By Will Blackford, Class of 2017

Recently, the Trump administration put forth two key initiatives to ease the burden of the Affordable Care Act (“ACA”) and to stabilize the Obamacare marketplace.

First, the Internal Revenue Service (“IRS”) quietly updated its website with a statement indicating that the agency will not reject 2016 tax filings that fail to indicate whether a taxpayer complied with the ACA’s individual mandate. Second, the Centers for Medicare & Medicaid Services (“CMS”), now overseen by Tom Price, the new Secretary of the Department of Health and Human Services, submitted a new proposed rule aimed at making health insurer plans under the Obamacare exchange more profitable.

Both changes come on the cusp of significant insurer uncertainty, with Humana announcing its departure from the exchange market in 2018, and other insurers—such as Aetna and Anthem—threatening to cease future participation in the absence of meaningful modifications to the system.

 

New IRS Individual Mandate Policy

Following the signing of an executive order by President Trump on Jan. 20, 2017, which directed federal agencies to reduce the burden of the ACA, the IRS retreated from its previous policy that would have required an indication of health insurance coverage on tax returns. The system the IRS initially developed would have automatically rejected tax returns that failed to indicate whether the individual maintained health insurance, allowing the agency to efficiently enforce the ACA’s assessment of a penalty on those lacking coverage.

Under the newly announced policy, this mechanism for handling so-called “silent returns” will not be implemented. Instead, the IRS will continue to accept and process electronic and paper returns, even in the absence of an indication of coverage status. However, the IRS will still be enforcing the individual mandate if people volunteer on their 1040s that they lacked health coverage in 2016. While the agency reserves the right request additional information from individuals that file “silent returns,” the policy shift will undeniably lead to a lesser degree of enforcement under the mandate.

 

CMS Market Stabilization Proposed Rule

As Congress continues its debate over repealing, repairing, or replacing the ACA, a recent CMS notice of proposed rulemaking (“NPRM”) is intended to calm insurer anxieties over the long-term viability of the health insurance exchange. The NPRM offers numerous policy and operational tweaks geared toward stabilizing the marketplace, including:

• Shortened 2018 Open Enrollment Period. The NPRM would reduce the open enrollment period for 2018 to 45 days (November 1 to December 15, 2017). This would allow insurers to collect a full year’s premium for 2018 from regular enrollees and limit adverse selection by those individuals who discover health issues during the months of December and January.
• Special Enrollment Periods. The NPRM would target special enrollment periods (“SEP”) by tightening up eligibility, restricting the upgrade ability of existing marketplace enrollees, and limiting overall use of the “exceptional circumstances” SEP.
• New Guaranteed Availability Requirement Interpretation. To address insurer concerns over potential abuses, the NPRM would add flexibility to the guaranteed availability requirement for allowing an issuer to collect premiums for prior unpaid coverage before enrolling a patient in the next year’s plan with the same issuer. This is meant to incentivize patients to avoid coverage lapses.
• Reduced Essential Community Providers Requirement. The NPRM proposes that for 2018, plans be required to include only 20 percent of Essential Community Providers (e.g., community health centers, family planning clinics, safety-net hospitals) within their network, rather than the current requirement of at least 30 percent.
• Network Adequacy Delegated to States. Starting with the 2018 plan year, CMS proposes deferring to the state regulators to ensure network adequacy, provided that the state has adequate authority and resources to ensure reasonable access to providers.

Unlike the traditional 30-day minimum for feedback, the NPRM has an unusually short comment period—only 20 days—for CMS to consider public comments prior to issuing a final rule. This expedited timeframe is intended to accommodate insurers who are frantically working to finalize their forms and rates for 2018.

By Will Blackford, Class of 2017

After four decades of anticipation, the Substance Abuse and Mental Health Service Administration (“SAMHSA”) published on January 18 a Final Rule modernizing the laws governing how providers share data about individuals with a substance use disorder (“SUD”). The affected regulations, known as 42 C.F.R. Part 2 (“Part 2”), were updated to meet the demands of the electronic age. The Final Rule is meant to facilitate broader data delivery and electronic exchange while safeguarding the privacy of the patient information.

Revisions to Part 2 under the Final Rule include:

• Consent. Rather than requiring the identification of a specific information recipient, patients are now allowed, in certain circumstances, to consent to a “general disclosure” to intermediate entities (e.g., “my current and future treating providers”).
• Disclosure. Any patient who opts for this general designation consent may request in writing (paper or electronic) a list of entities to which their information has been disclosed (“List of Disclosures”), and the disclosing entity named on the general consent form must respond within 30 days with a brief description of each disclosure made within the past two years.
• Description. All patient consent forms are required to include an explicit description of the amount and kind of information that may be disclosed.
• Scope. The applicability of restrictions on disclosures under Part 2 is expanded to include individuals or entities receiving patient records from “other lawful holders of patient identifying information.”
• Security. Part 2’s security requirements now apply to both electronic and paper records, as well as require Part 2 programs and “other lawful holders” to have formal security policies and procedures in place.
• Exclusions. Simply providing screening, brief intervention, or referral to treatment, within the scope of general healthcare, does not subject a provider to classification as a Part 2 program.
• Qualified Service Organizations. The definition of a Qualified Service Organization (“QSO”) is expanded to include an entity that provides population health management (“PHM”) services to a Part 2 program; however, disclosures under QSO agreements are limited to specific offices or units that actually carry out PHM and such agreements may not be used to circumvent patient consent.
• Re-disclosure. As a clarification, the prohibition on re-disclosure under Part 2 now applies only to information that would identify a patient as having been diagnosed, treated, or referred for a SUD, unless the patient expressly authorizes such disclosure.
• Other Disclosures. The Final Rule also relaxes requirements in specific areas, such as disclosure without consent for certain scientific research, medical emergencies, and audits or evaluations.
• Payment and Operations Disclosures. Due to commenter concerns, SAMHSA issued, alongside the Final Rule, a Supplemental Notice of Proposed Rulemaking (“SNPRM”) to seek comment on disclosures to contractors for payment and operations facilitations, as well as disclosures for Medicare, Medicaid, and other federal program audits or evaluations.

 

Although the Final Rule was scheduled to go into effect on February 17, 2017, President Trump’s 60-day hold on all rules published in the Federal Register that are not yet effective will likely delay the effective date until at least March 21, 2017. But even with the delay, those providers subject to Part 2 have a very limited timeframe to thoroughly review the new provisions and implement necessary changes.

Specifically, Part 2 providers should implement or update security procedures to address both paper and electronic records. Security measures should also clarify internal policies for creating, maintaining, transferring, destroying, and de-identifying such records. Should providers choose to utilize the new general designation consents for disclosures, there will need to be adequate recordkeeping processes in place to ensure compliance with any List of Disclosure requests. Additionally, providers working with QSO vendors should review relevant contractual documentation to confirm that such vendors are correctly categorized as a QSO under the new definition.

Stay tuned as we continue to monitor the implementation of this Final Rule and analyze its legal consequences.

By Ann Hogan, Class of 2018

After years of debate, on Wednesday, March 29, 2017, the Texas Senate unanimously passed Bill 1107, legalizing telehealth and telemedicine in the state of Texas and is to take effect immediately. Telemedicine is a health care service delivered by a licensed physician or health professional to a patient at a different physical location than the physician or health professional using telecommunications or information technology.

Bill 1107 removes the requirement of a face-to-face consultation between a patient and physician providing a telemedicine medical service within a certain number of days following an initial telemedicine service in order to create the physician-patient relationship. Now, a physician-patient relationship can be created through telephone or video.

Bill 1107 delegates the authority for the Texas Medical Board to create rules to effectuate appropriate quality care, the prevention of fraud and abuse, and the supervision of the healthcare professionals. It also requires the physician to comply with the standard of care that would apply to the provision of the same health care service or procedure in an in-person setting. Mental health services are excluded from this provision. Also noteworthy, physicians are not permitted to prescribe an abortifacient or any other drug or device that terminates a pregnancy through telemedicine.

The passing of this bill will likely have a significant effect for rural provider areas. For Texans who live in rural areas, telemedicine will allow them to seek care from providers via phone or video and have prescriptions called in to their local pharmacy. This will increase the efficiency of health care for Texans and save them time and money.

By Zachary Gureasko, Class of 2017

On President Donald Trump’s website, one of his objectives is: “Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.” President Trump believes that by allowing the individual to “shop around” for the best prices, competition among providers will increase and they will be forced to lower costs.

There are some organizations that already attempt to use existing data to provide consumers with cost estimates that they can use to make cost-informed choices. One such organization is FAIR Health, which is an independent, non-profit corporation whose mission is to promote cost transparency in healthcare costs. Using the website highlights some discrepancies in costs that would be helpful to consumers. For example, a procedure done in Nashville proper priced at $5,000 could potentially cost as low as half of that amount if it was performed more than 45 miles away from Nashville.

The health care industry has long been viewed as “hiding the ball,” so to speak, when it comes to the full prices of their services. Generally, the only information they offer before the patient elects to undergo a procedure or treatment is the immediate cost, such as a co-payment or deductible. Arguments have been made, even prior to President Trump’s call for increased transparency, for the provision of total costs to the consumer. The justification for this is that consumers with more information will be able to comparison shop and obtain the desired care for a relatively affordable price.

There are issues with price transparency from both provider and consumer perspectives. There are impediments to price reporting, such as contractual provisions preventing health plans from negotiating their rates with providers, as well as the indication that encouraging patients to be more price-conscious could have negative impacts on low-income consumers due to cost-shifting. Additionally, there is currently no standard structure for reporting prices, and the interplay between health care providers, insurance companies, and government agencies almost require some sort of formatted structure to be in place to enable providers to adequately report in a way that would achieve the intended result of these price transparency efforts.

Several studies have also shown that price transparency initiatives, such as requiring hospitals to publish the prices of their procedures and treatments up-front, do not truly lead to changes in either consumer behavior or pricing. This result is potentially attributable to a perceived correlation between high cost and high value, one that is not necessarily accurate in the health care industry as it might be in other industries. Another wrinkle in the fold from a consumer perspective is the notion that consumers will use price transparency tools in their decision-making. However, many consumers are unaware that such tools exist; moreover, even if they are aware of the tools’ existence, research has shown that this has little to no bearing on the consumers’ ultimate decisions or determinations.

As a final consideration, although efforts to increase price transparency are still in their early stages (and thus there is not enough data to form a fully conclusive study on their impact), not all health care services are amenable to “shopping around.” For instance, a person in an emergent situation will not be on his or her smartphone comparing the prices of different ERs. The person will assuredly utilize the nearest hospital with an emergency room. Emergency room services comprise a fairly substantial portion of health care costs. Therefore, it remains to be seen whether increased price transparency will truly increase competition or lower health care costs for consumers.

 

By Ann Hogan, Class of 2018

In July of 2016, the Department of Justice brought suit to block the $54 billion merger of Anthem and Cigna. In the complaint, the DOJ alleged, “Anthem’s purchase would eliminate it as a competitive threat and substantially lessen competition in numerous markets around the country. The harm to competition in any one of these markets is sufficient to enjoin the transaction.” If the DOJ is unsuccessful and Anthem and Cigna are allowed to merge, it would become the largest health care provider in the nation. “Anthem has argued that the deal would save health insurance customers over $2 billion in medical costs because Cigna customers will be able to access discounts that Anthem is able to offer its customers.”

However, on February 8, 2017, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia ruled in favor of the DOJ stating, “it would violate antitrust law for the second- and third-largest health insurers in the U.S. to combine.” The company made a statement that it, “promptly intends to file a notice of appeal and request an expedited hearing.”

Two weeks prior to Judge Jacksons’ ruling blocking the Anthem-Cigna merger, Judge John D. Bates of the United States District Court for the District of Columbia blocked the Aetna and Humana merger on antitrust grounds. Judge Bates wrote, “the court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anticompetitive effects for consumers in the challenged markets.” It seems that the judges side with the DOJ’s view that the merger of the top two companies would not be beneficial to consumers.

By Kim Macdonald, Class of 2018

Selling Health Insurance Across State Lines—A Summary

Currently, health insurers are restricted to each state for purposes of regulation. One primary health reform proposal is to allow insurers to sell health insurance to out-of-state markets. Proponents argue that removing the state line restrictions will encourage competition, increase consumer choice, and, therefore, offer national plans with much lower premiums as determined by the market. By providing people with more options, in theory, consumers can choose the plans that provide only the benefits they need without paying for superfluous benefits.  Critics argue that allowing interstate sales of insurance will instead provide a mechanism for insurers to choose their regulator, sparking a “race to the bottom” for the states with the least restrictive regulations. In turn, removing the barriers to selling health insurance across state lines may encourage states to have less restrictive regulations to attract health insurance companies.  Removing these restrictions would likely benefit the young, healthy policy holders, resulting in lower premiums because they do not rely on regulations to cover their needs. By contrast, fewer regulations could harm older and sicker policy holders who depend on the coverage restrictions to qualify for sufficiently robust policies.

Additionally, critics argue interstate sales of health insurance would decrease the availability of policies per state, since insurers have to compete on a national market rather than a regional or state-wide market. Some critics are concerned the proposal undercuts states’ role in regulating insurance, which, counterintuitively, may increase the necessity of the federal government to further regulate the market to ensure basic minimum standards.

Insurers would also have to grapple with the difficulty of setting up a network of providers and entities without being in-state.  Insurance costs reflect the general health of an area’s population. Therefore, while one policy may be affordable in one state due to its robust network of providers, lower cost of living, and overall health of the population, the exact same policy may not translate financially across state borders. Insurers face difficulties with selling “healthy state” plans to sicker populations in other states.

By Zachary Gureasko, Class of 2017

The future of the health care industry is as uncertain as ever, pending the potential repeal (and hopefully subsequent replacement) of the Patient Protection and Affordable Care Act (“ACA”), colloquially known as “Obamacare.”

On January 20, 2017, President Donald J. Trump signed an executive order titled “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” This particular order directed federal agencies to reduce enforcements of the ACA’s requirements, subject to two limits: any reductions in the enforcement of the ACA’s provisions must be consistent with the law itself, and the change must comply with “notice and comment rule making” requirements (should the law so require). Although these are significant limitations on the order, they indicate a willingness to repeal the ACA as soon as possible and practicable. As of the date of this post, proponents of the repeal of the ACA have not tabled a viable alternative to replace the Act. They have also not designated which provisions of the Act they intend to keep, if any, although President Trump has indicated that he wishes to keep in place the prohibition on denying coverage to individuals with preexisting conditions. There are some notable risks and benefits to this prospective repeal.

One of the notable benefits is for branded pharmaceutical companies due to the bidding processes that may take place in the event of the ACA’s repeal. Although 90% of the prescription drugs in this country are generic, and therefore there is significant market control over the prescription drug industry, pharmaceutical companies have been able to needlessly increase the prices of brand-name prescription drugs. These participants, who have often increased prices for products that do not provide significant value to the consumer, will most likely suffer. Unlike generic drug companies, brand-name drug companies are subject to the industry fees imposed by the ACA. Any cost reduction realized by the elimination of these fees will be counterbalanced by substantial revenue erosion. This will pave the way for other players in the brand-name drug industry to emerge, establishing a more competitive market that will hopefully drive up value while lowering costs. President Trump has stated that it is one of his express goals to remove barriers to entry into free markets for drug providers.

Pharmaceutical and biotech companies could also realize greater revenues if the Branded Prescription Drug Fee that levies taxes on drug-makers in proportion with their market share is eliminated by repealing the ACA. Companies’ bottom lines could be benefitted even further if Trump’s tax plan succeeds, thereby decreasing business tax rates, allowing larger companies to keep more of the money they earn. Deregulation is also integral to President Trump’s long-term plan for the healthcare industry. Stocks have reportedly increased for pharmaceutical and biotech companies since President Trump’s election and inauguration.

In contrast, the risks for providers and payers are significant if the ACA is repealed completely. Without a replacement, repealing the ACA would, in the first year, cause 18 million individuals who are currently insured to lose coverage. An increase in the number of uninsured individuals will have an exceptionally negative impact on providers, as an increase in the number of uninsured correlates with a provider’s inability to collect payments from the uninsured, increasing the provider’s “bad debt.” A greater number of uninsured necessarily implies higher premiums, deductibles, and cost-sharing for those who are still insured, meaning that Medicare and other third-party payers will have to pass these costs on to consumers that are still enrolled. This will lead to a decline in Medicaid enrollment, as the historically poor and categorically needy will be unable to afford these increased costs. Private insurers could potentially benefit, since they have not experienced the increased enrollment that was anticipated under the ACA’s individual mandate. The simple fact is that repealing the ACA without a viable alternative will leave millions uninsured, and the ones losing coverage are not the ones who will feel the first, strongest financial effects. Providers and payers will experience increased costs and bad debts, and this is undesirable in an era where the focus of the industry is moving toward value-based measures.

As time goes on, it appears that the ultimate goal of ACA’s many detractors is truly to replace and reform (or “repair”) the Act rather than repeal it entirely, but the future is uncertain, for better or for worse, for all those involved in the health care industry.

 

By Ann Hogan, Class of 2018

It is no secret that repealing the Affordable Care Act (ACA) is a top priority on the Trump Administration’s agenda. It is predicted that the use of Health Savings Accounts (HSAs) will increase and may be used as a replacement for the ACA. The Republicans favor competition among the insurance companies rather than a government-mandated program. Thus, HSAs will rise in popularity as it gives the individual more flexibility and control over their healthcare.

 

Enacted by Congress in 2003, Health Savings Accounts are usually paired with a high deductible insurance policy and allow both the policyholder and their employer to contribute money into the account for medical expenses without being taxed. Simply put, HSAs are a tax-free savings account to be used specifically for medical expenses. HSAs limit the amount of money that can be contributed to the account each year. In 2017, the policyholder and their employer may contribute up to $3,400 to an HSA for individuals and $6,750 for families. Policyholders age 55 and older can contribute an extra $1,000 each year. However, unlike the “use it or lose it” function of Flexible Spending Accounts (FSAs), HSAs allow the policyholder to keep their balance and continue saving from year to year. Another attractive feature of the HSA is that the policyholder can take their HSA with them if they were to switch jobs or insurance providers.

The Trump Administration believes that the increase of HSAs will give individuals more control over their health care decisions and costs resulting in better quality outcomes in care and cost. According to the 2015 Census of Health Savings Account – High Deductible Health Plans, AHIP Center for Policy and Research, Nov. 2015, “nearly 20 million Americans have an HSA.” The Report from the Health Care Reform Task Force states that House Republicans have proposed HR 5324: Health Savings Account Expansion Act of 2016 by Rep. Dave Brat. While the healthcare reform process will be slow to change, the utilization of HSAs are predicted to increase.

By Kim Macdonald, Class of 2018

A block grant is a proposed strategy used for managing Medicaid, which provides control of the program in state hands by placing a flat cap on federal funding. Proponents argue these locked lump sum payments would provide states greater freedom in regulating health insurance. As a result, less federal funding would be available for state Medicaid programs, which proponents argue would incentivize states to manage their finances more responsibly. However, critics counter that it is inherently challenging to “manage fiscal responsibility” for a program based on providing health care for the needy.

By turning Medicaid into a block grant-based program, states themselves would have the increased ability to decide who qualifies for coverage, rather than having to largely meet federal coverage requirements as a prerequisite for receiving federal funding. Currently, states have to meet federal requirements for coverage, such as covering children and low-income pregnant women, as a condition of receiving federal funding. Therefore, because the federal government and states share in the funding of Medicaid programs, states are restricted with how to spend federal money and what benefits to cover. Transforming Medicaid into a block grant-funded program results in loosening these state coverage requirements.

A block grant is different from a “per capita cap,” which provides fixed federal funding based on the number of enrollees in the state. By contrast, block grants do not account for this variability; if the number of enrollees shifts dramatically from year to year, federal funding through a block grant cannot account for this increased or decreased expense.

Proponents of the block grant structure for Medicaid argue it will encourage innovation by forcing states to spend their money more efficiently. However, critics argue the structure harms people in the guise of “experimentation,” by forcing states to take drastic measures to cut costs in the short term—perhaps by cutting benefits or increasing cost sharing obligations. One criticism is that these fixed federal grants would be based on national inflation, not medical inflation, which accounts for epidemics, new and expensive drugs, and an aging population. In order to account for the sudden loss of federal funding, many states may cut benefits entirely for current enrollees eligible for Medicaid in expansion states. In fact, block grant proposals likely would cut off all federal funds allocated for Medicaid expansion entirely. Given that thirty-one states and the District of Columbia have adopted Medicaid expansion, including about one hundred Republican House members and about twenty Republican senators, this drop in coverage would be problematic.  Alternatively, states may decide to cap enrollment to save costs, leaving many qualified enrollees without health care coverage. The Congressional Budget Office estimates block grant proposals to cut Medicaid by as much as a third over the next ten years. This drastic of a cut would primarily affect the elderly and the disabled, who are the recipients of the clear majority of the existing Medicaid budget.