Financial Resource

Recently barred fast track resolution by the U.S. Supreme Court, opponents of the Affordable Care Act (ACA) have resumed their legal quest to derail the law through the traditional Circuit Court route. Twenty-six states last week filed a motion in the 11th Circuit Court of Appeals in Atlanta urging the court to strike down the health care overhaul law. The motion asks the court to uphold a Florida federal judge’s ruling that the law’s core requirement, that everyone purchase health coverage, is unconstitutional. The filing comes about a month after the Obama administration formally appealed the Florida ruling. Once the 11th and 4th Circuits rule on ACA appeals, the U.S. Supreme Court is finally expected to take on the issue and become the final arbiter — but probably not until late 2012.

Federal

Last week the Republican-controlled House approved two bills  that would repeal funding for construction of school-based health centers and assist the states in establishing school-based health centers, as otherwise authorized by ACA.  Both items are part of a package of bills that are coming to the House floor to either repeal or revise ACA provisions that provide funding for various parts of the health care reform law. Neither will make it though the Democratic Senate, nor get past the President’s veto pen. This effort is all about setting up various lines in the sand from which to bargain with respect to the bigger battle over the budget and the national debt.  Whether either side will back down remains unclear. But it is clear that Republicans and Democrats are preparing for a major fight just around the corner.

On the Senate side, the top Republican on the Senate Finance Committee, Senator Orrin Hatch (R-UT), introduced legislation designed to further erode a provision of ACA.  The Senator’s legislation proposes repeal of the Medicaid/CHIP Maintenance of Effort (MOE) provision in ACA, which would give the states financial relief from the funding requirements demanded by ACA.  While the House companion bill (Congressman Phil Gingrey, R-GA) may have better luck than the Hatch bill in the Senate, this effort may have more life than other anti-ACA proposals because the states are in dire financial straits and both Republican and Democratic governors are clamoring for relief from Washington.

States

CALIFORNIA: The 2011 version of a hospital transparency bill was unanimously voted out of the Senate Health Committee last week. The legislation would prohibit hospitals from including provisions, commonly referred to as “gag-clauses,” in contracts with health insurers. These provisions prevent disclosure of hospital cost and quality information to health plan members. Individual hospital systems, the UC System and the California Hospital Association continue to oppose the bill, while insurers, payers and labor unions support the measure.  Also, the Senate Health Committee last week announced its new policy of making almost all benefit mandate proposals two-year bills. The Chair believes that the legislature should wait until the federal government defines essential health benefits under the ACA.  The only exception to this committee policy will be the maternity mandate bill, which the Chair believes is certain to be part of the essential benefits package.  There have been a dozen benefit mandates bills introduced this year.

COLORADO:  The Colorado General Assembly passed an insurance exchange bill after the Senate concurred to amendments added by the House. Passage of the bipartisan-sponsored bill is the culmination of nearly nine months of work that drew the support of the governor, business and the health insurance industry. Key bill provisions include:

Establishes an exchange as a nonprofit, unincorporated public entity
Designed to foster a competitive market, the exchange shall not solicit bids or engage in the active purchase of insurance
No duplication of Division of Insurance regulatory authority, including rate review
All carriers licensed in Colorado may be eligible to participate
Governed by a nine-member board of directors appointed by the governor and legislative leadership; plus three non-voting ex officio members
Majority of voting board members shall not be directly affiliated with the insurance industry
A legislative implementation review committee will review grant applications, financial and operational plans and have the ability to propose up to five bills per session
No separate state appropriation was made to fund the implementation

The bill does not address substantive issues such as the merging of the individual and small group markets or the size of eligible small employers.

CONNECTICUT: Governor Dannel Malloy last week signed a biennium budget bill, without a proposed increase in the premium tax. To avoid paying million in retaliatory taxes to other states, insurers supported temporarily lowering the amount of premium tax credits that can be used, from 70 percent to 30 percent for two years.  The budget includes the tax credit measure, which will sunset in 2013 .

Legislators are now focusing on other issues, including rate review. If enacted, the current rate review bill would: require a lengthy notice and public hearing timeline for all proposed rate increases; authorize the Healthcare Advocate and the Attorney General to be parties to any hearing; and broadly define “excessive” to include consideration of commissions, transfer of funds to a holding or parent company, the rate of return on assets or profitability, and a “reasonable” profit margin. The bill would also require that plans send written notice to insureds or subscribers of both the proposed rate and, later, the new rate. This bill would be effective July 1, 2011. The estimated cost of holding hearings for all proposed rate increases of 10 percent or more is million, for a department that has an annual budget of million. The bill was voted out of the Appropriations Committee nonetheless. If the bill were to be voted on today, it likely would pass. However, Insurance Commissioner Thomas B. Leonardi raised concerns about the potential cost and workload. The current law allows for the insurance commissioner to hold a rate hearing at his discretion. Leonardi said rates that aren’t justified by actuarial science will be rejected. Senate Insurance Chair Joe Crisco called the bill a “work in progress” and said he and other legislators will be working with Leonardi.

KANSAS: Kansas has joined the growing list of states asking the federal Department of Health and Human Services (HHS) for a waiver of ACA’s minimum loss ratio (MLR) requirements. If granted, the waiver would allow Kansas carriers until 2014 to fully comply with the 80 percent requirement under federal law. In a letter to HHS Secretary Kathleen Sebelius, Insurance Commissioner Sandy Praeger proposed a rule modification for the individual market to allow for a gradual implementation of the 80 percent requirement. The waiver would offer companies appropriate time to adjust their business practices and maximize opportunities for new companies to enter the Kansas market. The current MLR requirement for major medical coverage in the state’s individual market is 55 percent.  Commissioner Praeger’s letter proposes adjustments to the MLR standard at 70 percent in 2011, 73 percent in 2012, 76 percent in 2013 and 80 percent in 2014. To date, Maine is the only state to have received approval from HHS for a waiver. Guam and nine other states — Florida, Georgia, Iowa, Kansas, Kentucky, Louisiana, North Dakota, Nevada, and New Hampshire — have submitted waiver applications that are pending.

MAINE: The House last week voted 76-72 to approve an ambitious health care reform bill introduced by the Republican majority. The bill would overhaul Maine’s health insurance system and create a new one designed to foster more competition. If enacted, the bill would repeal Maine’s standard benefit package and geographic access rules (Rule 750 and Rule 850) and expand the rating bands to open up the individual and small-group insurance market to greater competition. The changes in rating for individual health plans and small group plans would be phased in over four years, with a maximum rate differential of 1.5:1 to 5:1, based on age, for individual and small group health plans. The bill also would authorize the renewal of short-term health insurance policies for a period not to exceed 24 months, instead of the current 12-month limit. By 2014, the bill would allow Maine residents to purchase insurance across state lines in four New England states: Connecticut, Massachusetts, New Hampshire or Rhode Island. In addition, it would establish an individual market reinsurance pool to be funded through a covered lives assessment capped at per month, per person. The bill is likely to pass the Senate as well, where Republicans hold a 20-14 majority.

In other legislative action, the Health and Human Services Committee heard testimony on a bill to repeal Maine’s 2003 Pharmacy Benefit Management (PBM) law. The law requiring PBMs to disclose contractual agreements with drug makers has been detrimental to the growth of competition. Medco testified that the law has led the company to turn down business in Maine. Express Scripts and Caremark, which is owned by drugstore chain CVS, also testified in support of repeal, portraying the law as the “most extreme in the country.” Michael Cianchette, an attorney for the LePage administration agreed, saying that Maine should conform to the national norm. Community pharmacies, which face competition from PBMs’ mail-order operations, oppose the repealer.

NEW JERSEY: Both chambers of the legislature are fully engaged in budget hearings as the

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