pricing, designed to encourage plans to negotiate treatments with high-quality providers at reduced costs, could be a subterfuge for the imposition of otherwise prohibited limitations on coverage, without ensuring access to quality care and an adequate network of providers. Therefore, they clarified that reference-based pricing would not cause a plan to run afoul of PHS Act Sec. 2707(b) MOOP provisions as long as the plan uses a reasonable method to ensure that it offers adequate access to quality providers.

What is a reasonable method? The Departments have stated that they will consider all facts and circumstances when determining if a plan is ensuring adequate access to quality providers at a reference price. Such facts and circumstances include the following:

Type of service. If a plan treats providers that accept the reference amount as the only in-network providers, the reference-based pricing should apply only to services for which the time between the discovery of the need for care and the provision of care lets a consumer make an informed choice with regard to their provider. Also, for emergency services, it will not be considered reasonable to limit or exclude a plan’s cost-sharing from counting toward the MOOP with respect to providers who do not accept the reference-based price.

Reasonable access. Plans should ensure that an adequate number of providers accepting a reference price are available to participants and beneficiaries.

Quality standards. The providers accepting the reference price should meet reasonable quality standards.

Exceptions process. This should be easily accessible, and services rendered by providers that do not accept the reference price should be treated by the plan as if they were administered by a provider that did accept the reference price if: (a) access is unavailable to a provider that accepts the reference price or (b) quality could be compromised with the reference price provider.

Disclosure. A fee may not be charged for the following disclosures: (1) information on pricing structure, which should be provided automatically; and (b) upon request, a list of providers accepting the reference price, a list of providers accepting a negotiated price above the reference price, and information on the process and underlying data that ensure quality standards are met by the providers accepting the reference price.

Friday, October 17, 2014

ACA may encourage self-employment, says report

The Patient Protection and Affordable Care Act (ACA) may encourage self-employment, according to a report issued by the Federal Reserve Bank of Kansas City. The report examined a Massachusetts state health reform law’s apparent bolstering effect on state self-employment rates and suggests that the ACA may have similar consequences. The authors submit that increased access to affordable insurance makes people less reliant on outside employers for insurance coverage, allowing them to work on their own.
Self-employment. Self-employment in the U.S. has declined over the past 30 years. One possible factor in the decline is the lack of access to the affordable health insurance that is frequently provided by other employers. In 2012, for example, 64 percent of the self-employed had private or public health insurance coverage, while 84 percent of private sector employees worked for employers that offered health insurance options.
Study. To determine whether increased access to affordable health insurance would affect self-employment rates, the report focused on the state of Massachusetts, where the Massachusetts Health Care Reform Act was signed into law in 2006 (see Report 509.-5). Like the ACA, the state health reform law involved a Health Insurance Exchange, an individual mandate, an employer mandate, Medicaid expansion, and prohibitions against discrimination based on pre-existing conditions and gender. The authors reviewed data from the Census Bureau’s Annual Social and Economic Supplement (ASEC), comparing Massachusetts residents’ answers prior to state health reform, from 2000 to 2005 (pre-reform), to their answers after state health reform, from 2008 to 2012 (post-reform). It then compared the Massachusetts residents’ responses to those from residents of the remaining Northeastern states and the U.S. as a whole.
Results. The report highlighted a number of findings:
·        While the national working-age uninsurance rate rose from 20 to 21 percent between 2006 and 2012, the Massachusetts rate dropped 9 percentage points, from 14 percent to 5 percent. The uninsured rate in other northeastern states declined by only 1 percent.
·        Among the self-employed, the national uninsurance rate increased from 31 percent pre-reform to 36 percent post-reform, and by two percentage point in other northeastern states. In Massachusetts, however, the self-employed uninsured rate decreased by 10 percentage points, from 20 percent to 10 percent.
·        Among the Massachusetts self-employed, there was a slight shift in the composition of insurance policies, with a 3 percent decrease in policies held by the self-employed and a 3 percent increase in policies in which they were dependents. In addition, Medicaid enrollment among the self-employed increased by 12 percent.
·        The national rate of self-employment decreased from 6 percent in the 2004 to 2006 period to 5.4 percent in the 2010 to 2012 period; the rate among other northeastern states decreased from 5.4 percent to 4.9 percent. In Massachusetts, however, the rate remained flat at 5.8 percent.
These findings suggest that the increased access to health care provided by health reform has a beneficial effect on self-employment, decreasing uninsurance among the self-employed population and causing fewer members to leave to find other employment. At the very least, the authors note that health reform does not seem to discourage self-employment.

Wednesday, October 15, 2014

Health reform will impact this year’s benefits communication strategy

The Patient Protection and Affordable Care Act (ACA) is impacting how employers are creating this year’s benefits communication strategies, according to recent research from the nonprofit National Business Coalition on Health and Benz Communications. The study found that 73 percent of employers report that the ACA will have the biggest impact on their benefits communication strategy in the year ahead.
However, the 2014 Inside Benefits Communication Survey found that plan design strategy seems to maintain the status quo with 39.4 percent saying they are maintaining current benefit plans and coverage levels, without increasing employee costs—like deductibles, coinsurance, and copayments. Slightly more than 32 percent indicated they will also maintain current benefit and coverage levels, but increase employee costs.
“However employers choose to respond to the administrative and cost burdens of the ACA, it’s imperative that they frame those actions in a way that clearly communicates to employees the high value of their benefit plans,” said Jennifer Benz, founder and CEO of Benz Communications. “Blaming or shaming the law as the reason for making—or not making—benefit changes doesn’t move the needle in helping employees make informed decisions about choosing plans, getting appropriate care, managing their health or controlling health expenses. As one of the last remaining sources for reliable and trusted health information, employers have everything to gain—and nothing to lose—in using ACA as a conversation starter to improve employees’ understanding and perceived value of their benefits.”
Cadillac tax. When asked how their company is preparing to comply with the ACA “Cadillac tax” in 2018 (a 40 percent excise tax on employer plans valued at more than $10,200 for individual coverage and $27,500 for family coverage), 26 percent responded that they are maintaining current benefit plans and coverage levels without increasing employee costs. In addition, almost 20 percent said they are maintaining levels, but increasing employee costs, and 15 percent are reducing benefit plans and coverage levels while increasing employee costs.
Private exchanges. The survey also found that most employers are not embracing private exchanges. More than half (55 percent) of employers indicate they will “never” stop sponsoring employee health plans in favor of giving employees money to buy coverage through a private exchange. Just 32 percent said they are considering moving to a private exchange within three to five years and 8 percent are considering such a move within the next three years. Only 5 percent say they already use a private exchange to provide employees’ health benefits.
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Monday, October 13, 2014

Solicitor General to SCOTUS: ACA subsidy review “unwarranted”; there is no conflict

Following the U.S. Court of Appeals for the Fourth Circuit’s decision in King v. Burwell, Virginia residents who do not want to purchase comprehensive health insurance filed a petition for writ of certiorari with the United States Supreme Court. On Friday, October 3, 2014, Donald B. Verrilli, Jr., the United States Solicitor General, filed a brief in opposition with the Court on behalf of the U.S. Departments of HHS, Labor, and the Treasury, as well as HHS Secretary Sylvia Mathews Burwell, Labor Secretary Jacob Lew, and IRS Commissioner John Koskinen. Arguing against the subsidy opponents’ claim that review by the High Court is necessary to resolve the conflict between two U.S. Courts of Appeals decisions, Verrilli wrote that not only is there no current conflict requiring resolution, but also that review is “unwarranted” because the Fourth Circuit’s decision is correct.
Background. Code Sec. 36B, enacted as part of the ACA, provides a federal tax credit to low- and middle-income Americans to offset the cost of insurance policies purchased on the Exchanges. The IRS promulgated regulations in a final rule making the premium tax credits available to qualifying individuals who purchase health insurance on both state-run and federally-facilitated Exchanges (26 C.F.R. Sec. 1.36B-1(k);77 FR 30377 (May 23, 2012). The final rule broadly interpreted the section to authorize the subsidy to include insurance coverage purchased on an Exchange established by the federal government under ACA Sec. 1321, as well as to coverage purchased via a state-operated Exchange under ACA Sec. 1311.
ACA Sec. 1311 delegates primary responsibility for establishing Exchanges to the states. However, where a state refuses, or is otherwise unable to establish an Exchange, ACA Sec. 1321 provides that the federal government, through the Secretary of HHS, may establish and operate Exchanges within the state. Currently, less than half of all states chose to establish Exchanges; the federal government established Exchanges in the remaining states, in most cases without state assistance.
A group of Virginia residents who do not want to purchase comprehensive health insurance challenged the IRS’ interpretation of Code Sec. 36B. Since Virginia has declined to establish a state-run Exchange, it is served by the federally-facilitated Exchange. Without the applicability of premium tax credits, these individuals would be exempt from the individual mandate under the unaffordability exemption. However, if premium tax credits are applicable, the reduced costs of the policies available to the Virginia residents may subject them to the minimum coverage penalty.
Circuit split. On July 22, 2014, the D.C. Circuit released its decision in Halbig v. Burwell, concluding that a federal Exchange is not an Exchange established by the state, and that Code Sec. 36B does not authorize the IRS to provide tax credit subsidies for insurance purchased on federally-established Exchanges. Within a couple hours, the Fourth Circuit released its decision in King, which upheld the final rule by giving Chevron deference to the IRS’ determination as a permissible exercise of agency discretion. The King court found that the applicable statutory language was ambiguous and subject to multiple interpretations, but that the IRS’ interpretation was reasonable. These two contrary decisions created a circuit split.
In the aftermath of the two appellate decisions, the losing parties faced a choice between requesting a rehearing en banc from the Courts of Appeals or petitioning the Supreme Court for a writ of certiorari. While the Virginia residents in King chose to appeal directly to the Supreme Court, the federal government requested a rehearing en banc from the D.C. Circuit for Halbig. Before the Supreme Court had considered the King petition, the D.C. Circuit agreed to a Halbig rehearing before all 11 Circuit Judges.
Opposition to certiorari. The federal government filed its Response in Opposition to the King petition after the D.C. Circuit granted its request for a rehearing en banc in Halbig. Using the D.C. Circuit’s decision to its advantage, the government argued that while the D.C. Circuit’s en banc proceedings remain pending, there is no disagreement among the courts of appeals and, therefore, there is no sound reason for the Supreme Court to accept the King petition. Its brief in opposition claims that the “principal basis” for the King petition was the necessity of Supreme Court intervention to resolve the conflict between the Fourth and D.C. Circuits, which the government says no longer exists.
The federal government does not exclusively rely on its “there is no conflict” argument. In the alternative, it also claims that the Fourth Circuit correctly interpreted the ACA and the IRS’ interpretation of Code Sec. 36B. In contrast, the government states, the King petitioners’ reading “would transform the [ACA] into a hash of superfluities, absurdities, and internal contractions,” as well as “obstruct the [ACA]’s express purpose.” It would also thwart the operation of the [ACA]’s interdependent reforms and gut the Exchanges,” and “destroy the [ACA]’s model of cooperative federalism by transforming the [ACA]’s promise of ‘State flexibility’ into a threat that a State may forgo establishing an Exchange for itself only at the price of crippling its insurance market and depriving its citizens of the tax credits at the heart of the [ACA].”
Premium tax credit subsidy status. The Supreme Court has begun evaluating petitions for its October 2014 Term; however, it has not yet considered the King petition. Halbig oral arguments are scheduled for December 17, 2014, with the D.C. Circuit unlikely to issue its decision until 2015. In July 2014, IRS Commissioner Koskinen noted the likelihood that the issue will eventually be determined by the Supreme Court, and announced that, for now, the circuit split will not affect the IRS’ treatment of premium subsidies.

Friday, October 10, 2014

Private exchanges already cover at least 2.5 million people

Fifteen percent of large employers either have adopted or are considering the adoption of a private exchange approach to employee health coverage, according to a recently-released Kaiser/HRET annual employer survey. Furthermore, in a new Kaiser Family Foundation report it is estimated that at least 2.5 million people already get their health coverage through private exchanges, including approximately 1.7 million group plan enrollees, 700,000 individual Medicare enrollees, and 100,000 individual enrollees, (not including the purely e-broker individual market). Kaiser further predicts that the market is expected to grow.

Employers who are shifting active employees to private exchanges tend to be those in lower-wage industries. Large employers who are already using private exchanges for active employees include Walgreen’s, Sears, Petco, and DineEquity, which is the parent company of Applebee’s and IHOP. IBM, Time Warner, General Electric, Whirlpool, Caterpillar, and Kinder Morgan are using private exchanges for retirees, and Target is using them for part-time and seasonal employees.

Kaiser clarifies that its analysis of private exchanges does not include traditional technology platforms that only provide online enrollment. The private exchanges analyzed in the report generally contain their own set of health plans, ACA-compliant environments and tools, and the ability to let employers shift to a defined contribution approach for health coverage, wherein an employee is given a fixed amount of money to spend on health or ancillary benefits in the exchange.

In the report, Kaiser explains that there are three major types of companies that are creating private exchanges: (1) carriers, such as Cigna, WellPoint, and Blue Cross; (2) benefit consultants, like Aon, Mercer, and Towers Watson; and (3) technology platform vendors, such as Bloom Health, Connecture, Connextions, hCentive, and ADP. Private exchanges appear to be forming into two types, single carrier exchanges operated by insurance carriers, and multi-carrier exchanges, operated by third parties that contract with multiple carriers to broker health plans. Small employers and employers with up to 1,000 employees seem to be using both single carrier and broker exchanges, and very large employers with more than 1,000 employees are primarily using exchanges created by large benefit consulting firms.

Most major players in the private exchange market appear focused on providing employers with as much flexibility in plan offerings as possible. The Kaiser report provides a detailed analysis of these companies’ exchanges, including:

Aon, which offers on its multi-carrier exchange only defined contribution plans and fully insured options, and was the first multi-carrier private exchange for large corporations. The Aon exchange plans are categorized much like those on public exchanges, as Bronze, Bronze Plus, Silver, Gold, and Platinum;

Array Health, which was originally a multi-carrier exchange selling to employers through brokers, but switched in 2010 to a purely single carrier technology platform model. It works with carriers and employers to create a mix of plans for each exchange;

Bloom Health, with both single carrier and multi-carrier options, and which gives employers a choice between a defined benefit and a defined contribution model, as well as the choice between fully-insured or self-funded models. Since its inception in 2009, Bloom has just about doubled the number of employees using its platform, and has almost 250 employers in 24 different states;

bswift, also with both single carrier and multi-carrier options, whose Springboard Marketplace allows flexible self-funded or fully insured medical plans. It focuses on employers with at least 1,000 employees, has for the last years sustained an annual growth rate of 40%, and serve almost every industry segment and state in the U.S.;

Buck Consultants’ RightOpt, created in 2013, which targets employers with at least 3,000 employees. It is a multi-carrier exchange, and it has options for active employees, part-time and seasonal employees, and retirees;

ConnectedHealth, founded by Subimo, which was later acquired by WebMD. It focuses on small and mid-size employers, but also serves the jumbo market, and it allows carriers and employers to design the plans for each exchange. It has both single-carrier and multi-carrier options;

Connecture, which originally had just a single-carrier exchange, purchased Insurint in 2010 to add a multi-carrier platform, and DRX in 2013 to expand its reach into the over-65 market;

Liazon Bright Choices, acquired in 2013 by Towers Watson, has both single-carrier and multi-carrier options, and is distributed primarily through brokers and consultants. It also provides services for health plans building proprietary exchange presences, including Blue Cross Blue Shield of Massachusetts. It facilitates the shift for employers to a defined contribution model. Originally, most of its employers group had less than 50 employees, but it currently serves over 700 mid-sized and large businesses;

Mercer Marketplace, which reached an agreement in April 2014 with GetInsured to provide  a brokered connection to the public exchanges and individual off-public exchange market for employers with part-time and seasonal employees, contractors, COBRA beneficiaries, and pre-65 retirees. A multi-carrier exchange, it is marketed to both retirees and active workers of employers with more than 100 employees. It expanded its capacity for retiree coverage when it purchased Transition Assist in March 2014;

My Plan by Medica, originally a partnership with Bloom Health in 2010. Medica provides product, network, and service, and Bloom Health provides technology and enrollment support tools. It is a single carrier exchange, and, unique to the private exchange world, it offers four different accountable care organization (ACO) networks. Its customer base is split about 50/50 between Medica conversions and new business; and

OneExchange, also from Towers Watson, (see Liazon Bright Choices above), a multi-carrier exchange that targets medium to jumbo-sized employers. It reportedly works with 80% of the Fortune 1000, and it allows employers to choose either self-funded or fully-insured plans.

What are implications of private exchanges for employers?

Kaiser estimates that, overall, it appears that the growing trend toward the use of private exchanges could offer the potential for cost stability for employers along with greater health plan choice for employees, as a result of the opportunity within a private exchange to shift plans to a defined contribution model.

Kaiser states that some large employers that wish to join one of the major exchanges such as Aon’s may be required to move to fully-insured plans, as is the case with Aon’s exchange – all 600,000 of their group lives are full insured. This transfers risk from previously self-funded employers to insurers. Kaiser also thinks that private exchanges could decrease employer involvement in the administration of health insurance, since a private exchange could conceivably provide all aspects of necessary health benefits administration.