Week of 5/20/2013

HRI regulatory center weekly newsletter

This week’s regulatory and legislative news

CMS releases final Medicare Advantage Medical Loss Ratio rule

Last week CMS released its final Medicare medical loss ratio (MLR) rule requiring Medicare Advantage and Part D prescription drug plans to spend at least 85% of revenue on medical claims or quality improvement activities. The rule was modelled on similar requirements for commercial drug plans and applies to individual insurance contracts. The final rule is mostly unchanged from the draft version with a few exceptions. It allows plans to include money recovered from anti-fraud efforts as medical claims and it pushes back the reporting deadline from July to December for most companies.

HRI impact analysis: If health plans do not meet MLR requirements for three consecutive years, they face penalties and enrollment sanctions. After five years of non-compliance, contracts are terminated. The MLR requirements could pose compliance challenges for Medicare drug plans that already face thin margins and increased scrutiny by CMS. Ultimately, plans will need to look for ways to reduce administrative expenses wherever possible.

Early indications of competition lowering exchange plan pricing

A handful of states have already announced the first participants in their health insurance marketplaces, and in Oregon and Washington, some plans came in with lower-than-expected bids. One notable reason: competition. With standardized benefit and cost-sharing requirements and websites that allow consumers to compare plans, lower prices may offer the best remaining competitive advantage for insurers. In Oregon, some companies reduced their plan bids by 15% or more after observing significantly lower bids from other carriers for similar coverage. Plan executives cited incorrect cost projections, pessimistic actuarial analyses, and a desire to remain competitive as the reasons behind the corrections.

HRI impact analysis: Plan competition will play out differently in each state and will be determined in part by the number of plans in the new exchanges. In some smaller markets such as Alaska and Maine, only a few insurers have expressed interest in participating in the exchanges next year—hence less direct competition. Conversely, Colorado recently announced its exchange could include up to 17 insurers offering 813 plans. Price variation may also be influenced by states maintaining a pre-existing condition pool, keeping high-risk enrollees separate from the exchange population, or requiring insurers to competitively bid. Insurers bidding on the exchanges will need to do their homework on pricing or risk recalculating rates if they are found to be outliers.

Hospital groups want CMS to rewrite “rebilling” proposal

Two of the nation’s largest hospital interest groups expressed concern over a proposed CMS rule that restricts the timing and amount hospitals are paid when they rebill Medicare after a denied inpatient claim. The American Hospital Association and the Federation of American Hospitals, in comment letters submitted to the federal agency last week, said that the rule restricts hospitals from submitting claims when there is a dispute over where services should have been provided—the most common form of denial. Instead, representatives from both associations said CMS should allow hospitals to rebill any denied claim, not just those within one year of the original date of service as required by the ACA. Prior to the law, the timely filing period was three years.

HRI impact analysis: It’s critical for hospitals to educate physicians on the finer points of Medicare billing. Ultimately, physicians are the ones who determine what type of services a patient requires—and where he or she should receive them. Hospital groups may have an ally under newly-confirmed CMS Administrator Marilyn Tavenner. In March, Tavenner issued a temporary ruling permitting hospitals to submit Part B claims that fall outside of the 12-month window. Hospital groups said they want any CMS final rule to more closely mirror Tavenner's interim ruling.

High-risk insurance pools in the homestretch

The ACA created the Pre-Existing Condition Insurance Plan (PCIP) as a temporary program to make health insurance available to those with pre-existing medical conditions until January 2014, when new insurance exchanges open. These high-risk pools typically include people with illnesses such as diabetes, asthma, cancer, and HIV/AIDS. Currently, over 100,000 people obtain coverage through the program. The ACA gave states the option of either running their own program or allowing the federal government to administer it, and in 2010, 27 states opted for the former. However, these states were recently given the chance to hand the reins over to the federal government, after HHS announced that it would cap money to states during the final months of the program. Seventeen of the 27 states have elected to transition to the federally-run program. In addition, late last week, HHS issued an interim final rule setting reimbursement rates in the federally-run high-risk pools at Medicare levels starting in mid-June.

HRI impact analysis: The cap on payments to states and the interim final rule are the latest in a series of efforts to make PCIP’s $5 billion budget stretch to the finish line. In the last year, the government also terminated payments to brokers for enrolling individuals, negotiated provider discounts, and suspended new enrollments. House Republicans are currently revisiting a bill on high-risk pools and may bring legislation this summer that redirects money from the ACA prevention and public health fund to the state-run pools. As the program comes to an end, many are wondering how the integration of these high risk pools—a frequent cost driver—into the broader exchanges will impact premiums. While the simultaneous enrollment of healthy, young individuals and reinsurance provisions in the ACA should help tamp down costs, some remain skeptical about how the expansion of coverage will affect costs.

New report on pharma, life sciences deals

PwC released its latest report analyzing mergers and acquisitions for pharmaceutical and life science companies. Total deal volume rose 48% during the first quarter of 2013 relative to the prior year. Download the report here.

HRI as we see it will not publish the week of 05/27/13

Due to the Memorial Day holiday on Monday, HRI will not publish a newsletter for the week of 05/27/13. Publication will resume on Friday, June 6.

Upcoming events & deadlines

  • June 3 – Comments due on the final rule implementing the Federal Medical Assistance Percentage rates for certain adult populations under Medicaid.
  • June 6 – The National Journal is hosting a policy summit on the emergence of new healthcare delivery models and the future of U.S. healthcare.
  • June 28 – Letters of intent due for round two of the Health Care Innovation Awards.
  • July 12 – Comments due on the proposed rule implementing the methodology for reducing Medicaid Disproportionate Share Hospital (DSH) allotments.

Quote of the week

“This is part of our longstanding ongoing effort to continue to simplify and streamline enrollment and renewal in Medicaid,” said Donna Cohen Ross, a senior policy adviser at CMS, about the federal government’s recent announcement that states can streamline the Medicaid enrollment process.

In the news

An article by the Wall Street Journal explores the possibility that some employers may be able to offer very limited health plans, covering only preventive services, which would cost far less than providing comprehensive benefits or paying the ACA-mandated penalties.

Factually correct

1 % - percentage increase in the number of people in Massachusetts covered by employer-based health insurance since the state enacted its health reform law in 2006. In contrast, the rest of the nation saw employer-based coverage decline by 5.7% during the same period. To learn more about HRI’s The Massachusetts Experience, visit the project’s website.

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