Health Law and Policy Update
Headlines of the week
Insurance officials approve medical loss ratio proposal
The National Association of Insurance Commissioners (NAIC) this week voted unanimously for a definition of medical expenses that, if adopted, will help ensure consumers get maximum value for the money they spend on insurance premiums.
The vote came during a meeting in Seattle with all state insurance commissioners, over 500 industry representatives and 17 NAIC-funded consumer representatives in attendance. At issue was how insurance companies will be allowed to calculate their medical loss ratios (MLR), the percentage of each health insurance premium dollar a health insurance company spends on medical care for their customers. A medical loss ratio of 85 percent, for example, means 85 cents of every dollar is spent on medical expenses, and 15 cents is spent on salaries, profits, agent commissions, overhead, marketing and other nonmedical expenses.
National health reform under the Affordable Care Act (ACA) requires health plans to meet certain MLR targets: 85 percent in the large-group market and 80 percent in the small-group and individual markets. Plans must begin reporting medical loss ratios in 2010. Insurers that do not meet those thresholds must provide rebates to consumers, effective January 2011.
The proposal NAIC members favored was supported by NAIC consumer representatives, a position supported by the Colorado Center on Law and Policy and other health advocacy and provider organizations. It says chronic disease management and wellness programs, hospital discharge programs, some call lines and public health education campaigns conducted with local health authorities offered by insurance companies will be included as medical expenses if measurable outcomes have been well documented.
Health insurance plans lobbied to have broker commissions, fraud prevention efforts, updates to the disease coding system, and a broad definition of quality improvement programs included as medical costs. NAIC did not agree with that position.
The unanimous vote included support from Colorado Insurance Commissioner Marcy Morrison. The NAIC proposal is now forwarded to U.S. Health and Human Services Secretary Kathleen Sebelius for her comments, possible approval and implementation.
More challenges remain for consumers: NAIC did not determine if all federal taxes paid by health insurance plans will be excluded from the denominator of the MLR calculation and some insurance commissioners agreed broker commissions should be included as medical costs.
House votes to provide Medicaid and education funding to states
The U.S. House of Representatives last week approved critical state aid that extends enhanced Medicaid and education funding. The move was a relief for Colorado, which had been bracing itself for a significant reduction in federal funding for the Medicaid. The state's 2010-11 budget assumed an extension of enhanced funding for the program, but after the budget was approved, a conflict arose in Washington, D.C., over whether to extend the enhanced funding. Last week's vote partly ameliorated that concern.
For Colorado, the funding extension means $159 million in Medicaid funding and as much as another $159 million in education funding, which will be crucial in helping stave off further budget cuts as Medicaid caseloads remain high and kids prepare to head back to school.
Colorado anticipated receiving $212 million under the package, but it will receive only $159 million because of the addition of a phase-out provision of the enhanced funding in the bill. Colorado Senators Mark Udall and Michael Bennet, and Representatives Diana DeGette, Jared Polis, Ed Perlmutter, and John Salazar should be thanked for their votes in favor of this important state aid.
Amendment to small business bill attempts to repeal a portion of health reform
An amendment to a small-business bill expected to be offered in the U.S. Senate could result in cuts to preventive health funding and a weakening of the individual mandate in the Affordable Care Act.
U.S. Sen. Mike Johanns of Nebraska is expected to offer the amendment the first day the Senate returns from its August recess. It would repeal new business reporting requirements created by the Affordable Care Act due to concerns about the burden the reporting requirements impose on business. The change would result in a revenue loss of $17 billion over 10 years that would be offset by cutting preventive health funding and allowing more people to opt out of the individual mandate.
The individual mandate is an integral component to health reform along with insurance market reforms and affordability provisions. In order to require an end to such practices as pre-existing condition exclusions and health status rating without driving up costs, an individual mandate is required. Affordability provisions must operate along side the individual mandate so that people can be assured of finding qualifying health coverage that will not be a significant financial burden.
By allowing more people to opt out of the coverage requirement, the Johanns amendment could drive up health insurance costs. A report from the Center on Budget and Policy Priorities provides a detailed analysis of the effects of the Johanns amendment. An alternative amendment is expected to be offered by Sen. Bill Nelson of Florida that would reform the reporting requirements and take advantage of other offsets rather than making cuts to public health and weakening the individual mandate.
Medicare Part D checks are in the mail
The third round of one-time, tax free $250 rebate checks were sent on Aug. 10 to eligible Medicare beneficiaries whose drug costs are so high they have reached the Medicare Part D prescription drug gap called the "donut hole." There is no requirement for seniors to sign up for this benefit - they receive the checks automatically when they reach the donut hole. The benefit is included in the Affordable Care Act. In 2011, the ACA provides for a 50 percent discount on brand name medications for Medicare beneficiaries.
WellPoint, which owns Anthem, reports second quarter results
WellPoint announced net income per diluted share results for the second quarter ending June 30 of $1.71 per share. That was an increase of 19.6 percent over the June 30, 2009, results of $1.43. Total earnings were $722.4 million in the quarter, compared to $693.5 million during the same quarter last year.
Commonwealth Fund report on Colorado preparing for health care implementation
In a new report, the Commonwealth Fund summarizes the transition plan and roadmap Colorado Gov. Bill Ritter's team is using to implement health care reform. The Interagency Health Reform Implementing Board meets monthly and will present a strategic plan for health reform implementation by Nov. 1.
State hosts second community meeting on health insurance exchanges
Last week, Colorado hosted the second in a series of community forums on the design of the health insurance exchanges. Attended by more than 100 people, the forum focused on how the exchanges will affect the insurance market. The next meeting will be 3 p.m. Aug. 30, location to be determined.
Stakeholders meeting to design and submit Consumer Assistance Program grant
The Affordable Care Act provides grant funds for states to build capacity for consumer assistance and ombudsman programs. Grants are due Sept. 10, and funding is expected to roll out as soon as Oct. 10. Stakeholders in Colorado are working to prepare a grant for approval by the governor's office and submission to the U.S. Department of Health and Human Services. The grant money will be used to designate an independent office of consumer assistance that will, among other things, "assist with filing complaints and appeals, including filing appeals with the internal appeal or grievance process of the group health plan or health insurance issuer" and "educating consumers on their rights and responsibilities with respect to group health plans and health insurance coverage."
Consumer Catalyst has produced a document summarizing the grant, and a Families USA document provides further information about designing consumer health insurance assistance programs.
What you can do
Schedule a presentation on health reform
Health reform can be confusing. The health staff at the Colorado Center on Law and Policy is ready to help community groups, medical professionals, lawmakers and others understand the complexities of health reform and how it will roll out during the next few years. Please contact us to schedule a presentation.
Health Care Director
Health Care Attorney
Released Aug. 20, 2010