By Kerry Young, CQ Roll Call

June 5, 2015 -- Medical groups last week praised Medicare officials for relenting on a demand that physician practices and hospitals accept some financial risk in order to continue participation in a shared savings test program, which is seen as a major driver of broader payment changes in the health system.

In a final rule released last week on the accountable care organization program, the Centers for Medicare and Medicaid Services (CMS) showed a clear desire to bring more doctors and hospitals into the program and retain those who already have chosen to participate. CMS will allow some organizations to continue working under models in which they stand only to gain from achieved savings and will not be forced into arrangements where they would be at risk for losses.

"Maintaining an ACO model that does not require repayment of financial losses will allow many physicians to gain experience analyzing data, improving care coordination and identifying opportunities to improve patient care while reducing spending, which will help prepare them for the implementation of the recent" Medicare payment law (PL 114-10), said Robert Wah, president of the American Medical Association.

Groups including the American Hospital Association and the National Association of ACOs, or NAACOS, also praised the decision regarding the so-called one-sided model, known as Track 1, while criticizing CMS for failing to make other requested changes. Some groups said they wanted to see a voluntary policy for assigning beneficiaries to ACOs. Additional adjustments could have helped make it more attractive for medical offices to advance to the Tracks 2 and 3 of the ACO program, said Clif Gaus, chief executive officer of NAACOS, in a statement.

"I remain skeptical that enough improvements have been made to Track 1 to sustain the growth we have been seeing and am concerned that large numbers of current ACOs are not ready to take on the higher risks" of Tracks 2 and 3, he said.

The health care industry as a whole needs to prepare for an eventual shift from Medicare's fee-for-service model toward one that will look far more like that of insurance companies, with systems used widely to control costs, said Alice Rivlin, a former top federal budget official at a recent event on Medicare at the Brookings Institution, where she is a senior fellow. The Department of Health and Human Services has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements by the end of 2016. That goal jumps to 50 percent by the end of 2018.

The ACO program is one of the most developed tools CMS has so far developed for pushing this transition. More than 7 million people enrolled in Medicare are served by organizations participating in the ACO program.

The ACO model reflects the challenge of trying to maintain a more traditional Medicare program while adding in cost containment features. In the rule, CMS stressed how ACOs differ from the insurer-run Medicare Advantage programs, which now serve about 16 million people enrolled in the program. Insurance companies managing Medicare benefits can limit the network of doctors covered. Within the ACO model, people "retain all rights and benefits under traditional Medicare. Medicare [few-for-service] beneficiaries retain the right to see any physician of their choosing," CMS noted in the payment rule. The expected savings are intended to come from better coordination of care, which is thought to prevent some illnesses and cut back on duplicative services.

In the rule, CMS said it is still considering other changes to the ACO program. Among them are what measure to use in weighing whether savings have occurred. The agency is considering a benchmarking methodology based on a blend of each ACO's recent cost experience and cost trends in its region. CMS intends to issue a benchmark rebasing methodology in a rule later in the summer.

By Rebecca Adams, CQ Roll Call

June 2, 2015 -- The Centers for Medicare and Medicaid Services (CMS) began posting proposed health insurance premium rate hikes of more than 10 percent online last week in response to a 2014 lawsuit—which was filed by a former top Obama administration health official.

"What HHS announced today is a huge step forward," said Jay Angoff, a former top Health and Human Services (HHS) advisor to then-Secretary Kathleen Sebelius whose law firm sued the agency. He said that the agency had committed in a March court brief to releasing the data.

"We're very pleased that it has followed through on that commitment, and its having done so should have a beneficial effect on the rate review process," Angoff said in an email last week. The firm, Mehri & Skalet, PLLC, had filed on behalf of the Consumers Council of Missouri on Sept. 30, asking HHS to release previous rate filings and to post future rate filings in time for the public to comment on the proposals before they are finalized for the following year. In some states, including Missouri, rate filings have never been public before.

Angoff said that some insurers chose to redact information that they claimed is a trade secret. One insurer redacted almost everything in its actuarial memorandum, a document that contains important details about how the company set its premium rates. Angoff said that he would keep pushing for greater transparency.

"It shouldn't be forgotten that HHS disregarded both the law and its own representations on its website when it failed to release either the 2014 or 2015 rate filings until after rates had already been implemented," said Angoff. "Nevertheless, taking a glass-half-full attitude, HHS's announcement today should really be applauded."

The proposed rates could change under pressure from state insurance commissioners, federal regulators or the public.

"But this year the health plans have hard claim data to show the regulators and a 35 percent rate increase is hardly going to be rolled back to 5 percent," said Robert Laszewski, a health insurance industry consultant.

The rates also cannot predict how much an individual will end up paying for coverage, because many people who buy insurance through the marketplaces are eligible for federal subsidies. More than 8 in 10 people who bought a marketplace plan through Healthcare.gov last year qualified for an average tax credit of about $263 per person per month. After subsidies were taken into account, about 8 in 10 people who bought insurance through Healthcare.gov states could have bought a plan for less than $100 per month after subsidies.

"The rate review process kicks off an important set of steps designed to provide consumers and others the opportunity to weigh in on proposed rate increases of 10 percent or more," said CMS Acting Administrator Andy Slavitt. "These specific rates will be subject to vigorous rate review and revision and the final rates consumers will see this fall will reflect the breadth of choice and competition in the marketplace."

The information is available for health insurers who operate within newly created marketplaces as well as those who provide insurance outside of the marketplaces.

By Rebecca Adams, CQ Roll Call

June 4, 2015 -- With the fate of President Barack Obama's top legislative accomplishment hanging in the balance, state officials are increasingly concerned that the administration is refusing to discuss contingency plans for insurance markets should the Supreme Court later this month strike down 2010 health care law subsidies for 6.4 million low- and middle-income people.

Officials in a variety of states, including many led by Republicans, say they are panicked by the uncertainty a ruling against the government in King v. Burwell could unleash. Justices are weighing whether the Affordable Care Act allows federal subsidies for coverage to be offered in all states, or just in those that, as the law states, are "established by the state." Sixteen states and the District of Columbia have created their own state-run health insurance exchanges; the others that rely on the federal healthcare.gov website to enroll people could see aid disappear.

State officials expected the administration to be publicly tight-lipped about the prospect of a ruling against the law. But some say they are surprised that, so far, the administration does not appear to be holding private discussions about how to address potential fallout. Affected states would have to address unique technical and legal quirks associated with covering their residents, as well as political obstacles. 

"Whatever the administration might be doing in terms of backup planning, they are not talking to the states about it, and groups like us are not privy to it," said Ron Pollack, executive director of the advocacy group Families USA, which supports the law. "The administration—and I really want to emphasize this—is confident that it will prevail in court and it doesn't want to do anything to undermine that possibility."

Governors would face enormous pressure to promptly respond should justices rule against the existing system for distributing subsidies. Although Supreme Court Justice Samuel A. Alito, Jr., has suggested that the court might carve out a grace period, health coverage for 2016 plan years must kick in on Jan. 1. State officials and health plans would have to scramble to come up with alternative coverage frameworks or risk letting people who lose subsidies become uninsured.

"For the governors, it's a tough situation for all of them," said Seema Verma, a consultant who advises seven states. "No one wants to see people lose coverage . . . What's ironic is that there's no discussion from the federal government to say, 'Here's our plan.' Especially in the short term situation, people are going to look to them to outline their plan and they have yet to do that."

Public Stance

The administration may be trying to avoid talk of contingency plans, fearing it would encourage wavering justices to strike down the subsidies. But that appears to have deprived the 34 states that depend on healthcare.gov of legal and technical advice on how they could comply with a ruling and declare an exchange their own.

Health and Human Services (HHS) Secretary Sylvia Mathews Burwell wrote in a Feb. 24 letter to lawmakers that "we know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision."

States would have a hard time setting up their own marketplaces in time for the 2016 term year because of time and financial restraints, although this week Pennsylvania Democratic Gov. Tom Wolf sent an application to federal officials seeking the option of creating a state-based marketplace. Wolf asked the federal government to continue administering some functions, if the state does proceed with its own exchange.

Delaware also would like to become a state-based marketplace, Burwell said.

Several states are considering ways to leverage the healthcare.gov's technology or that of other exchanges, such as Connecticut's, which has been deemed one of the most successful state markets in the nation.

Some states are discussing ways to lease technology. Under one scenario, states could give the federal government a percentage of a fee assessed on every insurance policy sold in the marketplace. The money is ordinarily used to pay for operation of the exchange. Under another idea, the federal government could provide it for free.

Seven states have contacted Connecticut to inquire about the costs of using its technology, said the exchange director there, Jim Wadleigh.

Some governors are weighing whether they can use executive orders to deem their use of healthcare.gov or another state's technology as a state-run marketplace, or whether HHS could do so, especially if the state already oversees tasks such as evaluating applicants' eligibility, overseeing marketing or helping to authorize participating plans to sell coverage.

Another option being floated is establishing a regional marketplace serving several states. But that would require extensive coordination and could prove logistically difficult.

Many solutions would also require the signoff of a state's legislature, especially those requiring new spending or the acceptance of federal money. Some states are not allowed to enter into contracts without approval from the legislature or state comptroller, so agreements to use healthcare.gov technology would have to be done through a different type of pact, such as a memo of understanding.

Nine states—Arizona, Arkansas, Georgia, Missouri, Montana, New Hampshire, North Carolina, Utah, and Wyoming—have prohibitions on creating exchanges without legislative approval, according to the National Conference of State Legislatures. Efforts to change the status quo could be difficult, because most legislatures have adjourned for the year.

"We don't typically call special sessions unless there is agreement coming in," said Monica Lindeen, the Montana insurance commissioner and the president of the National Association of Insurance Commissioners. "Otherwise, it's just a waste of time and money."

Ticking Clock

Against this complicated backdrop is the ticking clock.

Insurers in many states have already submitted their proposed premium bids for 2016 and are undergoing reviews from regulators. Rate submissions for the federal marketplace are supposed to be finalized by Aug. 25 so the information can be added to healthcare.gov and insurers can ensure the online data is correct.

HHS officials may be able to slightly delay deadlines to give states time to sort out their plans or review any revised, higher premium rates from insurers.

But the next open enrollment period under the law is scheduled to start Nov. 1, a date that is difficult to change not only because it is set in a federal regulation but also because federal officials want to give consumers time to consider their health insurance choices before coverage begins Jan. 1.

"All of the challenges make it very difficult for states to plan," said University of Michigan law professor Nicholas Bagley.

By Rebecca Adams, CQ Roll Call

June 4, 2015 -- More than 71 million people were enrolled in Medicaid or the Children's Health Insurance Program (CHIP) in March, which is a 21.2 percent increase since the health care law's most significant coverage expansions took place.

The growth in the early part of this year has been steady but not dramatic. Medicaid and CHIP grew by 534,845 additional people from February to March, less than a 1 percent increase, according to a recent report released by the Centers for Medicare and Medicaid Services.

Many of the additional 12 million people who joined the program since 2013 came from states that expanded the program, as the health care law allows. Expansion states' programs grew by an average of 28.1 percent.

The programs' covered population is booming in some states that implemented expansions, with half of the expansion states that reported data experiencing growth of at least 30 percent.

States that did not broaden eligibility for the program grew by an average of 8.6 percent.

The Affordable Care Act allowed states to expand Medicaid to people with incomes of up to 138 percent of the federal poverty line, with coverage starting on Jan. 1, 2014.

The 12 million increase doesn't count the nearly 950,000 additional people who signed up for Medicaid in seven states that expanded before Jan. 1, 2014.

By Marissa Evans, CQ Staff

June 1, 2015 -- Deep in the 2010 health care law is a provision that would give states a pot of federal money to create their own unique health insurance systems.

Under the "state innovation waiver" program, also known as 1332 waivers, states would pay for those new ideas with federal funds that would have gone as insurance premium subsidies to their residents. A state could create its own public insurance plan to compete with private plans on the federal exchange or offer an alternative health program for residents who don't qualify for Medicaid. They could even drop the infamous individual mandate.

But the waivers, which would begin in 2017, are at risk—at least for the 34 states that have not yet established exchanges. The waivers would be collateral damage if the U.S. Supreme Court rules this month that it's illegal for the federal government to give insurance subsidies to residents of states without exchanges, according to a recent report by Health Affairs.

"A ruling in favor of the plaintiffs would decimate the funding source for 1332-based reforms in those states," according to the report.

Heather Howard, director of Princeton University's State Health Reform Assistance Network, says the situation is somewhat ironic.

"The very states that might be most interested in the waiver could be the most screwed," she said in an interview. "That's the advantage of the waiver; it gives you money to do something else."

The waiver allows states to change the rules of the federal health law for covered benefits, subsidies, insurance marketplaces, and the individual and employer mandates. States can propose alternatives but must demonstrate to the Health and Human Services Department that coverage will stay accessible, comprehensive, affordable, and won't add to the federal deficit.

"This legislation offers an opportunity for states to engage in a 'race to the top' for what will deliver the best health care choices and options to their constituents," Sen. Ron Wyden, D-Ore., said in 2011 when he introduced the bill that established the waivers. "This provides a chance for states to do it better."

Waivers are being considered by health officials in Arkansas, Hawaii, Iowa, Minnesota, New Mexico and Oregon. Among those, only Arkansas and Iowa have not established health insurance exchanges.

Arkansas and Hawaii have established task forces to look into preparing a 1332 waiver application.

Arkansas' task force is considering using the waiver to fund an overhaul of its Medicaid program. Under its current program, which ends in December 2016, Arkansas buys private health insurance for more than 200,000 residents who qualified for Medicaid when the state expanded it in 2014.

One of the federal health care law's most vocal critics in the state, Republican state Sen. Bart Hester, said, "Regardless of how [the high court's King v. Burwell decision] turns out, we've got to have a plan that's going to work for Arkansas." He said all ideas are on the table for the task force.

"If we can overhaul the entire Medicaid program then I think we would consider [the 1332 waiver], but I just do not see any foreseeable way we would just do reform for the expansion population," Hester said.

"Our reform is going to . . . cut them off and remove them all if we can't reform the entire Medicaid program."

Hawaii's task force is considering a waiver to continue its own employer mandate, which is more expansive than the federal government's.

Vermont had applied for a waiver to help create a single-payer health insurance system, but dropped the plan earlier this year after Gov. Peter Schumlin said the costs would be too great.

Howard said that while states are "definitely interested" in the waivers, there's been little federal guidance on how they would work.

An estimated 13.4 million people could lose subsidies if the court strikes them down in King v. Burwell, according to the Kaiser Family Foundation.

"We are open and ready to assist states interested in developing innovative strategies so their residents have access to high quality, affordable coverage," said Ben Wakana, a spokesperson for HHS in an email statement regarding the 1332 waivers.

The waivers don't offer states complete freedom. They can't be used to roll back the federal health law's larger insurance market changes such as allowing insurers to deny coverage or charge customers more for having pre-existing conditions, or dropping the risk adjustment program that protects insurers if they attract high cost enrollees, or allowing annual or lifetime coverage limits.

The guidelines defining what HHS considers comprehensive and affordable will be important to examine in the next few months, according to Judy Solomon, vice president for health policy at the progressive Center on Budget and Policy Priorities. How the department defines what a state has to show to meet the waiver standards and what methodology it will use to compare the state's proposed coverage plan to the federal law is especially critical, she said.

The waiver could be an opportunity for states to ease the burden on consumers, Solomon said.

"We've seen how hard it is to provide subsidies as a tax credit," Solomon said. "We're asking people to make estimates of their income well in advance of when the year even starts, and they're at risk of paying money back or may not have enough to sustain coverage."

The waiver could be a viable option for Republicans to do something different with state health care programs if the Supreme Court upholds the subsidies, according to Doug Holtz-Eakin, president of the conservative American Action Forum. But at the moment, "There's no point under the current political conditions" for Republican governors to apply for one, he said.

"They're not going to get the waiver they want under the Obama administration," he said. "If they wait for the next president and it's a Republican, it's not going to be a matter of a waiver, it's going to be a matter of an ACA repeal."

By Rebecca Adams, CQ Roll Call

June 2, 2015 -- The number of people enrolled in health plans sold in state and federal insurance markets fell from 11.7 million near the end of February to 10.2 million paid customers at the end of March, according to a new enrollment report released by the Department of Health and Human Services (HHS).

The drop-off was attributed to some people not paying their premiums or voluntarily dropping coverage. The figure doesn't include individuals who signed up for coverage but plan to pay later, because some insurance companies have provided grace periods.

Last year, more than 8 million people signed up during an enrollment period that ran through a mid-April deadline, and 7.3 million were still enrolled as of Aug. 15. A Centers for Medicare and Medicaid Services official noted that although the immediate drop-off was more precipitous this year than last year, the overall population of enrolled people is still higher than a goal of 9.1 million people that HHS Secretary Sylvia Mathews Burwell set for this year.

About 7.3 million people had paid their premiums and were enrolled on March 31 in the 34 states that relied on the federal healthcare.gov website to enroll residents. Those individuals—coincidentally, the same total number of people who signed up in all the marketplaces last year—are at risk of losing their subsidies if the Supreme Court rules this month in the King v. Burwell case that subsidies are only allowed in states that created their own health care marketplaces.

Almost three-quarters of the people receiving subsidies nationwide live in the states that might lose the aid. About 6.4 million of the 8.7 million people nationwide live in the 34 states using the federal marketplace. This year, the average tax credit subsidy was $272 per month, similar to the $276 average credit last year.

"The health insurance marketplaces are working," Burwell said. "Thanks to the Affordable Care Act, millions of Americans now rely on the health and financial security that comes from affordable coverage through the marketplaces. We've seen a historic reduction in the uninsured and consumers are finding the coverage they need at a price they can afford."

The administration plans to release enrollment data on a quarterly basis.