By Rebecca Adams, CQ HealthBeat Associate Editor

December 20, 2012 – The Department of Health and Human Services recently said that they believe three more states have demonstrated that they will be ready to open exchanges in 2014, including one that will operate through a partnership with the federal government.

HHS issued conditional approvals to Delaware, Minnesota and Rhode Island. Delaware is the first partnership exchange to win a conditional approval.

Last week, HHS officials said they have deemed that Colorado, Connecticut, the District of Columbia, Kentucky, Massachusetts, Maryland, New York, Oregon and Washington will be ready to operate state-based exchanges in time for open enrollment in October.

So far, about half of the states are reserving their option to rely on the federal government to operate exchanges in their areas. Eighteen states and the District of Columbia told HHS officials by last week's deadline that they plan to set up their own state-based health insurance markets.

Another five—Delaware, Arkansas, Illinois, Iowa and North Carolina—have said they will operate a hybrid exchange in partnership with federal officials.

State officials still have until Feb. 15 to notify HHS that they would like to pursue a partnership. Analysts are watching to see whether states such as New Jersey and Virginia will eventually decide to work under a partnership model.

Under the health care law (PL 111-148, PL 111-152), HHS is supposed to issue all conditional approvals by Jan. 1 for exchanges that can start enrolling people in October for the year beginning Jan. 1, 2014. HHS officials had asked the states for their decisions earlier but extended the deadlines after governors complained that they did not have enough details to make informed choices.

HHS officials have said that states will still have some control over their markets, even where the federal government is overseeing the exchange. For instance, in a question-and-answer document issued on Dec. 10, HHS officials said federal officials could consult state reviews in places that have effective processes rather than try to have HHS officials decide alone whether plans should be allowed to offer coverage on exchanges.

"States across the country are working to implement the health care law and build a marketplace that works for their residents," HHS Secretary Kathleen Sebelius said in a written statement. "In 10 months, consumers in all 50 states will have access to a new marketplace where they will be able to easily purchase quality health insurance plans."

• HHS Exchange website

By Jane Norman, CQ Roll Call

December 19, 2012 – The idea of a health insurance exchange as laid out in President Barack Obama's signature law seems straightforward: an online marketplace where people will shop for private health insurance, like buying an airline ticket or a hotel room. But making sure exchanges in every state are ready for business by the law's deadline of 2014 has been anything but easy given the legal, technical and political questions surrounding them.

States had until Dec. 14 to tell the Obama administration whether they would be building their own exchanges. The answer was yes for 18 states and the District of Columbia. The remaining states, most led by Republican governors, will either have their exchanges run by the Department of Health and Human Services or take part in federal-state partnerships. One of the 18, Utah, is trying to gain permission to keep its current exchange even though it doesn't conform to the federal law.

Even with all that's been written about the 2010 law (PL 111-148, PL 111-152), a lot of confusion still exists about the exchanges and the process required to set them up. Following are some answers to a few basic questions that have been asked.

What does a health insurance exchange do and who joins one?

Each exchange will offer a selection of health care plans that meet standards for quality and affordability set by the health care law. The idea is that insurers will compete in the exchange to offer the best plans, reducing costs for consumers.

The exchanges will serve the 19 million people who don't have group health insurance through their employers and instead buy health care policies directly from insurance companies. Exchanges are not intended to replace the group coverage offered by large employers to about 60 percent of Americans.

Small businesses also will obtain insurance for their employees through the exchanges' Small Business Health Options Program. In addition, some states will have insurance plans in the exchange offered by nonprofit, consumer-run co-ops. The Congressional Budget Office estimates that 25 million to 26 million Americans will eventually buy their insurance through an exchange.

How do people take part in an exchange?

Enrollment will open in October and end in March 2014. Consumers will look at health insurance plans on an exchange website or obtain details over the phone from a call center. Prescription drug coverage, in-network doctors, co-payments and more will be spelled out.

Consumers also will be able to find out from the exchange whether they qualify for federal subsidies to buy insurance, which will be available to single people and families earning up to 400 percent of the federal poverty level. And they'll find out if they or their children qualify for Medicaid or the Children's Health Insurance Program. One of the IT challenges is how to communicate that information between the states and the federal government.

In states in which exchanges are run by the federal government, how will they be different?

HHS officials say the federal role will be limited to certifying and managing the health care plans offered in the exchanges, although that's a big task. States will continue their traditional roles in private insurance regulation and enforcement. Plans that are offered in federal exchanges must meet state licensing requirements and be considered in good standing with state insurance officials.

In each state, the federal government will operate a call center and website with a chat function. Call center employees will be trained on the details of insurance plans offered in the state as well as eligibility standards for each state's Medicaid program and Children's Health Insurance Program.

In working with states and in setting up the federal exchange, HHS officials in the last month alone have issued five proposed rules and notices dealing with exchanges, sent three letters to governors and other state officials and posted draft applications for public comment. Earlier this year, the agency issued 11 guidance documents for states as well as three final regulations and held 21 public meetings in 13 states that were open for public comment and questions.

Who will pay for operation of the exchanges?

HHS has distributed more than $2 billion in grant funding to states for planning and establishing exchanges. Once exchanges are up and running, they are supposed to be self-sufficient by Jan. 1, 2015, and raise enough money to pay for their administrative costs. In exchanges run by the federal government, federal officials have proposed imposing a fee on insurers in exchanges to pay those costs. States that will run their own exchanges also could levy user fees; the Massachusetts exchange that serves as a model for the health care law exchanges assesses a fee.

It's likely these fees will be passed on to consumers in the insurance premiums they pay.

What kinds of benefits will be included in the plans sold on the exchanges?

Any health care plan that is sold through an exchange will have to be a qualified health plan. That means it must meet requirements for a minimum level of value to consumers so it can be compared to other options.

Plans also must include an essential health care benefits package. Each state picks a typical employer plan in its state that serves as a model for that package. There must be coverage in 10 broad categories of health care: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services; prescription drugs; rehabilitative services and devices; lab services; preventive and wellness services; and pediatric services including dental and vision care.

What's next?

More deadlines. By Jan. 1, HHS has to issue approval of any state exchanges that will operate in 2014. On Feb. 15, states that intend to run state-federal partnerships in that first year have to submit their complete applications to HHS. Insurers start handing in applications in April to offer their plans in any of the exchanges. Consumer enrollment starts in October. And on Jan. 1, 2014, all 51 exchanges are to be up and running.

Also, because so many states will use a federal exchange or go with a federal-state partnership, pressure will increase on HHS to supply more details in coming months about how those types of exchanges will be operated.

HHS has yet to issue a detailed proposed rule on how the federal exchanges will operate, although a document with additional guidance was published in late November. A team from the agency in charge of eligibility and enrollment in the federal exchanges is expected to begin testing its processes soon with the help of insurance plans.

The agency also is working on how federal exchange websites will work to help consumers sort through their choices of health care plans based on their preferences.

And HHS must set up a program to establish the "navigators" in its exchanges—groups or individuals who get grants to help consumers pick plans.

By Rebecca Adams, CQ HealthBeat Associate Editor

December 21, 2012 – Trade organizations representing such major interests as medical providers and consumers argue in comments to federal officials that the essential health benefits proposal would give insurers and states too much flexibility, which could potentially undermine consistent, robust coverage.

The comments are just some of the more than 1,000 responses that the Centers for Medicare and Medicaid Services collected by Friday afternoon. Individuals are also bombarding CMS officials with pleas for specific benefits. Public comments are due by Dec. 26.

The American Hospital Association said that while its members understand the need for some flexibility for insurers, "we remain concerned that too much emphasis is being placed on providing flexibility and affordability rather than ensuring that coverage is meaningful."

Several groups said the proposed rule would allow too much substitution of services. The proposed rule did narrow the amount of substitution that could occur from an earlier bulletin released by federal officials last year. The bulletin had suggested that health plans could substitute one type of medical care for another. But the proposed rule, which was released Nov. 20, said insurers could only substitute care within certain categories, such as inpatient rehab services for outpatient rehab.

"The effect of this provision is that plans are allowed to deviate from their state's [essential health benefit] definition and the only real standard for the benefit is cost," Linda Fishman, AHA senior vice president for public policy analysis and development, wrote in the association's letter. "Furthermore, those substitutions may not be readily apparent in the general benefit summaries that will be available, resulting in a lack of transparency for consumers about what is covered."

Consumers Union suggested that summaries of the plans available in the exchanges be expanded to note what kinds of substitutions were made.

The group also recommended several provisions that would limit substitution and asked CMS officials to add language ensuring that state officials could ban benefit substitution if they wish.

Consumers Union officials offered an example of the kind of substitution that they are worried about.

An insurance company could substitute coverage of physical therapy services that treat short-term sports injuries for those that treat more chronic conditions and are more commonly used by people with disabilities.

"Leaving substitution up to insurers could result in their crafting benefit packages that attract certain populations at the expense of others," the group concluded.

The Alliance of Specialty Medicine, representing an array of specialists, said its members are worried that the proposal would lead to drug coverage that is not broad enough for many patients and result in insufficient access to specialty care.

In particular, the group raised concerns about the proposed rule's provision on prescription drug benefits. The original bulletin would have guaranteed coverage of at least one drug in every class. The proposed rule did expand that to say that every plan would have to cover at least one drug in every category and class, or the same number of drugs in each category and class as the benchmark plan that a state selects, whichever is more. That raises the possibility of having coverage of more than one drug in every class, but the Alliance said that does not go far enough.

"By allowing plans to cover an arbitrary number of drugs, there is no guarantee patients will get access to the medicines they need," the group wrote.

Another concern mentioned by groups, including the Alliance and AHA, is that the proposal would cap out-of-pocket spending by consumers but out-of-network costs do not count toward that limit, except for emergency care.

"As providers of specialty care, the Alliance believes it is a critical problem that there is no limit to the amount an individual may need to pay for out-of-network providers," the group said. "This aspect of the EHB proposed rule essentially promotes a closed provider network. It is especially problematic for patients who need to seek specialty care providers who, by the nature of their specialty, often see patients from a variety of health plans in- or out-of-network. This proposed rule would impede a patient's access to specialty care and treatment."

The National Health Council, a group that focuses on chronic disease, said it is important to put in place federal monitoring programs to ensure that plans are meeting federal requirements. They are worried that insurers could construct plans that would discriminate against people with certain types of conditions by putting in place high cost-sharing requirements or limits on services.

Insurers represented by America's Health Insurance Plans said that they are still working on their comments. They may want to respond to the concerns raised by other groups in their letters. The plans have said in the past that one of their main concerns is that the coverage be affordable, and they say putting restrictions on how plans can design their benefits can raise prices for consumers.

By Emily Ethridge, CQ Roll Call

December 18, 2012 – President Barack Obama's latest offer in the fiscal cliff negotiations includes a path to permanently repeal the formula that dictates cuts to Medicare payments to physicians, but that change—as well as others to the federal health care program—probably will wait until next year.

Until then, according to a House aide, Obama would provide physicians with a one-year payment patch to stave off the 27 percent cuts that are scheduled to take effect Jan. 1.

In addition, other major changes to Medicare, including a move to increase the program's eligibility age, also probably will not be considered until next year, when lawmakers take a broader look at entitlement programs, House Speaker John A. Boehner recently said.
At a press conference, he said he would not insist on raising the Medicare eligibility age from 65 to 67 during fiscal cliff negotiations before the end of the year.

"That issue has been on the table, off the table, back on the table. It's an issue for discussion. But I don't believe it's an issue that has to be dealt with between now and the end of the year," said Boehner, R-Ohio. "It is an issue, I think, if Congress were to do entitlement reform next year and tax reform, as we envision, if there's an agreement that issue will certainly be open to debate in that context."

That suggests that whatever deal Obama and Boehner come up with to avert the fiscal cliff will not include significant structural changes to the 47-year-old health care program for seniors and the disabled. In fact, even the details of the $400 billion in cuts to health care entitlement programs—floated as part of Obama's recent proposal—aren't expected to be worked out until early next year."

"The figure given was without specifics and obviously we're going to have to talk specifics at one point or another," Rep. Sander M. Levin, D-Mich., said last week. "I think the 400 billion in health care was proposed to be worked on next year."

Lawmakers and health provider groups have long lobbied to repeal and replace the sustainable growth rate (SGR), a 1997 formula that sets up how much physicians are paid to see Medicare beneficiaries. Lawmakers have consistently prevented the payment cuts from taking place for the past decade, but providers say the uncertainty can lead them to drop Medicare patients.

As with other major changes to the entitlement programs, however, the SGR replacement now is not expected to come up until talks next year.

The House aide said the permanent repeal of the SGR would be discussed next year as lawmakers negotiate other savings to entitlement programs.

Another source familiar with the talks said Obama's offer, made last week, included a permanent repeal of the SGR, in addition to the $400 billion in savings to entitlement programs.

According to a health care lobbyist, House Republicans plan to offer a two-year payment patch in coming days. The proposal would be offset by removing limits on reclaiming overpayments of subsidies for the insurance exchanges in the 2010 health care overhaul (PL 111-148, PL 111-152). A similar offset was used in the 2010 "doc fix," but Democrats have opposed such proposals more recently.

The major hurdle to a permanent repeal of the SGR, whenever it would happen, is the cost. The Congressional Budget Office found that keeping physicians' payment rates steady through 2022 would increase Medicare spending by $245 billion over the next 10 years. A one-year fix to keep payment rates steady is estimated to cost about $25 billion, and lawmakers in the past have demanded that cost be offset.
Senate Finance Committee Chairman Max Baucus, D-Mont., recently expressed enthusiasm for Obama's proposal to include a permanent solution to the SGR, along with one for the alternative minimum tax.

"I love it," he said. "I hope we can pass it."

But when asked how such permanent fixes could be paid for, Baucus replied, "We'll see."

Obama has said he wants a permanent solution to the physician payment formula, but he has not previously proposed a full replacement for it. His fiscal 2012 budget proposal included a two-year payment patch to stop pending cuts, but his fiscal 2013 plan did not offer a way to stop the scheduled reductions.

Obama's fiscal 2012 budget proposal also assumed that any patches to avoid the called-for cuts beyond those two years would be fully offset, but did not specify how. Because the plan did not provide details, the CBO did not include any of those savings in its score of the president's proposal.

If a fiscal cliff deal is not reached, it's unclear whether physicians would get a payment patch. In discussing his so-called Plan B legislation to deal with impending tax increases while negotiations continue, Boehner did not mention a patch to avoid the scheduled cuts.

Rep. Phil Gingrey, R-Ga., said he mentioned the expiring Medicare physician payment patch in a House Republican caucus conference last week.

"I felt very strongly that there should be a doc fix in it. And the speaker did not say one way or another whether there would be a doc fix in it," Gingrey said.

He added that his impression from Boehner was that the Senate might add a proposal to block the Medicare physician payment cuts when it returned the legislation addressing the tax increases.

By Caitlin McGlade, CQ Staff

December 20, 2012 – More than half of American workers whom the Employee Benefit Research Institute surveyed would switch to a less costly health benefits plan, shop for others or drop coverage altogether if the government began taxing health benefits.

The nonpartisan group's poll found that 26 percent of workers getting employment-based insurance would find a cheaper plan, 21 percent would shop for coverage directly from insurers and 9 percent would drop coverage if health benefits were taxed. Four in 10 of the respondents said they would stick with their current plans.

Lawmakers have considered a number of proposals over the past few years that would tax health benefits to help pay for the health care overhaul or fill revenue gaps. Sen. Max Baucus, D-Mont., suggested a tax on generous employer-provided health benefits in 2009, but his notion was met with sharp criticism by his own party. The Simpson-Bowles proposal included language phasing out tax breaks for employer-sponsored health insurance.

Sen. John McCain, R-Ariz., talked of replacing the tax-exempt status of employer health coverage with refundable tax credits. President Barack Obama fought the suggestion but then proposed a benefits tax on the top earners in 2011.

Study author Paul Fronstin has continued to measure public opinion on the topic annually because he expects that the tax break isn't safe in years to come.

"The fact is, given the longer-term financial issues of the budget, it's hard to imagine that the tax treatment of health benefits won't be a target," Fronstin said in an interview.

Fronstin's team randomly called about 800 people as part of the Health Confidence Survey, a poll that has been taken since 1998.

By Jane Norman, CQ HealthBeat Associate Editor

December 19, 2012 – The Department of Health and Human Services recently announced that 23 states qualified for $306 million in performance bonuses for their gains in signing up low-income children for health coverage, including Utah for the first time.

The bonuses come as states and the federal government work on setting up health insurance exchanges that will begin operation in 2014 and are intended to make enrollment in public programs even smoother. According to an Urban Institute study published earlier this month, 86 percent of eligible children were signed up for CHIP and Medicaid in 2010, an increase from 81.7 percent in 2008.

The bonuses were created under the 2009 reauthorization of CHIP (PL 111-3) and reward states for improving their CHIP and Medicaid programs' access to low-income children and also for increasing enrollment. This year marks the fourth fiscal year bonuses have been handed out. The amount of the payments is tied to increases in enrollment—the bigger the increase, the bigger the bonus.

Cindy Mann, director of Medicaid at the Centers for Medicare and Medicaid Services, said in a telebriefing that one of the agency's top priorities is making sure children get the medical care they need, and children's enrollment has been on the upswing in contrast to trends among adults.

The 23 states receiving bonuses are Alabama, Alaska, Colorado, Connecticut, Georgia, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Montana, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, South Carolina, Utah, Virginia, Washington, and Wisconsin. The largest bonus went to Colorado, at $43 million.

Medicaid and CHIP programs vary from state to state. According to CMS officials, states receiving bonuses upped their child enrollments above a baseline figure and also put in place at least five of eight specific program features. For example, to qualify, states could eliminate requirements for in-person interviews, use the same application and renewal forms for Medicaid and CHIP, allow health care providers to enroll children right away contingent on a review of eligibility and allow full-year enrollment regardless of parents' income changes.

Utah qualified for the first time because it eliminated the in-person interview and coordinated application and renewal procedures, among other changes, officials said.

• Urban Institute Study and CHIP and Medicaid Participation