By Jane Norman, CQ HealthBeat Associate Editor

October 28, 2010 -- The National Association of Insurance Commissioners on Wednesday formally sent to the Department of Health and Human Services its recommendations on a key rule establishing minimum medical payouts.

The recommendations, arrived at by commissioners last week following months of intense negotiations and debate, rejected pleas by insurance companies for greater flexibility in implementing new national medical loss ratio (MLR) rules.

Under the rules, policies sold to individuals and small groups must pay out at least 80 percent of premiums for medical care and quality improvements. For policies sold to larger groups, the minimum is 85 percent. Insurers must issue rebates to policyholders if plans don't meet those requirements.

The commissioners said in their transmittal letter that their decision was unanimous but "we continue to have concerns about the potential for unintended consequences" in the implementation of the rules. Consumers won't benefit if the result is destabilization of the health insurance market and less consumer choice, they said.

This is of "particular concern" in the period before 2014 because many people won't yet have improved access to insurance and might not be able to find other affordable insurance, they said. In 2014, insurance plans will have to accept applicants with pre-existing conditions and individuals will receive subsidies to take part in exchanges in which they will purchase health insurance.

The commissioners asked that Health and Human Services Secretary Kathleen Sebelius "give deference to the analysis and recommendations of state regulators" in markets that might be destabilized. They also repeated their promise to form a working group to examine the role of insurance agents under the new rules. Agents are concerned that their incomes will be cut because their expenses are considered administrative spending under the new rules, not medical.

Consumer representatives to the insurance commissioners' group sent their own letter to Sebelius urging that HHS adopt the recommendations "without significant changes." They also said that while insurance agents and brokers provide a "useful" function, there is no special designation of their commissions in the law and so the commissions should be treated like any other administrative expense.

By Rebecca Adams, CQ HealthBeat Associate Editor

October 25, 2010 -- State officials charged under the new health law with providing affordable insurance to people with preexisting medical conditions are trying to stretch the federal dollars available for that growing need by asking outside groups to help pay the tab.

These state health specialists are tapping unconventional funding sources to help people afford the high-risk-pool premiums. They're turning to a variety of sources—from local medical providers, such as hospitals and national charities such as the American Kidney Fund—in order to cover as many people as possible.

"You will see some creativity in the benefit and premium structure to make sure it's accessible," said Vernita Bridges-McMurtrey, the Missouri high-risk-pool director and the past chairwoman of the National Association of State Comprehensive Health Insurance Plans (NASCHIP). "I'm encouraging states to do what you can do in reaching the people who need this pool. It doesn't really require a change in the law."

This year, every state has been required by the new health care legislation (PL 111-148, 111-152) to create a separate Pre-Existing Condition Insurance Program funded by federal dollars. State officials can elect to run the pools themselves or allow the same company that runs the Federal Employment Health Benefits Program to operate them.

About 35 states already had high-risk pools that offer coverage to people whose preexisting medical conditions make it hard for them to find affordable insurance. In a handful of those, outside groups have helped pay risk pool premiums. State officials hope to have some agreements with these third-party groups to help pay federal risk pool premiums in place by the start of the year.

Even though the new federal pools have somewhat lower premiums than the existing state ones, their premiums are still out of reach for some critically needy patients. So state officials have decided to adopt this tactic.

"This is in its infancy, so it's hard to know" how all of the details will work, said Amie Goldman, the Wisconsin high-risk-pool director and current NASCHIP chairwoman. "How each state thinks about this might be slightly different. But it's definitely something we're exploring here and I know a number of other states are investigating it as well."

Debbie Armstrong, the director of the New Mexico Medical Insurance Pool, said that her state's high-risk pool has received funding in recent years from other state-funded health programs, such as those that provide medical care for HIV-AIDS patients and hemophiliacs. The pool also receives premium assistance from the American Kidney Fund, a national organization based in Maryland.
"It definitely makes it more affordable for the individual," said Armstrong. "It's really critical for us to have it affordable. It makes a big difference."

The outside help allows the administrators of these pools to stretch limited dollars as far as possible. The state-run pools are funded by patients' premiums, assessments on health insurers and, in some areas, state government subsidies. The new pools are financed by $5 billion in federal funds through 2013—an amount that the Congressional Budget Office has said would "not be sufficient to cover the costs of all applicants."

That $5 billion in federal funding may last somewhat longer than anticipated, because many administrators are dismayed that enrollment has been lower than expected. Over the past few months, high-risk-pool directors have worked on plans to expand the marketing of the pools and connect more people who need help to the program.

Social and Political Goals
State directors want to cover as many patients as they can—for both altruistic and political reasons.

First, many officials see the expansion of the pools as a social policy goal. Until new state insurance exchange markets are operating in 2014, many sick people have few or no affordable options for medical coverage. If states can leverage payments from third-party groups such as charities to bring more people into the pool, they are fulfilling their social and fiscal responsibilities.

"It's an ethical and moral obligation," said Goldman. "Most of the pools have a mission to provide affordable, high-quality health care to eligible residents who have no other option."

From a more practical standpoint, state officials are nervous that if they don't spend all of their allocated funds, the federal government could hand that money to another state. So it is in their political interest to enroll as many people as possible and use up their federal allocation.

"No state likes to see their federal funding allocations go to other states," said Goldman. "There's always that tension. There is a lot of political pressure to say, for example, we don't want Iowa's allocation to go to Kentucky. It's a little less noble reason, but it's real."

So if turning to third parties increases public interest in and use of the new federally funded risk pools, state officials believe it will become easier to attract new applicants and bolster the state's image as aiding the uninsured.

Sources of Help
The partnership between pool administrators and local providers is beneficial to both, for several reasons.

The medical providers may be willing to pay for people who otherwise would not have insurance, because it is cheaper for a hospital or physicians' practice to shoulder part of the monthly premiums than it is for them to eat all of the costs of uncompensated medical care.

"If it's possible for health systems to help patients access insurance, it may be in their interest financially, rather than count it as charity care, and it certainly would be good for the individual," said Goldman.

In Wisconsin, high-risk pool officials are considering a range of third-party options. Goldman said that hospital foundations are an obvious source they would like to tap. State officials have some experience working with provider groups, shen said, noting that Medicaid officials had worked out an agreement to allow providers such as hospitals to pay an annual $60 enrollment fee for patients who wanted to sign up for Medicaid but cannot afford the fee.

The state is reaching out to Advocacy and Benefits Counseling for Health, a Wisconsin-based nonprofit public interest law firm that seeks to ensure health care access for families, and the Milwaukee Health Care Partnership, a group that connects health care providers, government agencies and community organizations, to try to get out the word about the state's interest in covering more patients.

National charitable organizations—especially those focused on particular diseases—are another potential source.

The American Kidney Fund has paid for the premiums of high-risk-pool patients in three states: New Mexico, South Carolina and Texas. The group pays for premiums through its Health Insurance Premium Program, one of three efforts that directly subsidize patients' care. Its other two programs pay for Medicare drug costs and for out-of-pocket costs such as transportation to dialysis treatment and over-the-counter medication.

Patients apply directly to the American Kidney Fund for the help. The group assisted about 50,000 dialysis patients through the Health Insurance Premium Program last year, although president and CEO LaVarne Burton said that only a small number got high-risk-pool premium assistance. The rest were covered by other public and private coverage programs.

But that appears likely to change, if a number of high-risk-pool directors encourage dialysis patients to apply for premium grants next year. Is Burton ready for an onslaught of interest?

"We certainly do want to support our patients in whatever way we can, because there's a great need," said Burton. "One of our major missions is to help them pay for their health care."

By John Reichard, CQ HealthBeat Editor

October 25, 2010 -- Are for-profit insurers being more aggressive than ever before in denying insurance applications and limiting coverage?

Michael McRaith, director of the Illinois Department of Insurance, says that's his take. Insurers are attempting, he says, to build up a book of business that is as low-cost as possible by 2014, when they are required by the health care overhaul law to take all applicants regardless of health status.

Insurers attempt to cope with their costs from bad insurance risks through a process known as "underwriting"—they decide what to cover, what rates to charge, or even whether they will cover the applicant at all.

McRaith told a Washington, D.C., forum on Oct. 22 that "there are some including me who ... perceive the underwriting and rating to be more aggressive now than it has ever been because as we approach 2014 when every person who applies is to be covered, the for-profit companies would prefer starting with a healthier book of policy holders."

Having more of these good risks would help offset the costs of sicker enrollees coming in and require less of a premium increase going into 2014 to compensate for bigger medical outlays. But it would come at the expense of sicker people trying to get coverage before then.

When asked to elaborate on his remarks, McRaith said in an e-mail Monday that "In Illinois, we have received complaints and inquiries regarding premium increases from families and from employers of all sizes, large and small. We do not have guaranteed issue for employers with more than 50 employees. We have heard of insurers not even offering [coverage to] some groups of employee sizes between 50 to 100.

"Also, small employers with high-deductible plans are experiencing rate increases of 30 percent or more even though the employees do not ever reach the deductible level. Small employers commonly report rate increases of 30 percent or more. Insurers have attempted to attribute the reason for the increases to the [overhaul], even though the total cost of the reforms implemented to date should be 1 percent at most.

"In Illinois, individuals and families can be denied health insurance coverage for any reason other than 'race, color, religion or national origin.' We hear from individuals age 55-64 who are being coverage despite not having any history of serious illness."

A check with Consumers Union found no evidence on whether so-called cherry-picking is at an all-time high. But Sabrina Corlette, a professor at Georgetown University's Health Policy Institute, said McRaith's remarks "are similar to what I've been hearing from other folks in the field."

Corlette drew an analogy to insurer behavior leading up to the Sept. 23 requirement that plans no longer deny coverage to children with pre-existing medical conditions. Corlette said she heard from people in the insurance industry that they were trying to build up a base of the healthiest possible children as enrollees to better offset the costs of children coming in with pre-existing conditions. It "rings true" that insurers would be doing this leading up to 2014, she said.

John Greene of the National Association of Health Underwriters (NAHU) didn't directly respond to the question of whether underwriting is now more aggressive than ever. But Greene did point to conditions in the insurance market that suggest a greater need to reduce exposure to risk.

"With continued high unemployment, healthy people are dropping out of the market" for individual coverage, said Greene, "The addition of new coverage requirements adds the to the cost of coverage as does the ability of providers to demand increased payment from insurers because they have to include them in order to meet network requirements."

"Underwriting is an assessment of risk," Greene added. When insurers "look at their claim data and see healthy people leaving and sicker people coming in, then they will increase rates in order to satisfy the expected claims.

Robert Zirkelbach, spokesman for America's Health Insurance Plans, said "there's no evidence for that" when asked if underwriting is more aggressive than ever. But he said premiums are going up for various reasons including an increase in the costs of medical care, a sicker mix of enrollees, and requirements of the health law. The impact of the law on premiums depends on what type of coverage people have now—premiums go up more if they have less comprehensive coverage, Zirkelbach added.

By John Reichard, CQ HealthBeat Editor

October 29, 2010 -- Already stressed by many implementation headaches from the new health overhaul law, states have a real migraine when it comes to the IT challenge in setting up fast, accurate computer systems for insurance exchanges. Federal officials Friday announced a grant program they hope will ease the pain.

IT systems in the exchanges will have to handle a variety of complex transactions: finding the right health plan, determining the eligibility of applicants for coverage programs, enrolling people in plans, and administering subsidy payments.

Exchange IT systems will have to interact smoothly with databases operated by states, the Internal Revenue Service and health plans to get the job done. And if they don't, consumers using the exchanges will get frustrated and angry, potentially causing a backlash against the law.

The Department of Health and Health Services (HHS) said it will award "innovator grants" to five entities, whether individual states or coalitions of states, to design and implement leading-edge IT systems HHS aims to promote as models for other states to follow.

Officials wouldn't say, however, how much money they will pay out. "We are looking for the states to establish the parameters of the project, how ambitious they want to be, and what those costs would be," Joel Ario, an HHS official, told reporters in a telephone press briefing Friday. Ario is director of the Office of Health Insurance Exchanges in the HHS Office of Consumer Information and Insurance Oversight.

Ario said states not chosen for the grants will save money because they won't have to reinvent the wheel—they can simply use the same designs as those developed by the grant recipients. That approach will make it easier for HHS to evaluate IT systems in deciding whether to certify that an exchange is ready to handle its duties under the overhaul law.

States must obtain that certification by 2013; exchanges must begin operating under the law by 2014. The residents of states that fail to obtain certification will be required to use a federal insurance exchange.

HHS said in a news release that the two-year grants will be awarded by Feb. 15 to five applicants "that have ambitious yet achievable proposals that can yield IT models and best practices that will benefit all states."

All states, including the five awarded grants under the program, will be able to apply in February for other federal grant money to cover the costs of creating the exchanges. But once they are established, states will have to find other funding sources.

"It's going to take a lot to make it work," Washington and Lee University Law professor Timothy Jost said last week concerning the IT challenges exchanges must master. "If we flop there, the exchanges could be a miserable failure," Jost told a Washington, D.C. forum. "If people apply for tax credits and don't hear for weeks and then things get screwed up and they have to come in somewhere and provide lots of documents that's going to be a disaster," he said.

By Jane Norman, CQ Healthbeat Associate Editor

October 28, 2010 -- If Republicans take over the House it could mean some movement on mandating greater disclosure of prices charged by doctors, hospitals, and other health care providers. It's a favorite suggestion among members of the GOP as a way to keep rising health care costs in check and a possible source of bipartisan legislation with sympathetic Democrats.

"For individuals and families to shop for their health care, they must have a better sense of what they are expected to pay—and what they are getting for their money," says Republican Rep. Paul D. Ryan in the section on health care in his "road map" proposal. Ryan is the frontrunner to be Budget Committee chairman if the GOP captures the House. "Making data on the pricing and effectiveness of health care services widely available is critical to the success of an effective health care marketplace," Ryan says.

Interest in the issue has been bipartisan but it has been strongly pushed by Republican Rep. Michael C. Burgess of Texas, a physician who would be a key player on health issues in the Energy and Commerce Committee next year. He said in an interview that the medical pricing idea probably will be the subject of congressional hearings if the GOP wins the House.

Three bills aimed at price transparency were introduced in the current Congress, one by Democratic Rep. Steve Kagen of Wisconsin (HR 4700), another by Burgess with Democratic Rep. Gene Green of Texas (HR 2249), and a third by Republican Rep. Joe L. Barton, who wants to regain the Energy and Commerce chairmanship (HR 4803). There wasn't any companion legislation in the Senate.

Burgesss said that he had strong support from outside groups for his approach. "Like it or not, that is important," he said. The Burgess-Green proposal would mandate that state Medicaid programs require hospitals to publicly disclose prices and estimated out-of-pocket costs for services.

Barton would require private and public health plans to provide enrollees with information on covered items and services. He would also require hospitals and ambulatory surgical centers to disclose costs for the services they typically perform.

Democrat Frank Pallone of New Jersey, chairman of the Energy and Commerce Health Subcommittee, held a May 6 hearing on the three proposals but didn't push further action. Burgess and Green's bill also was incorporated in initial Democratic health care proposals, aides to Burgess said.

Pallone said he likes the transparency concept but experts have cautioned that lawmakers should proceed carefully because purchase of medical treatment "is not like going out and buying a TV or a new car." Patient choice is limited by insurance plans and patients may not want to go against a doctor's wishes to find a lower price, Pallone said.

But Republican Rep. John Shimkus of Illinois said it's impossible to find out what medical services cost and patients rarely find out the true cost of health care services. "Without this information we take the power away from consumers and prevent a market based system from functioning," he said.

By John Reichard, CQ HealthBeat Editor

October 28, 2010 -- After years of both parties piling the cost of blocking Medicare physician payment cuts onto the federal deficit, Republicans are saying "No more."

With the possibility of major gains in Tuesday's midterm elections, they are thinking big—talking about permanently replacing Medicare's troublesome sustainable growth rate (SGR) formula, which triggers bigger and bigger doctor payment cuts that lawmakers won't tolerate.

And Republicans say they will find budgetary offsets to pay for stopping the cuts.

Each year Medicare sets an SGR target for how much it will spend to pay physicians across the country to treat beneficiaries. For every dollar that target is overshot, physician payments must be cut to compensate for the excess.

The cuts triggered by the formula are expanding all the time not only because of past spending in excess of the yearly targets, but also because the costs of short-term legislative patches to block the cuts aren't offset with tax increases or cuts elsewhere in the federal budget.

For example, on Dec. 1, when the latest short-term "doc fix" runs out, Medicare is scheduled to cut doctor payments by 21 percent. On Jan. 1, another cut of 6 percent is scheduled.

After the headache of enacting multiple short-term fixes this year to block such cuts, Republicans are committed to a long term solution to the SGR formula, says a House GOP aide. "We aren't going to pass a physician fix that isn't paid for," the aide adds.

"You need to put in a new system," says Rep. Joe L. Barton of Texas, who would vie with fellow Republican Fred Upton of Michigan to become the new chairman of the House Energy and Commerce Committee. Barton says he wants to hold hearings to develop a bipartisan approach.

For his part, Upton says "we cannot let our physicians continue to live in fear of cuts in their reimbursement. The SGR needs to be fixed once and for all, and that should be one of the top priorities of the committee."

Both the Energy and Commerce and Ways and Means committees would be involved in fashioning a solution, and joint planning by committee Republicans and House GOP leaders is already under way.

"It's not just a Ways and Means thing, the leadership is involved, as is Energy and Commerce," the aide said.

But the enormous cost of replacing the SGR—lobbyists put the total at between $300 billion and $400 billion over 10 years—makes a permanent SGR fix a remote possibility at best.

That's because Republicans are talking about paying for scrapping the formula by dismantling this year's health care law, which would almost surely trigger a presidential veto.

That doesn't mean they won't move legislation to dismantle the law in the House if they gain control. They could try to score political points by doing so, saying they would block the expansion of Medicaid under the law, thereby raising $400 billion to pay for fixing doctor payments.

But with the Senate and President Obama almost surely blocking such legislation, it does mean that at some point Republicans must find a realistic way of paying to block the Medicare physician cuts.

And that means reaching agreement with congressional and the White House on how to do that.

With tax increases off the table, that means cutting federal spending. But where? Reducing the length of time cuts under the SGR are blocked reduces the cost of pay-fors and makes the challenge more manageable, at least in the short run.

Doctor groups have been talking about a two-step approach. In step one, lawmakers would pass legislation in November to block the Dec. 1 cut until Jan. 1. In step two, they would pass another bill in December to keep any further cuts from taking effect during 2011.

But GOP and Democratic health aides do not know where cuts could be made to pay the estimated $17 billion-to-$20 billion cost of that approach, said Julius Hobson, a senior policy adviser with the Polsinelli Shughart's Washington law office.

Hobson thinks a one-month fix is in the offing, to be followed by a series of short-term fixes next year because of the difficulty of reaching agreement on offsets.

"A permanent fix is off the table," he says. "I could see Congress doing three months at a time next year."