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December 2, 2013

Washington Health Policy Week in Review Archive e29f6184-8ab6-44d9-927c-07b0513dc42a

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Administration Delays Online Health Insurance Enrollment for Small Businesses

By Rebecca Adams, CQ HealthBeat Associate Editor

November 27, 2013 -- Small-business owners who want to apply for new health coverage for their workers through the new marketplaces will have to do so through brokers or paper applications because the online portal will not work for another year, federal officials said recently.

"For 2014, small employers will use direct enrollment rather than in states where the federal government is running the marketplace," said a Health and Human Services Department spokeswoman in an email. "This allows small employers to sign up for coverage through offline enrollment while Centers for Medicare and Medicaid Services (CMS) works on creating a smoothly functioning online experience in the SHOP Marketplace."

Even before the announcement, lobbyists who watch the issue had speculated that there would be an additional delay.

The 2010 health care law (PL 111-148, PL 111-152) calls for online marketplaces in each state—typically one for individuals and a separate one for small companies. The federal website has handled enrollment for individuals in 36 states.

The delay affects businesses in those 36 states that are supposed to use for enrollment. The goal is to have an online Small Business Health Options Program (SHOP) enrollment by November 2014.

CMS Administrator Marilyn Tavenner had testified that she recommended before the Oct. 1 launch of the new marketplaces to delay two functions of the website. One was the portal for small businesses and the other was for the Spanish-language version of the website. CMS officials promised that both of those delayed functions would be ready by the end of November, but neither will be. Administration officials recently said the Spanish-language website will be up later in December.

"This new delay announcement is a disappointment but not a surprise," said National Federation of Independent Business Manager of Legislative Affairs Kevin Kuhlman. "Small businesses continue to be low on the priority list during the Obamacare implementation process. It probably matters little to people in Washington that the failure to get the small business exchanges online adds yet another onerous paperwork requirement for job creators. The continued delays add to uncertainty and contribute to the decision of many owners to take early renewals of their small-group plans."

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Health Law Advocates Hope for Silver Lining in Subsidy Data

By John Reichard, CQ HealthBeat Editor

November 27, 2013 -- Here's the bad news about the people who have signed up so far for the insurance plans sold on the federal and state exchanges that opened Oct. 1 under the 2010 health law: Relatively few took up subsidies to help pay their premiums.

Here's the good news about those new enrollees: Relatively few took up subsidies to help pay their premiums.

Only 30 percent of exchange applicants as of Nov. 2 were eligible for federal subsidies to lower their premiums and cut out-of-pocket medical costs, according to an analysis released this week by Washington consulting firm Avalere Health. That's far below the 84 percent of exchange enrollees that the consulting firm projects will ultimately turn out to be eligible for those subsidies.

The low figure suggests the word just isn't getting out to people who could qualify for financial help. That's bad news for the law's proponents, who expected the subsidies to drive millions of Americans to get coverage, particularly the young and healthy whose relatively low medical costs would make it possible for older and sicker Americans to find affordable coverage on the new marketplaces.

But it's good news too, says Avalere CEO Dan Mendelson.

"The figures show the potential for increased exchange enrollment in the coming weeks as we get closer to the deadline for 2014 insurance," Mendelson says. "As lower-income Americans determine that they have access to subsidized commercial insurance products, we can expect to see many enroll to save money."

As of Nov. 2, a total of 106,000 people nationwide had enrolled in health plans through the federal exchange site and state exchanges, Avalere noted, citing data from the Health and Human Services Department. "However, nearly 1.1 million individuals had applied and been deemed eligible for coverage."

Among those, 30 percent were eligible for subsidies, meaning they had incomes below 400 percent of the poverty line, with 84 percent of final exchange enrollees ultimately projected to qualify.

Subsidy eligibility among visitors to the marketplaces was higher on the federal exchange than on state exchanges, which is perhaps surprising since states are thought to be more active in promoting the new coverage options under the health law (PL 111-148, PL 111-152). The percentage found to be subsidy eligible on state exchanges was 23 percent compared to 34 percent at the federal exchange.

HHS says exchange customers must enroll in plans by Dec. 23 and pay by Dec. 31 in order to have coverage that starts Jan. 1.

A stronger advertising and outreach campaign next month could boost awareness of subsidies and sign-up rates. But the Obama administration faces a delicate balancing act because it doesn't want to crash problem-plagued given its history of becoming easily overloaded.

Figures released Nov. 21 by California's exchange, among the nation's most successful, also showed that people who completed coverage applications in many instances were not eligible for subsidies. State data showed that 30 percent were eligible for subsidies, 31 percent were non-subsidized and 39 percent appeared to qualify for Medicaid. English was by far the predominant language of applicants.

"The enrollment numbers so far reflect a tremendous demand for health insurance, which will only grow stronger as the facts about Covered California health coverage options spread across California's diverse communities of language and culture," said Peter Lee, director of the state's exchange.

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Obama Administration Proposes Giving More Money to Insurers

By Rebecca Adams, CQ HealthBeat Associate Editor

November 25, 2013 -- Federal officials released a proposed rule last week that would increase the amount of money the administration will give insurers to compensate for any losses they have on health plans in the new marketplaces.

Republicans protested that the proposal also would exempt labor unions from having to pay a tax under the health care law (PL 111-148, PL 111-152). Sen John Thune, R-S.D., called the exemption "crony capitalism at its worst."

The rule "would exclude from the obligation to make reinsurance contributions those self-insured plans that do not use a third party administrator for their core administrative processing functions."

A Centers for Medicare and Medicaid Services (CMS) official said that in addition to multi-employer plans used by unions the change also applies to a number of local and state governments and universities.

The proposal is part of a scramble by the administration to compensate insurers for unexpected losses they may face because of recent health law implementation problems,

Administration officials said last week that they were exploring ways to provide more money to health insurance plans because President Barack Obama unexpectedly announced a change in requirements for benefits in health plans next year.

Federal rules previously had said that health plans must provide a minimum set of benefits starting on Jan. 1, unless the plans had been in existence in March 2010 when the health care law was enacted and haven't changed substantially. As a result, insurance companies sent notices to millions of customers saying that their plans would be cancelled at the end of the year. Then Obama said last week that insurance policies could be extended for another year if insurance commissioners and insurers agreed.

The 255-page proposed rule recently released by the CMS outlines several ways that the administration is thinking about providing more money to insurers. The agency is giving the public 30 days to comment on it before the administration finalizes a rule.

Insurers said they were pleased that the administration has outlined its thinking.

"We appreciate that the administration is taking steps to stabilize the market and minimize disruption for consumers," said Robert Zirkelbach, spokesman for America's Health Insurance Plans.

The extra cash will come through the federal reinsurance program, which pays the costs of unusually expensive patients, and the federal risk corridor program, which limits insurers' losses and profits.

Federal officials proposed paying for a greater number of high-cost cases in 2014. They said they are considering paying costs above $45,000 next year instead of the original plan to pay expenses over $60,000 under the reinsurance program.

The reinsurance program is limited to $20 billion for three years under the law. The proposed rule also takes the insurance industry's recommendation of ensuring that all of the contributions collected for a benefit year are spent that year instead of some of the money being used the following year.

For 2015, CMS officials proposed paying half of the costs above $70,000 for patients with high medical expenses, up to a $250,000 cap that is similar to one that appears to remain intact for 2014.

The risk corridor program includes targets for insurers' expected profits, after their costs are considered. If less money comes in, then the federal government splits the losses with the companies. If the companies make more money, then they have to give some back to the federal government.

One way that CMS officials may give insurers more funding is by increasing the amount of money the federal government will pay for losses that are more than 3 percent higher in 2014 than what insurers expected. Under previously published rules, the federal government would pick up half of the costs for losses that were between 3 percent and 8 percent higher. For losses that were 8 percent higher, the agency would pay 80 percent of the losses.

The proposed rule asked the public to comment on some ideas that the agency suggested to boost those payments through a change to the formula. Agency officials also invited the public to put forward their own ideas.

As part of the proposed fixes, the agency would increase the amount of costs that insurers could subtract from their revenue. Under previous rules, insurers' costs would be capped at 20 percent of after-tax profits.

The agency also suggested another way that they are considering providing more funds to insurers. CMS officials said they might adjust a requirement under the medical loss ratio provisions of the health care law that forces insurers to spend at least 80 percent of the money they get from customers on medical claims. "We seek comment on the best way to make such a modification," the rule said.

The rule proposes to freeze user fees on health plans in the new federally-administered marketplaces at 3.5 percent in 2015, just as in 2014.

Insurers say that changes to risk corridors and reinsurance are critical because of recent implementation problems with the law.

Specifically, the troubled startup of the website could lead to an older and sicker mix of enrollees on which 2015 rates will be based, America's Health Insurance Plans said in an "issue brief." Also, the decision by the Obama administration to let insurers and state regulators renew canceled policies in the individual market could lead to fewer younger and healthier enrollees coming into exchange plans.

"If fewer younger and healthier people choose to purchase coverage in the exchange due to these changes, premiums will increase in the marketplace and there will be fewer choices for consumers," the brief says.

Risk corridor and reinsurance will now play a more critical role in assuring a stable long term market, it added. "Without additional support, consumers may face higher premiums and fewer choices in future years."

The proposal also contains a wide range of other issues, including information on cost-sharing and provisions affecting the small business marketplace. For instance, a SHOP marketplace could allow an employer to define up to four different contribution levels, depending on whether the worker was full-time or part-time and whether the employee chose self-only or family coverage.

Some industry officials and consumer advocates are dismayed at the short time period allotted to comment on the rule, which includes the phrase that the agency plans to "seek comment" 66 times.

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Forget Nov. 30; Crunch Time for Health Law Comes Jan. 1

By Rebecca Adams, CQ HealthBeat Associate Editor

November 27, 2013 -- Saturday marks the day the Obama administration has said will be in fairly good shape, although officials are downplaying expectations and contending while the website is much better, it will continue to be improved. Another deadline, however, is unavoidably real: the start of January.

That is when health coverage is supposed to begin for plans sold on the federal marketplace and the marketplaces operated by the states under the 2010 health law.

Many possible problems are coming into focus as Jan. 1 approaches, raising a question perhaps crucial to the fate of the health care law. Will the availability of new benefits soften harsh public perceptions of the law's rocky rollout, or will an onslaught of new difficulties make the launch seem much worse?

The arrival of the new year could make the enrollment problems in October look almost tame by comparison. For example, people who had coverage in 2013 may not have it in 2014. Some people who believe they enrolled in time for 2014 coverage may not be listed correctly in insurers' databases. That could mean problems getting claims paid by insurers next year.

Last-minute enrollees may not get notified that they are covered by the time benefits start. And many of the newly enrolled people, some of whom have never had insurance before, may be uncertain about what their new benefits provide, which doctors are covered or how much they have to pay out of their pockets.

Even supporters of the law (PL 111-148, PL 111-152) expect confusion as the benefits start.

"It's very likely there will be some confusion as to whether people are covered or not, who's in the network, whether their drugs are covered," said Tim Jost, a law school professor at Washington and Lee University who is an expert on the health care law. "And I'm sure we can count on opponents of the law calling every reporter and sending out negative anecdotes. It probably is going to take a little while for everything to settle down."

White House officials say that, which handles enrollment in 36 states, is operating much more smoothly than it was soon after the October launch. But even after recent improvements, the website is expected to only be able to handle 50,000 users at a time.

And the administration expects a surge of interest in December, because anyone who has not enrolled by Dec. 23 will not be covered in January.

The administration hopes that only about one in five people would have to apply through paper applications or by calling a hotline because they are unable to enroll online. It is not clear whether they are meeting that goal.

Some people who currently have coverage could find themselves without it on Jan. 1. That includes those who are getting notices that their policies are not being renewed because the benefits do not comply with the law's minimum benefits standard. President Barack Obama announced recently that insurers could choose to extend those policies for an additional year if state insurance commissioners allow it. But that reprieve does not help everyone.

In California, more than 900,000 people have gotten cancellation notices. State officials are not permitting extensions, except for one previously announced plan that covers about 200,000 people. It seems clear from recent enrollment statistics that hundreds of thousands of Californians who will lose coverage on Jan. 1 will not have enrolled in the marketplace by then.

"No doubt there will be some people who had coverage before who receive cancellation notices who will not have been able to get enrolled in new coverage, and so there are going to be some problems like that," said Families USA Executive Director Ron Pollack, a supporter of the law. "I don't know how large ultimately the gap will be."

Pollack acknowledged that for "anyone with significant health care problems, this is going to cause some significant difficulties for them, no away around it."

Another category of people who are losing coverage are those who currently are covered by the 35 state high-risk plans.

Fifteen of the 35 plans had been slated to cancel coverage by Jan. 1 because state officials assumed people would transfer to the new marketplaces, where insurers will be unable to deny coverage for people with pre-existing conditions, according to the National Association of State Comprehensive Health Insurance Plans. Another two states, Colorado and Florida, planned to end coverage in April and June 2014, respectively.

Those enrolled are chronically ill patients who do not want to stop getting medical care for their conditions, such as cancer or diabetes.

One state, Indiana, has announced it would extend coverage, but it is not clear how many more will follow that lead.

Administration officials did try to give consumers more time to enroll by extending the original deadline for January coverage from Dec. 15 to Dec. 23. But that time frame put more pressure on insurance companies who have to process the information.

Some of the biggest concerns involve the information flow between the website and insurers. Centers for Medicare and Medicaid Services (CMS) IT advisor Henry Chao, who has been one of the leaders of the project, said earlier this month that 30 to 40 percent of the website still had not yet been built.

Those functions include the payment and processing tasks that the public does not see, such as sending subsidy payments to insurers.
Bob Laszewski, a consultant for insurers, said recently that some progress has been made, "but not enough." Insurance companies are still seeing errors in enrollment information sent from people who have enrolled through

Last week, CMS Communications Director Julie Bataille said that "two-thirds of the high-priority" fixes for problems with sending information to insurers had been completed. Federal officials have not said when all of them would be finished.

"Unless major progress is made in the next week, people in the insurance industry are very worried about a great many people signing up in December creating a major customer service challenge," Laszewski said. "There would be a challenge anyway just from volume. Add the current error rate to it and this would be a real mess."

Leading supporters of the law already are trying to shift the focus from Jan. 1 to yet another deadline—March 31, when open enrollment ends. People who have not signed up by then will not have another chance to enroll in the marketplaces until November, unless they have a personal change, such as a loss in health care coverage or a move to another state.

"If the enrollment is successful and many millions of people do get enrolled by the end of March, the political problems will be relatively small and potential benefits could be very high," Pollack said.

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Supreme Court Agrees to Hear Challenge to Contraception Rule in Health Law

By Rebecca Adams and Melissa Attias, CQ Staff

November 26, 2013 -- The Supreme Court announced last week that it will take up another challenge to the health care law, this time focused on the constitutionality of a requirement that employer health plans cover contraceptives free of charge.

The high court will consider two cases, one brought by the Hobby Lobby craft store chain and a second by Conestoga Wood Specialties, both for-profit businesses.

The justices chose to consolidate the two cases. The order that was issued by the court called for a total of one hour for oral argument, which likely will come in March.

The most high-profile case involves Hobby Lobby Inc., an Oklahoma-based operation with 13,000 full-time workers. Hobby Lobby prevailed in lower court decisions.

The Pennsylvania company Conestoga Wood Specialties Corp., which is run by a Mennonite family, filed the other case. The lower courts ruled against that challenge.

The announcement comes after the justices met privately on Tuesday to decide which of the four cases, if any, to hear this term. A case needs four votes to be accepted for the high court's review, which is less than the majority of votes required for a ruling.

At the center of the controversy is a rule from the Department of Health and Human Services (HHS) that requires most employers to cover contraceptives approved by the Food and Drug Administration as a preventive service under the health care overhaul (PL 111-148, PL 111-152). The law requires that new health plans provide coverage for a range of preventive services without cost-sharing such as co-pays or deductibles.

While opponents say the requirement violates religious freedom, supporters say the way it's written strikes a balance between religious and reproductive rights. Religious institutions, such as churches and mosques, are exempt from the rule, and religious nonprofits, such as hospitals and charities, do not directly arrange or pay for the coverage.

But the HHS rule does not provide any special arrangements for businesses, even if their owners have religious objections to providing birth control coverage.

"We believe this requirement is lawful and essential to women's health and are confident the Supreme Court will agree," said White House spokesman Jay Carney. "The Administration has already acted to ensure no church or similar religious institution will be forced to provide contraception coverage and has made a commonsense accommodation for non-profit religious organizations that object to contraception on religious grounds. These steps protect both women's health and religious beliefs, and seek to ensure that women and families—not their bosses or corporate CEOs—can make personal health decisions based on their needs and their budgets."

A total of 96 lawsuits have been filed in federal court challenging the requirement, according to the National Women's Law Center. That tally includes 46 challenges from for-profit businesses.

The rule has also received attention in Congress, where lawmakers who oppose it have worked to advance legislation to exempt employers, insurers and individuals who object on religious or moral grounds. With Democrats in control of the Senate and the White House, however, none of those efforts have been successful. That's left many looking to the court as the best chance for action.

The Justice Department had requested that the court review the Hobby Lobby case. The Justice Department had said in court filings that allowing employers in for-profit businesses to refuse to follow federal rules "would disregard fundamental tenets of corporate law that distinguish between the rights and responsibilities of a corporation and those of its owners."

The court did not specify when it would hear the cases, but attorneys quickly speculated.

"The cases almost certainly will be argued on March 24, 25, or 26, which are the next available dates on the Court's calendar," Andrew J. Pincus, a partner at Mayer Brown, said in an email. "It seems likely that the decision will come at the end of the Court's tern —during the last week of June."

Lawmakers and interest groups reacted immediately to the news.

"I am very pleased that the Supreme Court will consider whether Obamacare is violating the religious freedom of employers," said Rep. Joe Pitts, R-Pa., the chairman of the House Energy and Commerce Health Subcommittee, who represents the district where Conestoga Wood Specialties is located. "Conestoga and people of faith across the nation are waiting to see if the court will protect their constitutional right to live out that faith in the marketplace."

The court did not say it had agreed to consider two other cases that had been under consideration: Autocam Corp. v. Sebelius and Liberty University v. Lew.

John Kennedy, the CEO of the Michigan-based Autocam business, said in a statement that although the family-owned company will not get a chance to argue its case before the Supreme Court, they were hopeful that the court would strike down the mandate. Kennedy said the requirement violates the family's beliefs because they are Catholic.

"If the mandate stands, we will be forced to make drastic and unwanted changes to our coverage that will place a tremendous burden on our employees and their families," said Kennedy.

Women's groups said that the companies' positions were intrusive and unfair.

"We urge the court to uphold the contraceptive coverage requirement, and let doctors and their patients decide which health services women need," said Debra L. Ness, president of the National Partnership for Women and Families. "No woman should be denied coverage for birth control because of where she works. "

The cases will test the limits of the 1993 Religious Freedom Restoration Act (PL 103-141) that said that the federal government cannot "substantially burden a person's exercise of religion" unless there is a "compelling" reason.

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Medicare Advantage Enrollees May Have to Switch Plans to Keep Costs Down

By Rebecca Adams, CQ HealthBeat Associate Editor

November 25, 2013 -- Insurers squeezed by the health law could be bumping up costs for Medicare enrollees who get their coverage through private plans, said a recent study.

But many beneficiaries in the Medicare Advantage program can avoid cost increases by switching plans, says the report by the non-partisan Kaiser Family Foundation.

"The uptick in premiums for enrollees who do not switch plans, and the increase in average out-of-pocket limits, may be a response by insurers to the payment reforms" in the law (PL 111-148, PL 111-152), said the analysis. "Additional research is needed to explore whether plans are making other changes in 2014 to constrain costs, for example, by increasing cost-sharing requirements for individual services or narrowing provider networks, which might have important implications for beneficiaries."

The law calls for reductions in payments to Medicare Advantage plans and for the addition of new taxes on insurance plans in 2014.

The amount that individuals will have to pay out of their pockets before insurers pick up the rest of the tab is growing by about 11 percent, from an average of $4,333 this year to $4,797 in 2014, according to the report.

If beneficiaries stick with the same plan, the increase in the out-of-pocket cap is higher: about 15 percent, from an average of $4,294 in 2013 to $4,900 in 2014.

The same trend is seen with monthly premiums. Beneficiaries who change plans could actually see a reduction in their costs, from an average of $51 per month this year to $49 per month next year. But people who do not switch "will find that, on average, their premiums will increase by almost $5, from $35 to $39" per month, said the report.

But most seniors and other beneficiaries get comfortable with one company and don't want to switch.

One small group of people—about 526,000 individuals or 5 percent of the Medicare Advantage population—will have no choice. They will have to pick a new plan because their insurance will not be offered in 2014. But the study finds that about 91 percent of them "should have little problem finding a substitute plan with similar characteristics." And often the alternative will be offered by the same company.

Virtually all—about 99 percent—of beneficiaries in plans that are withdrawing from their area will still have at least one Medicare Advantage plan in their area, said the report.

Otherwise, the market will be similar to what beneficiaries saw this year. Consumers will have a choice of about 18 plans in 2014 on average, two fewer than in 2013, the analysis said.

Analysts initially predicted the health law would cause a sharp drop in Medicare Advantage enrollment, but that hasn't been the case because of the popularity of the plans among retiring baby boomers.

However, cuts are beginning to deepen. Plans may adjust by shifting costs to their enrollees or tightening their networks of doctors and other providers.

Recently, UnitedHealth Group said it planned to cut its provider network by 10 to 15 percent by the end of 2014. And America's Health Insurance Plans has been trying to mobilize Medicare Advantage enrollees to support funding for the program as lawmakers eye cuts to Medicare entitlement spending.

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