Last week, Milliman released its annual Milliman Medical Index, and it shows that the average American family’s medical costs have doubled in less than nine years and increased 7.3 percent from 2010 to 2011. The results also show that hospital spending, which accounts for 48 percent of total health care spending, accounts for more than 60 percent of this year’s total increase. And, outpatient facility costs increased more than any other component. The medical index illustrates the complexity of the health care cost problem, while legislative remedies to date have focused principally on health plan rate review processes and medical loss ratio restrictions.
Interestingly, a new Yahoo Finance analysis of quarterly financial data shows that the health plan sector of the health care system ranked only 143rd out 215 in terms of profit margin.
In yet another political statement, a Republican-controlled House Committee last week approved legislation to repeal the maintenance of effort (MOE) requirements for the state Medicaid and CHIP programs. The requirements, which prohibit states from reducing Medicaid eligibility for adults until 2014 and for children until 2019, were passed as part of the Affordable Care Act (ACA) and the federal stimulus bill. Republicans view the MOE provision as one more example of big government telling the states what to do for yet another entitlement program. Repealing the provision would reduce Medicaid/CHIP enrollment and save $2.1 billion over 10 years, but it will likely not become law given the Democratic Senate and White House. Its only chance of adoption would be as part of a really big compromise deal on the budget and deficit later this year.
CONNECTICUT: State legislators plan to pass a consensus bill creating a Connecticut Health Insurance Exchange by the end of session on June 8. Three exchange bills have cleared committees and differ largely in the make up of their boards. The Administration supports SB 921 which creates a governance framework for the Exchange, establishing a quasi-public authority with a 13 member board that includes industry representation. The board is charged with making recommendations to the Governor and legislature on Exchange policy issues by January 1, 2012.
The rate review bill is still active and if enacted would: require a lengthy notice timeline for proposed increase, and a public hearing for any increase over 10%; authorize the Healthcare Advocate and the Attorney General to be parties to any hearing; define “excessive” to include consideration of such factors as commissions, transfer of funds to holding or parent company, the rate of return on assets or profitability compared to similar filers, and a “reasonable” profit margin. Due to the $2.3M annual cost to the state, it does not currently have the support of the Administration. However, a negotiated bill is likely to pass this session.
INDIANA: The legislature has adjourned, and its accomplishments this session include passing a bill that makes changes to eligibility levels in the Medicaid program and ACA-conforming Indiana health insurance law — including coverage of children to age 26, grievances, and rescissions. The new law also prohibits any requirement that any state resident purchase coverage under a health plan, but it allows residents to delegate to their employers the authority to purchase or decline to purchase coverage under a health plan. The legislature also passed legislation that requires insurance reimbursement for certain services provided by a licensed athletic trainer under the athletic trainer’s scope of practice. The law also prohibits an insurer from requesting a substitution of a treatment (drug, device or therapy) from an insured’s physician or contacting an insured concerning certain substitutions. The legislature also passed changes to the School Corporation Health Insurance Act that specify new requirements and recommendations for school corporation employee health insurance coverage programs.
KANSAS: The legislature adjourned last week after the Senate approved a budget late Thursday night and the House followed suit in the early hours of Friday morning. The two chambers also agreed to blend 12 health-related bills into a single measure, House Bill 2182. Of interest to Aetna and its customers, the new bill includes a statutory version of the Health Care Freedom Act, which states that no person, provider or employer can be forced to participate in any health care system or to purchase Kansas health insurance. Other provisions would require pharmacy auditors to give advance notice, adopt a (still unfunded) Health Information Technology Act, require changes to the DOI internal and external review procedures (consistent with ACA), require an increase in the high-risk pool’s cap and the addition of children as participants, and prohibit abortion coverage with a separate coverage rider.
MAINE: The Senate voted 24-10 to approve the Individual and Small Group Market Reform bill with several amendments. The bill now goes to the House for concurrence and possibly further amendments. The amended version would:
Expands and alters community rating bands over five years, allowing insurance policies to be more accurately priced according to various risk factors “to the extent permitted by the federal Affordable Care Act” (in amended version);
Establishes a reinsurance program for high cost individuals using existing funding sources, ACA funds as permitted, and a covered lives assessment (capped at $4 for the pool, and $2 for the pool’s net losses, if any, in the amended version);
Allows individuals to purchase insurance in four other states (NH, RI, CT and MA);
Conforms state loss ratios to federal standards;
Repeals the standardized State Health Plan;
Loosens the geographic access standards by allowing insurers to offer incentives to members to use providers based on cost and quality;
Provides a wellness tax credit for employers with 20 or fewer employees;
Permits the creation of captive health insurance associations, and allows smaller businesses (up to 50 employees) to band together purchase insurance.
NEW JERSEY: The legislative proposal put forth by Governor Chris Christie and Senate President Stephen Sweeney to change employee benefits by legislation rather than through collective bargaining continues to get a very cool reception in the Democratic-controlled legislature. The lack of support for the Senate President’s legislation by members of his own party severely limits the bill’s chances of success, given the Democrats’ advantage in both chambers. Reform of public sector health benefits is directly tied to the pending budget, so a resolution is anticipated by early June.
In other legislative news, the Senate advanced legislation to avert an anticipated $300 per employee unemployment insurance tax on employers. This employer tax would be triggered this summer due to the insolvency of the state Unemployment Insurance Fund. The bill making its way through the legislature would incrementally increase the tax over three years to lessen the immediate financial impact on employers. Also, Commissioner Tom Considine, Department of Banking & Insurance (DOBI), last week expressed the Department’s continuing concern over the implementation of ACA. He specifically cited the timeline for establishing a state health insurance exchange as a concern.
NEW YORK: The Senate Insurance Committee and the Senate Banking Committee Chairs each announced that their committees will be considering the nomination of Governor Cuomo’s Chief of Staff Ben Lawsky to be the Superintendent of the newly merged entity for Banking and Insurance to be known as the Department of Financial Services. Prior to joining the Cuomo Administration, Lawsky was a federal prosecutor and special assistant in then-Attorney General Cuomo’s office. He is also a former judiciary counsel to Senator Chuck Schumer. Mr. Lawsky is expected to be confirmed by both Committees. The merged entity would then have a separate Deputy Superintendent for Banking and one for Insurance serving under Lawsky. Those would be appointed positions and do not require Senate confirmation.
With only 16 session days left, there is speculation that the state will not pass enabling legislation for a health insurance exchange. New York can apply for a five-year grant under ACA to create an exchange but only if it has passed key state legislation. Setting up the exchange will be expensive, which is why consumer advocacy groups want New York to be able to access the federal grant money. According to an April 20 state document on planning the exchange, New York anticipates spending at least $52.7 million on planning the exchange between fiscal years 2011 and 2014. The state received a $27.4 million federal Early Innovator Grant award and anticipates receipt of at least another $11.7 million through enhanced federal Medicaid matching funds. The Department of Insurance (DOI) announced it will hold a series of public forums throughout the state in the next two weeks to allow New Yorkers to present their ideas on the design of an exchange.
NORTH CAROLINA: A North Carolina health insurance exchange bill has been accepted and found favorable by first the House Insurance Committee and then the House Appropriations Committee. Committee changes include adding another board member. The bill now also would prohibit the Exchange Authority from imposing penalties and other fees on individuals who cancel enrollment because they become eligible for other coverage options.
OKLAHOMA: The Department of Insurance’s newly created Oklahoma health insurance Exchange Workgroups on Enrollment/Eligibility and Funding both met last week. The Funding group discussed sustainability models and recommendations, as well as the NAIC White Papers on exchange funding. Aetna presented feedback, specifically noting that funding for insurance exchanges should not be limited to insurance assessments and instead should be as broad-based as possible. Exchanges should evaluate all available funding sources to support continuing administrative and operational expenses, including available grants, fees, assessments and taxes. The groups also discussed pending legislation that would create the framework for an exchange, which is still making its way through the legislative process. The session is scheduled to adjourn by May 27, and many now assume an exchange will not be created legislatively until the next legislative session in the spring of 2012.
PENNSYLVANIA: The Senate has unanimously confirmed Governor Tom Corbett’s nomination of Michael Consedine for the post of Pennsylvania health Insurance Commissioner. The vote followed the Senate Banking and Insurance Committee’s unanimous approval of the nomination. Consedine, who has headed the Insurance Department as Acting Insurance Commissioner since January, previously served as a partner at the law firm of Saul Ewing, where he was Vice Chair of its Insurance Practice Group. Prior to joining Saul Ewing 12 years ago, Commissioner Consedine served as Insurance Department Counsel.
TEXAS: The House of Representatives gave final approval last week to legislation that extends the life of the Texas Department of Insurance and sets tighter guidelines for the review of rate increases. One key amendment is a page of language that would provide the state some flexibility to proceed on planning for a Texas health insurance exchange. The measure was amended during debate to allow 3-Share programs to be considered qualified health plans even though ACA does not appear to allow for that. The bill now moves to the Senate for Committee debate and floor approval prior to the scheduled adjournment date of May 30.
Governor Rick Perry signed legislation last week that the state’s largest physician organization promoted as a bill that will help rural communities recruit physicians. Sponsored by Sen. Robert Duncan and by Rep. Garnet Coleman in the House, the bill was approved in the House last week and was then signed almost immediately by Governor Perry. The new law will allow critical access hospitals, sole community hospitals, and hospitals in counties of 50,000 or fewer to employ physicians. Most of these hospitals are run by local governments. Texas is one of the first states to statutorily pass clinical protections for physicians who choose employment.
WASHINGTON: Governor Chris Gregoire signed the Health Benefit Exchange bill creating the exchange as a public-private partnership, with operations set to begin in January 2014. The exchange governing board will include nine members recommended by each legislative caucus and appointed by the Governor. Board members will include those with actuarial expertise and representatives of small business, consumer advocacy and identified areas of the health care system. Health insurer representation is not excluded nor specifically required but would be included on a technical advisory committee.
The new law requires the Washington Health Care Authority and the Legislative Joint Select Committee on Health Reform Implementation to apply for federal grants, develop an operational budget, and devise a plan to achieve financial sustainability by 2015. A work plan and report on operational considerations are both required, addressing topics such as the role of the exchange in aggregating funds, whether to implement a basic health plan option, whether to merge risk pools, certification of and standards for participating plans, and implementation of effective risk management methods.