By John Reichard, CQ HealthBeat Editor

July 19, 2011 -- Starting in 2013, a growing number of insurance companies are likely to begin 100 percent coverage of comprehensive preventive services for women, including a wide range of contraceptives, because of developments set in motion by a report an Institute of Medicine panel.

The health care law helped set the stage for covering such services by requiring the prestigious institute to issue a report detailing where there are gaps in existing recommendations for covering preventive services without any out-of-pocket charges. The aim was to spur greater use of preventive services that the research community thinks are needed to improve public health.

Health and Human Services is expected to make a decision in early August on whether to accept the recommendations, but with the Institute of Medicine providing cover, it is highly unlikely that federal officials would not follow the suggestions to any significant degree. HHS Secretary Kathleen Sebelius issued a statement praising the report as "historic."

"Before today, guidelines regarding women's health and preventive care did not exist," she said. "These recommendations are based on science and existing literature, and I appreciate the hard work and thoughtful analysis that went into this report."

The recommendations call for full coverage in eight different areas. Perhaps most prominently, they include coverage for a wide range of contraceptives—all of those approved by the Food and Drug Administration. Among them are the so-called morning after contraceptives, Plan B and Ella.

"Access to contraception, counseling for victims of domestic abuse, and preventative screenings for HIV and other diseases will empower women to reduce unintended pregnancies and better protect themselves and their health," said Rep. Louise Slaughter, D-N.Y.

But the panel did not recommend covering the drug RU-486. Its omission may help reduce the intensity of criticism of the IoM recommendations from Americans who oppose abortion because RU-486 is clearly an abortion-inducing drug. Products like Plan B and Ella may be less likely to be viewed that way by many Americans, since they are intended for use right after unprotected sex.

Not surprisingly, leaders of the Catholic church condemned the recommendations, and backers of abortion and contraceptive rights enthusiastically praised them. Surveys show that many U.S. Catholics practice contraception that is opposed by the leaders of the church.

Critics will oppose the recommendations on other grounds, however, such as cost. Robert Zirkelbach, press secretary for America's Health Insurance Plans, said that "current coverage of preventive services is based on the recommendations put forth by independent, expert organizations such as the Advisory Committee on Immunization Practices (ACIP) and the U.S. Preventive Services Task Force (USPTF). Broadening the scope of mandated preventive services that go beyond or conflict with the current evidence-based guidelines will increase the cost of coverage for individuals, families and employers."

Sen. Richard M. Burr of North Carolina, a Republican on the Senate Health, Education, Labor and Pensions Committee, said, "I'm not sure you could point to any area of health care that I believe should be free. All of health care should have some out-of-pocket cost-sharing. One reason why health care spending is at the level it is is because a lot of people perceive it to be free. That's a utilization nightmare."

If HHS or Congress don't go along with the recommendations, it likely will be because insurers and employers kick up a big fuss about the costs. If they strongly argue that it will lead to fewer employers offering coverage and companies holding down wages, the pressure could lead to some narrowing of the scope of the recommendations.

But opposition could be tempered somewhat by the fact that insurers wouldn't be changing coverage right away. Although HHS officials will decide shortly whether to accept the recommendations, they would not go into effect until August 1, 2012, and then only in the first full plan year that begins after that. In addition, plans "grandfathered" from complying with a number of provisions of the health care law (PL 111-148, PL 111-152) would not have to meet the requirements. But many plans will be losing that status over the next few years.

An HHS official said that if the department were to adopt these recommendations on Aug. 1, 2011, "non-grandfathered plans would have to cover them in the first plan year beginning after Aug. 1, 2012. For many plans, this will be Jan. 1, 2013."

The official added that with regard to grandfathered plans, in 2011 "an estimated 31 million people in new employer plans and 10 million people in new individual plans will benefit from the new prevention provisions under the Affordable Care Act. The number of individuals in employer plans who will benefit from the prevention provisions is expected to rise to 78 million by 2013, for a total potential of 88 million Americans whose prevention coverage will improve due to the new policy."

The official added that "many of the 98 million people in group health plans that are expected to be "grandfathered" and thus not subject to these regulations already have preventive services coverage.

By John Reichard, CQ HealthBeat Editor

July 18, 2011 -- The Centers for Medicare and Medicaid Services (CMS) released a 56-page proposed rule that aims to help launch new consumer-oriented health plans in every state.

These cooperative plans are supposed to give customers better value for their dollar than existing for-profit insurance companies.

Within days, CMS also expects to announce the availability of $600 million in loans to help start the "consumer operated and oriented plans" (co-ops), along with another $3.2 billion to help keep them solvent.

Officials estimated that roughly 57 entities could be funded with the $3.8 billion, but they cautioned against assuming that would be the final number. They said actual loan amounts will depend on the size of plans and how much risk they are willing to take on.

But insurance industry insiders say the loan money, which must be fully repaid, is not nearly enough for co-ops be able to survive against big insurance companies. That's because of the leverage big companies have to hold down costs through bulk purchasing and their power to command lower rates from providers by steering more customers their way.

The proposed rule implicitly acknowledges the struggles some co-ops will have surviving, predicting that the federal government won't be repaid for 35 percent of the solvency loans and 40 percent of the start-up loans.

Uncle Sam would lose $230 million from 2012 to 2013, based on what the proposal calls a "high estimate" of costs to the federal government from defaults on loans and the loss of interests involved in those defaults. A CMS spokesman said the projections on the non-repayment of loans are "an absolute worse case scenario. " He emphasized that the loans would be carefully monitored and that if a co-op had problems repaying its loan, "we fill figure out a repayment schedule that fits to keep you viable."

Steve Larsen, director of the Center for Consumer Information and Insurance Oversight (CCIIO), said in a press call that he doesn't expect the rate of non-payment to actually be that high. The figures are high in the proposed rule because CMS is being "conservative," he said.

Championed by Sen. Kent Conrad, D-N.D., the CO-OP Program was created under the health care law (PL 111-148, PL 111-152) in an effort to appease those disappointed that the overhaul did not include a "public option" to cover the uninsured.

Officials said in the telephone news briefing that the money can only go to new entities. Under the health care law, loans may not go to insurance companies in existence as of July 2009. "CO-OPs will use any profits to benefit ... members, including actions to lower premiums, improve health benefits, improve the quality of members' health care, expand enrollment, or otherwise contribute to the stability of coverage for members," CMS said in a news release.

The rule describes the qualifications the new entities must meet to qualify for the $3.8 billion in repayable loans the law authorized. The rule specifies that the loans will only be made to "private, nonprofit entities that demonstrate a high probability of becoming financially viable,'' according to a written statement from CMS officials.

Larsen announced the release of the proposed rule at the National Alliance of State Health Co-ops' first conference in Washington.

The rule says the goal is to have at least one co-op in every state.

"I think it's a little early right now to speculate," on how many states will actually end up with such entities, Larsen said. But he predicted that a number of states would.

"There are many people represented here,'' Larsen said at the meeting, adding that "as the word gets out now that we have the funding and regulatory structure in place, that will generate a lot of interest as well.''

John Morrison, chairman of the new group, said that there are people in 15 states working on creating co-ops. Morrison wouldn't say how many of those he believes will make it. Morrison said given the $3.8 billion the federal government will allocate to help get co-ops up and running, he believes they will happen.

CMS in its news release sought to allay skepticism about co-op survival by noting that they are not experimental. "Several successful health insurance cooperatives currently exist around the country, covering nearly 2 million individuals," the news release said. The two are Group Health Cooperative Puget Sound in Washington state and HealthPartners in Minnesota and Wisconsin, officials said.

The health overhaul law originally allocated $6 billion for co-ops, but Congress stripped $2.2 billion of that in the 2011 continuing resolution.

During his remarks, Larsen gave several examples of areas in which providers have expressed interest in forming co-ops, including doctor groups in Rhode Island, Connecticut, and Illinois; primary care providers in Maine; physicians in Maryland who are interested in managing patients with chronic diseases; and a large multispecialty group in Arizona.

Asked how long it would take to get a co-op up and running, Larsen noted that there are 18 months before the first open enrollment period begins for health insurance exchanges under the law. The co-ops will be an option in the exchanges. "That's an aggressive time frame, no question," he added. Larsen said that the tight schedule is "doable" but it doesn't leave much time for "noodling."

"Hopefully, we will be able to have these co-ops center the market on consumers,'' Larsen said. The reason behind starting the co-ops was to have consumer-run plans available alongside corporate-run plans.

Also in the proposal, CMS officials said they adopted many of the recommendations of a federal advisory board that stressed that the new co-ops should make consumer involvement a priority.

Morrison said his organization would help co-ops by jointly purchasing services, such as claims and asset management, actuarial, and reinsurance, among others.

An attorney in private practice and Montana State insurance commissioner from 2001 to 2008, Morrison served as chairman of the health insurance committee of the National Association of Insurance Commissioners in 2005. Previous leaders include Health and Human Services Secretary Kathleen Sebelius and Larsen.

Under the rule, co-ops will be able to sell insurance policies through the general state health benefit exchanges as well as the Small Business Health Option Programs (SHOP Exchanges).

By Jane Norman, CQ HealthBeat Associate Editor

July 18, 2011 -- Accountable care organizations (ACOs) may have grabbed plenty of attention when it comes to coordinated care in Medicare. But the ACO program's cousin—payment bundling—is also on the way, and maybe sooner than expected.

Under the health overhaul law, a large-scale pilot program is to be established to try out payment bundling—a single payment for multiple hospital services from a number of providers received by one patient, rather than the traditional fee-for-service payment system.

The voluntary program is supposed to begin by Jan. 1, 2013, and continue for five years. If it's successful in cutting costs while maintaining or improving quality, the secretary of Health and Human Services could expand the pilot.

But Richard Gilfillan, acting director of the Centers for Medicare and Medicaid Innovation, said at a Center for American Progress forum that the agency's intent is to launch at least part of the pilot prior to 2013. "We are moving forward sooner with a program that addresses bundled payments for care improvement," Gilfillan said, without citing any specifics. "So, we are interested in getting going."

Nancy-Ann DeParle, White House deputy chief of staff, said that "in the weeks ahead" Medicare will launch a series of different models for payment bundling for hospitals and post-acute care facilities. "Interested providers can begin implementing and using these models in hospitals and other health care sites beginning this year," she said.

DeParle, who also worked on the health care law, said other models will come next year.

Bundling payments should help stop the perverse incentives now in Medicare, she said. "Right now there's no financial incentive for providers to work together and prevent illnesses from becoming serious long term health problems with disastrous consequences for patients and cost containment," she said.

While some bundling already goes on in hospital payments, the pilot project would extend the concept to cover payments across multiple providers, according to a Center for American Progress report on payment bundling also released at the forum. There could be financial rewards as well as penalties for providers.

The law requires that the pilot project pay for episodes of care that occur in connection with a hospitalization, with episodes defined as the time period from three days prior to hospital admission through 30 days afterward, though HHS could alter the time frame.

The services to be covered are acute inpatient hospital, physician services in and outside the hospital, outpatient hospital, emergency room, post-acute services such as physical therapy and potentially other treatments identified by HHS like care coordination.

Under the pilot, 10 defined conditions, some chronic and some acute, will be included for bundled payments, and providers can choose whether they want to participate.

Judy Feder, a health policy expert at the Georgetown Public Policy Institute and one of the report authors, said at the forum that one key issue for the pilot's design is to stimulate the broadest participation possible. Conditions for inclusion and standards for performance should be clear, she said.

In addition, the focus should be on conditions with high volumes so costs can be averaged over high numbers of patients and are more predictable, said the report. They should also be conditions for which medical treatments are well established and evidence-based.

One major challenge is to get providers who have worked separately to come together, not just in their work providing health care but in their contractual arrangements, said Feder. She suggested that if an organization such as a hospital wants to take on an entire bundle and divvy up the payments, they should be able to do so. Or Medicare could offer an alternative route in which Medicare would manage the payment, she said, distributing the payments on an agreed-upon formula.

By John Reichard, CQ HealthBeat Editor

July 22, 2011 -- Just because you build it doesn't mean they'll necessary come—at least not right away. That's been the history of various government programs to cover the uninsured, ranging from Medicaid to the Children's Health Insurance Program to, most recently, the Pre-Existing Condition Insurance Plan under the health care overhaul.

Given that track record, it's not a sure thing that enrollment will ramp up quickly when Medicaid and subsidized private plan coverage expands sharply in 2014 under the health law (PL 111-148, Pl 111-152).

Two analysts outlined some of the challenges involved and the lessons learned from existing health insurance exchanges in presentations this week to an Institute of Medicine workshop on "health literacy." The term refers to the ability to read, understand, and act on health-related information of various kinds. Surveys show that the nation's health literacy is low, hindering access to effective health care.

Alice Weiss of the National Academy for State Health Policy noted that the vision lawmakers had in passing the health law was of a speedy and efficient enrollment process. Applicants would be able to quickly and easily obtain information to compare plans and enroll. In this "enrollment superhighway," the uninsured would only have one stop to make to sign up for a plan, whether they are eligible for Medicaid or for subsidized private coverage in state health insurance exchanges. There would be no more repeated phone calls and shuffling from government office to government office.

An increasingly tech-savvy population adept at using computer technology such as smart phones, even in lower-income ranges, would be able to obtain needed information and enroll online.

But "there's obviously a great gap between where states are today and where they need to go," Weiss told the July 19 meeting. People trying to enroll in Medicaid for example are used to a technology-enabled environment but are entering an antiquated paper-based system that involves going from office to office as part of the sign-up process.

Weiss noted that according to a survey by the Pew Charitable Trusts, 35 percent of American adults now use smart phones, enabling them to download information from the Internet. That could mean frustration in a few years when health law enrollment begins. "This presents a major challenge for states, which are still stuck in a paper-based system," Weiss said.

Weiss noted that language also is a potential obstacle. One in six adults in the U.S. do not speak English, she said. Many families have "mixed status," with one parent legally in the country, the other parent an illegal immigrant and the children U.S. citizens. Trying to help them figure out how to navigate the system is going to be a challenge, she said.

Weiss also noted that fluctuating income levels during the year is going to require states to find a way to shift people back and forth from Medicaid to subsidized private coverage in exchanges. "States are going to have to make that process seamless," she said.

Another difficulty is the large number of new applicants many states will have to handle when Medicaid eligibility increases to 133 percent of the federal poverty level in 2014. Some states only enroll adults up to 32 percent of the poverty line, she said. So some "are going to have this incredible expansion of Medicaid," she said.

Where can states get help? Weiss noted the availability of grant money from the Department of Health and Human Services to assist with planning and federal matching funds in some cases for language translation services. In addition, she said that the California HealthCare Foundation is sponsoring a "UX 2014 Project" to better understand what users need or want and develop a "user experience prototype."

A second speaker, Sabrina Corlette of Georgetown University, described user experiences with health insurance exchanges already operating in Utah and Massachusetts. Exchange users in Utah objected to having to fill out detailed questionnaires about their health histories, she said. Fifty-five percent of exchange customers said the enrollment process was not easy and 74 percent said they used a broker to help.

In Massachusetts, people going to exchanges initially complained that there were too many plans to pick from and that they were overwhelmed by the level of choice. The state has switched to more standardized benefits and cost-sharing provisions to allow apples-to-apples comparison, Corlette said.

Another lesson from the state is the importance of public education to inform residents about the exchange and the "personal responsibility" provision of that Massachusetts' coverage law. State residents are required to sign up for coverage just as Americans elsewhere will be in 2014. Massachusetts made a "significant investment" in public education about the requirement and the exchange, using Boston Red Sox baseball players and other public figures to spread the word, she said. The state also set up call centers and used door-to-door visits to help people enroll. That kind of activity was "absolutely essential" to getting the big increases in coverage of the uninsured the state has seen under its health care overhaul, Corlette said.

By John Reichard, CQ HealthBeat Editor

July 21, 2011 -- It's one of the biggest decisions they have to make under the health law—but Health and Human Services officials are remaining resolutely mum about whether Uncle Sam will deny insurers access to the health benefit exchanges it runs if they give consumers a lousy deal.

Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, declined to tell reporters when that decision would be announced. Larsen wouldn't even say whether it would be announced this year.

Denying such information is consistent with the Obama administration's overall strategy: Keep from giving GOP candidates fresh opportunities to tag the controversial overhaul law with the "big government" label going into next year's elections.

Larsen spoke during a Q-and-A session with health reporters in which he delivered a status report on the big insurance regulatory structure HHS is creating under the law (PL 111-148, PL 111-152). Larsen's description showed HHS to be proceeding in workmanlike fashion—and keeping a low political profile as it goes about the work of implementing the law.

Larsen dealt with various regulatory mechanisms intended to give consumers better value for their insurance dollar: state health insurance exchanges, medical loss ratio rules, rate review rules and "essential benefits" rulemaking setting out minimum coverage standards that plans will have to meet under the law.

Shape of the Exchanges

The health care law requires the federal government to operate an exchange in a state that declines to do so or fails to make adequate preparations. How many states will be in that position is unclear. But many states have a long way to go to get exchanges ready by the Jan. 1, 2014 opening date under the law.

A big question is how the federal government will run exchanges and specifically whether it will be an active purchaser, meaning it can deny insurers a place in the exchange if they don't offer consumers a good deal. The recent HHS-proposed regulation on exchanges did not say.

Larsen said that "we will be releasing further guidance in some form—it's not clear whether it will even have to be a regulation—that would clarify how we will be setting up an exchange or portions of an exchange."

"I can't describe for you now the particular time frame," Larsen added. "I can only say that we know that's an issue that has to be resolved."

One possibility is that HHS would give the markets inside exchanges a chance to stabilize before becoming an active purchaser, Larsen said. The health care law includes a number of provisions to temporarily cushion insurers from losses after their entry into exchanges, an attempt to encourage their participation.

Starting out with what's called an "open model"—in other words, one in which exchanges don't exclude insurers based on the prices they charge—is "certainly part of the mix of thinking about which model" the federal government will employ, Larsen said. It's possible that both the federal government and state governments could decide to start with an open model and make a transition to becoming an active purchaser later, he said.

Larsen was asked to respond to criticism that the proposed exchange reg went too far in offering states flexibility and instead should have offered a standard model to prod states to take a particular approach.

"Like many, many of the decisions that we have to make with the regulation, we have to kind of balance competing and in some cases equally legitimate interests," Larsen responded. "We think that there's tremendous value if you have both models."

"At the end of the day we thought that it was more important to allow states to tailor their exchange to the circumstances in their state. We'll see how many offer the active purchaser model. I think some will."

The insurance and drug industries have locked arms in a nationwide campaign to keep state and local officials from becoming active purchasers. If the Obama administration is going to enter into that fight by becoming an active purchaser in federally run exchanges, it's in no hurry to show its hand. Larsen said that in general, states "are making good progress" in developing exchanges, but he declined to predict how many would be ready to run the marketplaces on their own by Jan. 1, 2014. Ten states have enacted legislation to create their own exchanges, and in "about the same number there's legislation pending or will again be pending when states reconvene in January," he said.

Larsen said that more than 40 states are talking to stakeholder groups about exchange development. "About half the states have a task force and regular interagency meetings to do exchange planning," he said. An important analytical job each state must do is an information technology "gap analysis" to determine the data processing needs of its exchange. Larsen said 30 states have begun that analysis and about half of those have completed it.

Later this summer HHS will start examining each state to determine how it is progressing in exchange development against specific benchmarks. "We may have a small number of states in which the state plays no role" in running the exchange, he said.

At the other end of the spectrum, he singled out Colorado as a state that is particularly far along in exchange development.

Larsen noted that states have access to federal funding to establish and run exchanges through 2014 and that the law does not cap the money available for these "establishment grants." The amount of money spent will depend on the number of applications HHS gets, he said.

Larsen was asked what would happen if a state created an exchange and it failed to provide consumers affordable coverage. Would the federal government then step in and run it? The HHS official said the department hasn't gotten far enough along in its thinking to have addressed that question.

Larsen noted that additional rulemaking and regulatory guidance governing exchanges are in the works. The rulemaking and guidance will address such issues as the quality improvement plans insurers participating in exchanges must have; how plans in exchanges will be ranked based on quality of care; and eligibility and enrollment functions.

Essential Benefits

Another regulation HHS officials say they will propose later this year governs the "essential benefits" that insurers must provide inside and outside exchanges. As part of that process, the Institute of Medicine is preparing a report on essential benefits, but Larsen noted that the report won't recommend a specific package of benefits but rather a process for determining what the essential benefits are.

Larsen was asked about a rumor that HHS will leave it to each state to decide what the essential benefits are in its state. "I'm not going to comment on the rumor," he said. But "there are certainly a range of approaches you can take." So far, HHS has shown a strong tendency to let states decide matters, an approach that helps the Obama administration counter criticism that the health care law puts federal bureaucrats in charge of what care people will get.

Rate Review

"We completed our evaluation of whether states have an effective rate review process," Larsen noted. Non-grandfathered plans that have a proposed rate increase over 10 percent must notify the public and justify the increase, starting Sept. 1. Many states have hired actuaries and consultants to beef up their review processes, he said. There are 40 states or so that now have an effective rate review process. "You're looking at real, concrete progress," he said.

This fall, the federal government will do the reviews in the 10 states that lack an effective rate review process. The health care law doesn't give states power to deny increases, but the hope is that insurers will reduce them if state or federal officials label proposed premium hikes as unreasonable.

Factors HHS considered in determining whether a state has an effective rate review process include whether it receives documentation from an insurer sufficient to determine that a rate hike is unreasonable, whether the state has effectively reviewed the documentation, whether the state reviews the reasonableness of the assumptions insurers make in proposing a rate increase, and whether the state sets forth a standard in law or regulation in determining whether a rate his is unreasonable.

Reportedly, the 10 states in which HHS will review rates are Alabama, Arizona, Idaho, Louisiana, Missouri, Montana and Wyoming in both the individual and small-group markets, and Iowa, Pennsylvania and Virginia in the small-group market.

Larsen emphasized that "for the first time there's going to be a uniform disclosure form" insurers must issue laying out for consumers why their rates are going up.

Medical Loss Ratio

Larsen was asked about the status of health plans for U.S. expatriates under the medical loss ratio requirements that establish minimum payouts by plans for health care and quality improvement. A questioner noted that the plans' exemption from the standards expires this year and said at least one of them, Cigna Corp., has said it would move its international operations involving hundreds of jobs overseas if it doesn't get a permanent exemption.

Larsen said HHS is aware of the plans' concerns and that "hopefully we can work through this in a way that avoids unfortunate consequences.

"We're very aware and tuned into concerns that they have," he added. "One of the things that has always guided our thinking when we're implementing the ACA is to maintain the promise" that people can hold on to the coverage that they have.

HHS expects to issue regulations by the end of the year addressing the status of "expat" plans and of "mini-med" plans under the MLR standards. Mini-med plans are those that offer relatively few benefits.

He also said that HHS will issue decisions within 10 days on requests from North Dakota, Iowa, and Kentucky for additional time to comply with MLR standards.

By CQ Staff

July 18, 2011 -- The American Hospital Association's Board of Trustees has elected Benjamin K. Chu, who is group president of Kaiser Foundation Hospitals in Southern California and Hawaii, as its chairman-elect designate.

Chu will assume the chairmanship in 2013, becoming the top elected official of the national organization that represents America's hospitals and health systems, the group said in announcing his election.

Chu served for three years as president of New York City's Health and Hospitals Corporation, the largest public hospital system in the country. He was senior vice president for medical and professional affairs for the public hospitals from 1990 to 1994, as well as acting commissioner of health for the New York City Department of Health.

Maureen Bisognano has been elected to The Commonwealth Fund Board of Directors. Bisognano is president and chief executive officer of the Institute for Health Care Improvement, a not-for-profit organization that works to improve health care. Bisognano is also an elected member of the Institute of Medicine and instructor of medicine at Harvard Medical School.