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Health Law and Policy Update

Headlines of the week

Insurance companies abandon children with pre-existing conditions
At least four major health insurance companies doing business in Colorado are trying to avoid a provision in the Affordable Care Act requiring them to cover children with pre-existing conditions. The health plans (Aetna Life Insurance Co., Assurant Health -- sold in Colorado as Time Insurance Co., Cigna Corp. and Humana Insurance Co.) intend to stop writing new child-only health insurance policies for Colorado children in the individual market as of Oct. 1, the Denver Business Journal reports. The requirement to cover children with pre-existing conditions goes into effect Sept. 23.

Health plans' objections to covering children with pre-existing conditions began to surface shortly after passage of the Affordable Care Act, when the industry announced it interpreted the law to mean health plans were not required to cover those children until 2014. In March, Health and Human Services (HHS) Secretary Kathleen Sebelius wrote to Karen Ignagni of America's Health Insurance Plans raising concerns that "some insurance companies may be seeking to avoid or ignore a provision in the new law that prohibits insurance companies from excluding children with pre-existing conditions." This despite a clarifying fact sheet from HHS, which says grandfathered "child-only" plans (meaning plans in existence before March 23, 2010, that have not made substantial changes), are exempt from the requirement, and insurance companies offering in the individual insurance market may restrict enrollment of children with pre-existing conditions to open enrollment periods. Health insurance reform, Sebelius wrote "is designed to prevent any child from being denied coverage because he or she has a pre-existing condition."

Responding to Sebelius, Ignani affirmed health plans' commitment to children: "Health plans recognize the significant hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition. ... That is why health plans in 2008 proposed reforms to make pre-existing condition exclusions a thing of the past."

The commitment affirmed by Ignagni appears to have been short-lived as health plans announce their intention to stop writing individual policies that cover children in order to avoid the requirements of the law. According to The Hill, Kansas Insurance Commissioner Sandy Praeger said: "When it's happening with national companies, I can guarantee you it's happening probably in every state ... and once the national companies start doing it, it starts to impact the smaller, regional companies."

While companies are still not permitted to drop coverage for those who are currently insured, refusing to write new policies for children decreases substantially the options for all children. Families hit the hardest will be those with sick children who were hanging on until the provision of the law eliminating pre-existing condition exclusions took effect.

Sabrina Corlette of the Georgetown Health Policy Center writes of the requirement to cover children with pre-existing conditions:

This is a reform that should be embraced by everyone - how can anyone justify denying a child access to health care? And early on, most health insurance companies said they would willingly comply with the new rules. But lately, that commitment has started to crumble as the companies look at their bottom line and realize that covering kids who need health care will drive up their costs. In a move that demonstrates how dysfunctional our health system has become -- and why the broader insurance reforms, slated to go into effect in 2014, are so vital -- many are now saying they want to get out of the kids' market.

1 million seniors have received drug rebates as a result of the Affordable Care Act
Health and Human Services Secretary Kathleen Sebelius announced Monday that 1 million seniors have received a one-time, tax-free $250 prescription drug rebate check. The rebate begins to close the Medicare prescription drug gap in coverage known as the "donut hole." That coverage gap effects seniors on Medicare who must pay out-of-pocket for annual drug costs that fall between $2,830 and $6,440. Beginning in 2011, seniors who hit the donut hole will get a 50 percent discount on brand-name drugs and gradually increasing discounts on generic drugs. The donut hole will be closed completely by 2020.

Colorado benefits from Affordable Care Act's reinsurance program
From HHS: The U.S. Department of Health and Human Services announced the first round of applicants accepted into the Early Retiree Reinsurance Program. Nearly 2,000 employers, representing large and small businesses, state and local governments, educational institutions, nonprofits, and unions have been accepted into the program and will begin to receive reimbursements for employee claims this fall. Created by the Affordable Care Act as a bridge to the new health insurance exchanges in 2014, the Early Retiree Reinsurance Program provides $5 billion in financial assistance to employers and unions to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare. Businesses and other employers and unions that are accepted into the program will receive reimbursement for medical claims for early retirees and their spouses, surviving spouses and dependents. Savings can be used to reduce employer health care costs, provide premium relief to workers and families, or both. The program ends on Jan. 1, 2014, when state health insurance exchanges are up and running.

The approved applications represent nearly every sector of the economy: 32 percent of applications came from businesses, 26 percent from state and local governments, 22 percent from union sponsors, 14 percent from schools and other educational institutions, and 5 percent from nonprofits.

Colorado companies accepted in the program to date: Alenco, Inc. Board of Trustees - Pipe Industry Health and Welfare Trust; Board of Trustees of the Colorado Finishing Trades; Board of Water Commissioners; Carpenters & Millwrights Health Benefit Trust Fund; City of Colorado Springs; City of Grand Junction; Colorado Permanente Medical Group, P.C. Colorado Sheet Metal Workers' Local 9 Family Health Plan; Great-West Life & Annuity Insurance Company; Hermes Consolidated, Inc.; JA Worldwide; Operating Engineers Health and Welfare Trust Fund; Public Employees' Retirement Association of Colorado; Trustees, Co Laborers H&W Fund; and the University of Colorado. For a list of approved applications by state, visit HealthCare.gov.

Denver area hospital systems enjoyed high profits in 2009
Despite a decrease in inpatient hospital days, an analysis of hospital cost reports submitted to Medicare shows that hospitals in the Denver area had pre-tax net income of $742.4 million, or 12.9 percent of net patient revenues in 2009. HealthOne/HCA had net income before taxes of $367.3 million in 2009, or 20.9 percent of net patient revenue. The Centura hospitals in the Denver area had net income of $70.7 million (7 percent) while the three Exempla hospitals had net income of $65 million, or 7.1 percent of net patient revenues.

What's new

Colorado Health Insurance Exchange meeting schedule
The next meeting on Colorado Health Insurance Exchange will be 3 to 5 p.m. Sept. 23 at a location to be determined.

The fifth and final meeting in Denver will be 9 to 11 a.m. Sept. 29. Dates outside the Denver metro area:

  • Alamosa: 10 a.m. to noon Oct. 11
  • Grand Junction: 10 a.m. to noon Oct. 21
  • Colorado Springs: 10 a.m. to noon Oct. 26
  • Greeley: 10 a.m. to noon Oct. 29

Details about the meetings are on the governor's health care reform website.

Advancing the debate

Resources on exchanges
Georgetown Health Policy Center released a paper this week on health insurance exchanges.

Forum will address health care equity
The Colorado Multi-Ethnic Consortium will host a forum Sept. 9 on "Healthcare Reform: Laying the Foundation for Equity." The two-hour event will provide an overview of some the provisions in the new law that will help close the gap, including prevention and public health, coverage expansions, and initiatives that specifically address health care disparities.

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 Law and Policy Update is issued weekly by the health staff of the Colorado Center on Law and Policy. Subscribe by e-mail or read previous editions.

Health Care Director
Elisabeth Arenales   

Health Care Attorney
Adela Flores-Brennan   

Special Counsel
Ed Kahn   

Communications Director
Perry Swanson

Released Sept. 3, 2010