Monthly Archive: November 2014

Workplace wellness flash point of large employer frustration with rising medical costs

Frustration among large employers over the continued high and rising cost of providing medical coverage for their workforces nearly five years since the Affordable Care Act’s 2010 enactment is reaching a flash point. The flash point is workplace wellness programs amid questions over their ability to reduce medical utilization costs by improving the health status of their employees. And specifically whether large employers who require biometric testing of employees are running afoul of rules promulgated to implement Patient Protection and Affordable Care Act provisions governing the programs.

The Affordable Care Act sanctions two types of wellness programs employers can offer as part of employer-sponsored health plans. In addition to the traditional participatory wellness programs such as discounts on fitness club memberships, health assessments and seminars, employers can also offer — on a voluntary basis — contingent wellness programs that require participating employees to take part in health improvement plans designed to help them reach health status goals such reducing weight, body mass index (BMI), blood pressure, or cholesterol levels. Employers can provide those achieving their goals economic incentives in the form of reduced health plan premiums.

However, the U.S. Equal Employment Opportunity Commission (EEOC) has sued some large employers, charging they are requiring all employees and not just those participating in voluntary, contingent wellness programs to undergo biometric testing. That goes beyond contingent wellness program rules and violates Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) since the testing is not job-related or consistent with business necessity, the EEOC claims.

Reuters (via Yahoo News) reports the federal government litigation has ticked off large employers to the extent that they are now politically turning against the Affordable Care Act and may work to undermine it in Congress and the courts.

The application of the workplace wellness rules isn’t the real issue. Large employers have known the how the rules governing voluntary and contingent wellness programs work for two years. Their real beef is over the fact that they’re not seeing their health costs being meaningfully reduced by the Affordable Care Act. Nor are they likely to without reforming their organizations to support a culture that truly respects the health and wellness of their members and affords them ample opportunity to engage in health promoting behaviors.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Idaho mulling reforming Medicaid to use blend of DPC and “Arkansas plan”

Idaho is considering restructuring its Medicaid program to use state funds to directly cover primary care (DPC) for Medicaid eligibles earning less than 100 percent of federal poverty levels while using federal Medicaid funding to cover their major medical costs. Those with household incomes between 100 and 138 percent of federal poverty under the Patient Protection and Affordable Care Act’s Medicaid expansion would be eligible to purchase commercial health plans through the state’s health benefit exchange marketplace. That strategy is referred to as the “Arkansas Plan” in recognition of that state’s obtaining a waiver from the U.S. Department of Health and Human Services last year approving of the use of Medicaid dollars to help those new Medicaid eligibles buy exchange plans. The state’s Medicaid Redesign Workgroup estimates implementing both would save $1 billion over 10 years.

(H/T to Liz Osius of Manatt Phelps & Phillips LLP for the heads up in her weekly health care reform roundup)



Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Proposed rules for 2016 and post individual, small group and exchange marketplace issued

The U.S. Department of Health and Human Services last week issued a proposed rulemaking governing the individual and small group health insurance markets and the state health benefit exchange marketplace for plan year 2016 and later years. Happy holiday reading: comment on the proposed rules (Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2016, CMS-9944-P) is due December 26, 2014.

There’s a lot to digest in the rulemaking with some of the key proposed rules summarized below. As usual, Timothy Jost has taken his customary deep dive into the rulemaking with posts on the Health Affairs blog that can be viewed here and here.

  • Plan issuers must publish up-to-date, (updated at least monthly) accurate, and complete provider directories including information on which providers are accepting new patients, the provider’s location, contact information, specialty, medical group, and any institutional affiliations in a manner that is easily accessible to plan enrollees, prospective enrollees, the State, the Exchange, HHS and OPM. Directories will be considered easily accessible when the general public is able to view all of the current providers for a plan on the plan’s public website through a clearly identifiable link or tab without having to create or access an account or enter a policy number. The general public should be able to easily discern which providers participate in which plan(s) and provider network(s) if the health plan issuer maintains multiple provider networks and the plan(s) and provider network(s) associated with each provider should be clearly identified on the website.
  • For the purposes of the employer shared responsibility mandate, large employer-sponsored plans must meet both minimum actuarial value and minimum standard of benefits. Plans must provide substantial coverage of both inpatient hospital services and physician services.
  • Health plan issuers must establish pharmacy and therapeutics (P&T) committees to ensure plan formularies cover a sufficient number and type of prescription drugs. P&T committee standards that must be met for prescription drug coverage meet prescription drug essential health benefits requirement for individual and small group plans.
  • New special exchange enrollment period for individuals in non-Medicaid expansion states when their household income increases to meet exchange minimum income eligibility standard, i.e. 100 percent of federal poverty.
  • Individual market open enrollment period for plan years 2016 and later: October 1 to December 15.
  • Expansion of special enrollment period to individuals enrolled in non-calendar year individual health insurance coverage when their policy year ends in 2014 to all years.
  • Small employers participating in state exchange Small Business Health Options Programs (SHOP) can elect to offer SHOP coverage to former employees, retirees and also provide required continuation coverage via the SHOP.
  • Exchanges, QHP issuers, and web brokers must provide oral interpretation services to include telephonic interpreters in at least 150 languages.
  • Health plan issuers may optionally count cost sharing for out-of-network services toward annual cost sharing limits.



Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Health exchanges’ finances face test in 2nd year – US News

PROVIDENCE, R.I. (AP) — The federal government shelled out billions of dollars to get health insurance marketplaces going in the 14 states that opted to run their own. Now they must act like true marketplaces and start paying for themselves.

Under President Barack Obama’s Affordable Care Act, state-run health insurance exchanges need to be financially self-sustaining starting in January. Some appear to be on that path, while others have shaky funding models or even none at all.

Some states, prohibited from using state money, are imposing fees on plans sold on the marketplaces. Others are spreading costs more widely — which, in one instance, has drawn a federal lawsuit.

via Health exchanges’ finances face test in 2nd year – US News.

The AP reports state-based exchanges (SBEs) present a mixed outlook of their ability to operate financially independent of the federal government when federal exchange establishment grant funding ceases January 1, 2015. The less than certain finances of some SBEs could alter their relationship with the feds. In order to gain initial federal approval, SBEs were required to submit operational “blueprint” plans by January 1, 2013 showing how they intended to fund their operations after the grant funding ends.

Lacking adequate funding to be financially self-sufficient could put SBEs technically in violation of federal rules. States operating SBEs “must ensure that its Exchange has sufficient funding in order to support its ongoing operations beginning January 1, 2015…” (45 Code of Federal Regulations 155.160(b) – Financial support for continued operations.)


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

ACA’s Multi-State Plan provision could aid government’s case in King v. Burwell

The issue before the U.S. Supreme Court in King v. Burwell is whether the U.S. Treasury Department properly interpreted the intent of the drafters of the Patient Protection and Affordable Care Act regarding the availability of tax credit subsidies for health plans sold on state health benefit exchanges. More specifically, whether Treasury is correct in determining the subsidies are available to qualified individuals regardless of whether an exchange is established by a state or if the federal government operates the exchange under a default provision of the Affordable Care Act if a state opts not to do so.

The high court could look to other parts of the statute for context as it discerns Congress’s intent regarding the availability of the subsidies. One element of the law that could support Treasury’s position is at Section 1334 of the Affordable Care Act. Section 1334 creates a federally-chartered Multi-State health plan (MSP) that must be offered in all state exchanges by 2017. The policy intent is to bolster competition and consumer choice, particularly in states with smaller populations and fewer plan issuers.

In the context of the question before the Supreme Court in King, the government might argue Congress could not have intended that the subsidies are available only for MSPs offered in states that chose to establish an exchange but not in those that did not. Especially given the objective of MSPs to make individual and small group health coverage more widely available. In a proposed rulemaking issued last week, the federal Office of Personnel Management (which charters MSPs) noted it “intends to ensure that MSP coverage is available as expansively and as soon as practicable.”


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Feds draw bright line between employer group, individual coverage

The U.S. Departments of Labor, Health and Human Services and Treasury issued guidance that draws a bright line delineating employer group health coverage from individual coverage sold to those who aren’t covered by government or employer sponsored health plans.

Under the guidance issued November 6, employers cannot reimburse employees to cover individual policy premiums. “If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee,” the guidance states.

Nor may employers set up health reimbursement account (HRAs) that enable employees to purchase coverage and access advance premium tax credits for individual plans sold in the state health benefit exchange marketplace. HRAs are group health plans and therefore employees participating in them are ineligible for the credits or cost-sharing reductions, the departments reason. “The mere fact that the employer does not get involved with an employee’s individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan,” the guidance notes.

In addition, the guidance states employers may not offer cash to an employee in poor health in order to steer the employee away from a large employer’s group health plan. Such arrangements violate Health Insurance Portability and Accountability Act (HIPAA) provisions barring discrimination based on one or more health factors, the departments conclude. “Offering, only to employees with a high claims risk, a choice between enrollment in the standard group health plan or cash, constitutes such discrimination.”


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

SHOPs unlikely to stem erosion of small group health coverage

To restore functionality to the troubled individual health insurance market, the Patient Protection and Affordable Care Act operates to force sellers and buyers together. On the sell side, it does so by requiring individual health plan issuers to accept all applicants without medical underwriting. On the buy side, it creates incentive for people not covered by employer-sponsored or government plans to sign up for coverage or pay a tax penalty. In addition, advance tax credit premium subsidies are available to those with low and moderate incomes.

The small group health insurance market segment — coverage sold to small employers – lacks this mix of sticks and carrots. The sole incentive is for small employers with 25 or fewer low wage employees, who can receive tax credits if they offer coverage to their employees and pay at least half the premium. The credits are available for 2014-16 and for plans purchased through the Small Business Health Options Program (SHOP) of the state health benefit exchange marketplace.

SHOPs are grounded in the Affordable Care Act’s philosophical underpinnings that recognize most working age Americans obtain health coverage though their employers. Rather than incentives, the idea behind the SHOPs is to strengthen the small group market by pooling the buying power of small employers. The SHOPs are designed to act like a small employer health insurance purchasing cooperative, giving small employers collective negotiating leverage with health plans, thus in theory helping to drive down premiums and making small group coverage more affordable to even the smallest employers.

As The New York Times reports, however, multiple stumbling blocks impede the rollout of the SHOPs that may ultimately make it impossible for them to build critical mass and achieve the pooled purchasing power they were intended to provide:

Experts say it remains an open question whether the program, known as SHOP for Small-Business Health Options Program, will eventually work. “I think it will take a number of years, if it succeeds,” said Jon Gabel, a policy expert at NORC at the University of Chicago. There remains strong opposition from brokers and some insurers, he said, who view it as a threat to their existing business.

That is leading to the classic chicken and egg problem. If too few small employers opt for SHOP coverage, they will have little buying clout with health plan issuers and thus SHOPs won’t be able to help hold down premium rates. That will encourage more small employers to stop offering coverage to their employees on the grounds that it’s not affordable, which in turn reduces the potential market of the SHOPs.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Employees offered group plans without hospitalization coverage eligible to use advance tax credit subsidies for exchange plans

Employees offered employer-sponsored health plans without coverage for hospitalization are eligible for advance tax credit subsidies for individual coverage in the state health benefit exchange marketplace, according to Internal Revenue Service guidance issued this week.

Notice 2014-69 clarifies that such plans do not provide minimum actuarial value (MV) covering 60 percent of expected health care utilization costs, which entitles employees to use tax credits toward the purchase of qualified health plans (QHPs) sold on the exchanges. It also notes regulations will be promulgated by the IRS and the U.S. Department of Health and Human Services formalizing the guidance.

The Departments believe that plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in this notice as Non-Hospital/Non-Physician Services Plans) do not provide the minimum value intended by the minimum value requirement and will shortly propose regulations to this effect with a view to being in a position to finalize such regulations during 2015 and make them applicable upon finalization. Accordingly, employers should consider the consequences of the inability to rely solely on the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value for any portion of any taxable year ending on or after January 1, 2015, that follows finalization of such regulations.

While large employers are subject to a penalty for each employee who uses advance tax credits to purchase an exchange QHP, the guidance waives the penalty if a large employer began enrolling employees in a group plan that does not offer hospitalization coverage prior to the November 4, 2014 date of the guidance and who relied on the MV calculator to determine if their plans provided minimum actuarial value. The guidance adds that the regulations, when issued, will not apply to plans that were effective prior to March 1, 2015.

Under the guidance, employers offering plans without hospitalization coverage must correct notifications issued to employees that such plans preclude employees from obtaining premium tax credits for the purchase of exchange QHPs.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

Floor of small group market may be rising

The small group market may be undergoing a redefinition. Section 1304(b(2) of the Patient Protection and Affordable Care Act defines small employers as those having between 1 and 100 employees. (Through 2015, states have the option to set the upper limit at 50 employees.)

The marketplace could be raising the single employee floor on a de facto basis, according to this Bloomberg story reporting those working for small employers are increasingly purchasing individual coverage though state health benefit exchanges. The shift is accelerating among the smallest employers, Ana Gupte, an analyst at Leerink Partners LLC, told Bloomberg, adding it’s “happening faster than expected.”

The implication is the low end of the small group market – generally defined as organizations with fewer than 10-20 employees — is being cannibalized by the individual market, where the incentives for participation are far stronger. That would effectively change the practical definition of the small group market to a range of between 10 or 20 and 100 employees.

How this will affect state small group markets over the next few years remains to be seen. It could adversely impact the small employer side of the state exchanges — the Small Business Health Options Program (SHOP) – by significantly shrinking the pool of small employers that might potentially enroll. That could prompt all but the largest states to exercise their option under Affordable Care Act Section 1311(b)(2) to merge their individual and SHOP exchange functions. States also have the option starting in 2017 to offer large group plans on their exchanges as allowed under Section 1312(f)(2)(B)(i). But with the growth of private exchanges in the large group market, it’s doubtful the public state benefit exchanges would be appealing to large group plans.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email or call 530-295-1473. 

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