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Year One for the Health Care Law: Expecting the Unexpected

By Jane Norman, CQ HealthBeat Associate Editor

March 16, 2011 -- The word "waiver" does not appear in the section of the health care overhaul law that bans insurers from imposing lifetime or annual limits on benefits.

But the 1,040 waivers covering 2.6 million people—granted by the Department of Health and Human Services for so-called "mini-med" plans—are an example of an unexpected development and a source of controversy in the rollout of the first year of the landmark law. While any major piece of legislation will bring surprises as it's put in place, the overhaul measure—which never went through a final scrubbing or conference committee—has encountered more than its share of turmoil in its first year of life.

Other somewhat surprising events that have shaped the implementation debate included loud protests by cash-strapped states over Medicaid maintenance-of-effort requirements, the difficulties of fashioning a financially stable program for long-term care and a Republican takeover of the House that accelerated the drive for repeal. Then there's been the rapidly expanding court battle over the law's constitutionality.

On the other hand, the law's extension of parents' health insurance to young adults—an addition to the bill overshadowed at the time by larger battles—has proven unexpectedly popular and helped boost the overall appeal of the overhaul. Enrollment in Medicare Advantage plans went up despite cuts to the program and warnings of its demise. And Medicare beneficiaries flocked to physicians' offices to take advantage of free annual wellness visits authorized in the law (PL 111-148, PL 111-152).

To some extent, such surprises are to be expected, observers say. "The law of unintended consequences is always a big factor in any bill," says Mark Hayes, former health policy director and chief health counsel for Republicans on the Senate Finance Committee. "It's impossible for any group of people to think of everything, and foresee everything."

When Republicans wrote the 2003 law (PL 108-173) that created the Medicare prescription drug benefit, many issues emerged associated with the quick transition to a major new government program, Hayes recalls. "That first couple of months it looked like the wheels would fall off," he says.

"Health care reform is certainly no different, and the scope is so much greater it's really not surprising at all that some issues are coming up," added Hayes, who's now with the law firm GreenbergTraurig.

Lots of waivers granted
Among them are the waivers, issued by HHS so that businesses, unions and other organizations don't drop minimal "mini-med" health care plans used to cover mostly low-wage, seasonal and part-time workers. The law bans lifetime limits on all health insurance policies, beginning Sept. 23, 2010, and annual limits as of Jan. 1, 2014, for any plan that's not "grandfathered."

Steve Larsen, director of the Center for Consumer Information and Insurance Oversight (CCIIO) at the Centers for Medicare and Medicaid Services (CMS), told a House panel that the word "waiver" might not be in that particular section of the law but that Congress recognized there should be a "transition period" for plans that need a bridge to 2014. Without such a bridge, "immediate compliance could cause disruption of this coverage," he said.

The law allows HHS to set a "restricted" annual limit on benefits prior to 2014 and gives the agency the ability to "ensure that access to needed services is made available with a minimal impact on premiums."

In June 2010, HHS published interim final regulations that set those new minimum annual benefit limits at $750,000 beginning Sept. 23, 2010, $1.25 million beginning Sept. 23, 2011, and $2 million beginning Sept. 23, 2012 through Jan. 1, 2014. The regulations also allowed a program to begin in which plans could apply for one-year waivers from the limits. Guidance on how to apply for a waiver was posted on the HHS website in September.

Larsen said applications came in at a relatively steady rate at first but then many more were received in December, since most plan years begin Jan. 1. As of February, Larsen said HHS has approved 94 percent of the applications received, or 1,040. Those waivers now cover 2.6 million people out of the 160 million who have employer-sponsored health coverage, or less than 2 percent of the total. "A very small percentage," Larsen said. Asked after the hearing how many more waivers are expected in 2011, he said he doesn't know, though "it's trailing off."

Democrats said the transition period was needed and expected, and praised the development of the waivers as an example of good governance. "No one really expected this sweeping and monumental change to be fully implemented overnight," said Illinois Democrat Danny K. Davis, ranking member of the House Oversight and Government Reform subcommittee that held the hearing.

Far from indicating weakness in the law, the waivers "reflect its strength in matching requirements with capacity," said witness Judith Feder, professor of public policy at Georgetown University and a senior fellow at the liberal-leaning Center for American Progress.

But Republican Trey Gowdy of South Carolina, chairman of the subcommittee, said the waiver process exposed the "myth" that people could keep their health plans under the law. He called the waiver process an "amorphous process shrouded in ambiguity, and understood by few." Other Republicans questioned Larsen on how well the availability of the waivers has been publicized and whether special consideration was given to labor unions, which he denied.

If nothing else, the exceptions have given Republicans another buzz word to use as they attack the law. One state has been approved and four states are seeking waivers—although HHS prefers the word "adjustment" in this case—to medical loss ratio rules that require insurance companies to spend 80 percent of premiums in individual and small group plans for health care and quality improvements. The wave of waivers prompted Republican Rep. Mike Rogers of Michigan last week to introduce a bill that would allow all individuals and small businesses to apply for waivers from mandates in the law. Everyone else is getting them, he said, in justifying the need for the measure.

Governors blast Medicaid rules
Other provisions have also gained unexpected prominence. The overhaul's requirement that states maintain their current Medicaid standards has produced many complaints from governors. Even President Obama recently acknowledged in remarks to the National Governors Association that more flexibility is needed.

Dean Rosen, former chief health adviser to Senate Majority Leader Bill Frist, says he's been "a little bit surprised the state issues have bubbled up so quickly." The law came as states' budgets are continuing to reel from the effects of the recession, says Rosen, who's now with the firm Mehlman Vogel Castagnetti. Given those influences, "it's a little surprising to me that Congress didn't foresee the pressure it was placing on states in the short term," he says.

Another program established in the law is facing revision even before its rules are written. The Community Living Assistance Services and Supports (CLASS) Act is intended to be an insurance program for all Americans for long-term care. But HHS Secretary Kathleen Sebelius said recently that she has the authority to make changes that would affect premiums, eligibility restrictions and penalties for people who drop out of the program.

Politically, those implementing the law faced a much different landscape in Congress and in the states after the November election than could have been expected when Congress approved it in March. Republicans took over control of the House and launched a drive for repeal that has included hugely increased oversight over implementation and many requests for Sebelius and other administration officials to appear for hearings. In the courts, more than 20 legal challenges were filed against the measure and several have already moved with surprising speed to the point where oral arguments are scheduled in appeals courts.

What People Like in Law
Then there are the revelations that the administration is eager to publicize. Sebelius said at a Senate Finance Committee hearing that HHS is seeing an unexpectedly large number of Medicare beneficiaries taking advantage of new free annual wellness visits. Contrary to projections, Sebelius said that Medicare Advantage enrollment is up 6 percent, and that average premiums are down by 6 percent compared with 2010, while benefit and cost-sharing levels remain about the same.

A provision in the law that allows young adults to remain on their parents' health policies until age 26 received little attention initially. But the administration widely touted its use for families. Polls have found wide public approval of that piece of the measure even while the public has doubts about the mandate that all Americans have insurance.

Perhaps as surprising as anything are recent findings that many Americans think the law already has been repealed when in fact only the House has passed a repeal bill. The Kaiser Family Foundation February poll found that 22 percent of those surveyed think the law is dead and gone and 26 percent are unsure of its status, which foundation CEO Drew Altman called a "doozy" of a revelation.

"As a part-time pollster I should not be too surprised by these results. But as someone who once taught a course called "The Policymaking Process" in a political science department at a major university, it is a little jarring to learn that almost half the American people do not know the difference between a symbolic repeal vote in the House and the actual repeal of the law," Altman wrote in a column accompanying the poll's findings.

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