Health Care Reform January 11, 2010

Week of January 11, 2010

The Centers for Medicare and Medicaid Services last week released its annual report on national health care expenditures, for 2008, and at a glance the news looked good. Health care spending in 2008 increased 4.4 percent while health insurance premiums grew just 3.1 percent, the slowest rate of increase found in many years. Despite the declining growth in spending, the rate of increase was nearly double growth in the GDP, a key measure of the overall economy. The results show that the growth rate in health care spending is not sustainable. While Congress wrestles with how to combine the Senate and House health care reform bills into one single bill that can pass both chambers, the business community and others continue to try to persuade Congress that health care reform needs to include a long-term strategy, currently missing, to reduce the growth of health care costs.

Congressional Democratic leaders met with the President last week while the rest of Congress remained back home, still on recess. The President pressed the Senate Majority Leader and the House Speaker to get health care reform done quickly in time for the State of the Union speech during the first week in February — before the opposition can mount an effective grassroots campaign to scuttle the bill. To this end the Democratic leadership has agreed to bypass a formal conference, which would be fairly public, contentious and time-consuming. However, no deadline was promised, and there was some pushback from Speaker Nancy Pelosi that the House would not simply accept the Senate bill. The plan calls for the two chambers (Reid/Durbin, Dodd/Harkin and Baucus for the Senate, and Pelosi/Hoyer, Miller, Rangel and Waxman for the House) to work on a compromise, pass it first in the House and then in the Senate. Under this “ping-pong” process, the Senate will have but one vote in which 60 Senators will have to vote “Yes.”  While it seems very unlikely that the public plan option (in the House bill) or the Medicare buy-in provision, already rejected by the Senate, will make the final cut, there are more than enough issues in conflict to keep negotiators busy for several weeks. They include: abortion; immigration; the House tax surcharge on the wealthy vs the Senate’s Cadillac tax; the insurance company tax; changing McCarran-Ferguson (pushed by the House); and increasing subsidies to low-income Americans. The current betting is that Democrats will get a bill to the President for signing sometime in the coming weeks, but there is absolutely no margin for error.

CALIFORNIA health insurance : In his annual State of the State message last week, Governor Arnold Schwarzenegger chastised California’s  Congressional delegation for supporting the U.S. Senate and House versions of health care reform legislation. In his speech, Schwarzenegger said, “We are currently owed billions of dollars by the federal government for various programs. We need to work with the feds so that we can fix the flawed formula that demands that states spend money they do not have. Now Congress is about to pile billions more onto California with the new health care bill.” Schwarzenegger and a number of other governors believe the additional costs levied on states from health reform will further damage their ability to get out from under massive budget deficits. In other developments, U.S. Senator Diane Feinstein sent a letter to Schwarzenegger and legislative leaders urging them to support the regulation of health care premiums in California. Over the past several years, legislation has been introduced that would have enacted a premium approval process in the state, but it has consistently been rejected by the legislature.

COLORADO health insurance : In a January 6 press conference, Governor Bill Ritter announced that he would not seek re-election in November. Ritter said that by removing himself as a candidate he will be in a better position to make the hard decisions necessary to address the economic woes facing the state. The field of contenders began emerging almost before the Governor’s formal announcement. Denver Mayor John Hickenlooper is the most prominent contender being mentioned by the media.

CONNECTICUT health insurance : The state’s estimated $550 million budget deficit will not slow down the development of SustiNet, the state’s universal health care plan enacted last year over Governor M. Jodi Rell’s veto. The SustiNet Board must design a self-funded plan that will control costs while increasing access, and then submit its recommendations to the legislature by January 1, 2011. Enrollment is set to start in 2012. However, the revenue to implement sweeping changes is not there. Legislators also will again debate allowing municipalities, nonprofit organizations, and small businesses to buy into the state employee program. In addition, the legislature will likely reintroduce the bill prohibiting disability income insurance from including an offset provision that would reduce benefits based on Social Security Disability Insurance payments made to or on behalf of dependents. Perennial provider issues, such as standardized contracts, are likely to come up again, as will Medicaid reimbursement levels, assignment of benefits rules, “all products” clauses, prompt-pay requirements, and restrictions on usual, reasonable and customary determinations by health plans. Additionally, lawmakers may consider new taxes or assessments on health plans to pay for reform and mandatory medical benefit ratios for private market coverage. Other measures likely to be introduced would establish a new external review process for long-term care insurance claim denials, impose restrictions on generic substitution of prescription drugs, and prior approval of premium rates in the individual market.

GEORGIA health insurance : The Legislature will begin the 2010 session this week, and issues they are expected to address in the weeks and months ahead include rental network restrictions, mandatory coverage for autism, and prohibition of generic substitution of certain drugs. Aetna is working with America’s Health Insurance Plans and the Georgia Association of Health Plans on addressing these issues.

ILLINOIS health insurance : The Director of the Illinois Department of Insurance issued a bulletin to all health insurance carriers and HMOs in late December regarding health coverage rescission documentation requirements. Illinois health carriers can rescind a health policy only “when an insured has provided a false statement in an application which materially affected the acceptance of a risk or hazard assumed.”  The DOI indicates that when a consumer files a complaint about a rescission, it will measure the effect of the false statement by examining the insurer’s underwriting guidelines. Thus, the carrier will be required to respond to rescission complaints by providing a “full and complete copy of its underwriting guidelines,” including any supplements, appendices, or exhibits. The underwriting guidelines must be submitted free from redactions, deletions, or exclusions.  Clarifications on the bulletin are being sought because of the potential for requiring release of proprietary information.

KENTUCKY health insurance : The 2010 legislative session convened on January 5, and the state’s $1.4 billion budget shortfall is the main issue. On the health side, the Kentucky Department of Insurance has posted its legislative agenda, which includes a bill that would mirror a federal law in prohibiting insurers from adjusting premiums or denying coverage on the basis of genetic information and that would limit the collection of genetic information by insurers. The Department also will pursue measures that would change the mental health and substance abuse parity law and modify the schedule for financial exams of domestic insurers from every 3 years to every 5 years. A proposed expansion of the autism mandate would require large group health benefit plans to provide coverage for the diagnosis and treatment of autism spectrum disorders for individuals between the ages of 1 and 21, including annual coverage of $50,000 for individuals who are age 1-6, and annual coverage of $12,000 for individuals age 7-21, for specified treatments. It also would require individual and small group market plans to provide coverage of $1,000 per month for pharmacy care, psychiatric care, psychological care, therapeutic care, applied behavior analysis and rehabilitative care for the treatment of autism spectrum disorders. All provisions would take effect January 1, 2011.

MAINE: A number of bills have been carried over from 2009 for a short session of the legislature this year – January to April. They include the “Universal Childhood  Immunization Program,”  which would assess plans to cover recommended childhood vaccines not covered under the federal Vaccines for Children Program. To date, plans have voluntarily contributed to the Maine Childhood Immunization Program (MCIP) based on self-reported membership. Other bills recently introduced include An Act to Protect Health Care Consumers from Catastrophic Debt, which would prohibit annual, lifetime or other benefit maximums for individuals and groups; another “mini COBRA” expansion to make Maine residents permanently laid off from their employment eligible to maintain, at their expense, coverage under their former employer’s group health plan; and an anti-mail-order bill that would bar health insurance carriers from ensuring cost efficiencies and consumer savings through mail-order pharmacies. It would require that coinsurance,copayment and deductible factors be applied uniformly regardless of the type of pharmacy the enrollee chooses, and it would prohibit a carrier from limiting the quantity of drugs that an enrollee may obtain at one time unless the limit is applied to all in-network pharmacies.

NEW JERSEY: In the final days of the 2009 session, the legislature passed a bill requiring managed care organizations to remit direct payments to out-of-network providers. Aetna, along with the business community, trade unions and other health plans, unsuccessfully opposed this legislation. Despite this setback, the chairman and members of the committee found arguments concerning egregious out-of-network reimbursement and network deterioration sufficiently compelling to commit to drafting legislation addressing this issue in the 2010 session. The legislation was amended to delay its effective date for 12 months and provide carriers the option of issuing a check requiring dual endorsement. Also, the Assembly took up legislation requiring ambulatory surgical centers to report clinical and financial data to the state. Similar legislation passed unanimously in the Senate.

NEW YORK: Governor David Paterson is developing his 2010-2011 budget based on the assumption that the state has a $9 billion deficit.  Absent a windfall of tax revenue from a revived Wall Street or a new federal stimulus bill, the legislature has few rabbits to pull out of a hat to close a deficit of this magnitude. Efforts to bridge the gap solely on cuts in spending are unrealistic. While the governor and the legislature will try to avoid broad-based taxes, expansion of the HCRA patient services assessment to physician services and the $1 per claim tax on TPA services will no doubt be back in play. Health plans also will face numerous bills that particular legislators perceive as critical to re-election. These include an autism mandate, Ian’s law (discontinuance of a product line allegedly to cut off a high-cost member), and requirements for using out-of-network labs. In addition, the DOI and Senate Insurance Chair Breslin have also indicated their intent to renew efforts to pass a prior approval bill this year. Aetna will continue to build on last year’s successful coalition-building and grassroots efforts to oppose HCRA tax expansions, to work with legislators to address their constituent concerns, and to strengthen its relationships with both the DOI and policymakers.

OKLAHOMA health insurance : In preparation for health insurance exchange provisions contained in health care reform legislation, Insurance Commissioner Kim Holland sponsored two focus groups with broad stakeholder representation in Tulsa and Oklahoma City to gather specific recommendations for the design and implementation of a health insurance exchange. Those recommendations included: plans should cover alcohol and drug abuse treatment and should be portable between jobs; an exchange should include at least one common benefits package across all plans to enable “apples to apples” comparisons; and rather than establishing defined differences between benefit levels, plans should tailor each piece to the individual by way of a cafeteria-style menu with underlying formulas that would calculate premiums and copayments accordingly. Additionally, the participants felt the number of plan choices and carriers available should be limited to between three and five with standardized plans in each benefit category (bronze, silver, gold). The Commissioner is expected to take these and other recommendations from the focus groups into account when she moves forward with plans to create an insurance exchange in Oklahoma.

OREGON: The Oregon Insurance Division has submitted temporary rules to the Secretary of the State regarding the availability of state continuation coverage. Effective December 22, the rules extend the period of eligibility for state continuation coverage from 6 to 9 months. The temporary rulemaking provides up to an additional 6 months of subsidies for the state COBRA program, extending the maximum overall time period for subsidies to 15months for people terminated involuntarily through February 28, 2010.

WASHINGTON: The Office of the Insurance Commissioner has released its annual “Direct Patient Provider Primary Care Practices” report, regarding retainer medicine in the state, to the legislature. Legislation passed in 2007 permits direct practices to operate free from many of the requirements applicable to health carriers and health maintenance organizations. The report notes that as of 2009, about 8,000 patients in the state were enrolled in a direct practice, up from 4,708 in 2007. While the number of practices and providers has increased slightly, direct practice offices remain isolated to three counties: King, Snohomish and Thurston Counties.

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