Category: Health Care Law

Sharing Cyber Threat Information

HIPAA PRIVACY ISAOsThe Information Sharing and Analysis Organization-Standards Organization (ISAO-SO) was set up under the aegis of the Department of Homeland Security pursuant to a Presidential Executive Order intended to foster threat vector sharing among private entities and with the government. ISAOs are proliferating in many critical infrastructure fields, including health care, where cybersecurity and data privacy are particularly sensitive issues given HIPAA requirements and disproportionate industry human and systems vulnerabilities.  Therefore, in advising their companies’ management, general counsel and others  might benefit from reviewing the FAQ’s and answers contained in the draft document that can be accessed at the link below.

Announcing the April 20 – May 5, 2017 comment period, the Standards Organization has noted the following:

Broadening participation in voluntary information sharing is an important goal, the success of which will fuel the creation of an increasing number of Information Sharing and Analysis Organizations (ISAOs) across a wide range of corporate, institutional and governmental sectors. While information sharing had been occurring for many years, the Cybersecurity Act of 2015 (Pub. L. No. 114-113) (CISA) was intended to encourage participation by even more entities by adding certain express liability protections that apply in several certain circumstances. As such proliferation continues, it likely will be organizational general counsel who will be called upon to recommend to their superiors whether to participate in such an effort.

With the growth of the ISAO movement, it is possible that joint private-public information exchange as contemplated under CISA will result in expanded liability protection and government policy that favors cooperation over an enforcement mentality.

To aid in that decision making, we have set forth a compilation of frequently asked questions and related guidance that might shed light on evaluating the potential risks and rewards of information sharing and the development of policies and procedures to succeed in it. We do not pretend that the listing of either is exhaustive, and nothing contained therein should be considered to contain legal advice. That is the ultimate prerogative of the in-house and outside counsel of each organization. And while this memorandum is targeted at general counsels, we hope that it also might be useful to others who contribute to decisions about cyber-threat information sharing and participation in ISAOs.

The draft FAQ’s can be accessed at :  https://www.isao.org/drafts/isao-sp-8000-frequently-asked-questions-for-isao-general-counsels-v0-01/

ARTICLE BY Stuart M. Gerson of Epstein Becker & Green, P.C.

©2017 Epstein Becker & Green, P.C. All rights reserved.

Health-Related Programs Face Deep Cuts In President Trump’s “Budget Blueprint to Make America Great Again”

President Trump Budget Make America Great Again HatsOn March 16, 2017, President Trump Administration released his first budget outline for the 2018 fiscal year (FY 2018). In an effort to “shrink the role of government,” the $1.1 trillion budget proposal calls for a $54 billion increase in defense spending, with a corresponding $54 billion reduction in funding for many federal government programs. In particular, the Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) would absorb double-digit budget cuts, in addition to other consolidation efforts involving those agencies.

President Trump is expected to release a full FY 2018 budget request in May of this year. Although the budget blueprint delivers on President Trump’s campaign promise for increased homeland security and military spending, opposition from both Democratic and Republican lawmakers suggests that the proposed cuts are unlikely to fully survive the congressional appropriations process.

Key Health-Related Spending Cuts Under the Budget Proposal

The NIH, a division within HHS, is the principal government agency for biomedical and health-related research. While 10% of NIH funding is used for research within its own facilities, the agency awards nearly 80% of its funding to outside universities, medical schools, and other research institutions. The Trump Administration proposes to reduce the NIH’s budget by $6 billion, or nearly 20%—back to its lowest level in 15 years.

The proposed budget cut eliminates $403 million in health professions and nursing training programs because the programs purportedly “lack evidence that they significantly improve the Nation’s health workforce.”

The proposal also calls for a “major reorganization” of the 27 NIH institutes and centers “to help focus resources on the highest priority research and training activities.” So far, the Administration’s only request with respect such reorganization is the abolishment of the Fogarty International Center, a $70 million program dedicated to training scientists in developing nations, particularly in Africa, to detect and control the spread of emerging infectious diseases.

The spending plan also consolidates the Agency for Healthcare Research and Quality (AHRQ) within the NIH. The AHRQ, which supports research on healthcare delivery cost, quality, and safety, could cease to exist under the proposed cuts.

Not surprisingly, President Trump’s budget proposal has been met with criticism from those in the biomedical research community. According to a statement released by the Association of American Medical Colleges, major cuts to the NIH would “cripple the nation’s ability to support and deliver” biomedical research. Likewise, according to Andrew Rosenberg, director of the Center for Science and Democracy with the Union of Concerned Scientists, “[w]hat this budget does is ignore evidence and undermine our very ability to collect it across the board.”

Other Important Budget Details

The budget blueprint also proposes to decentralize the Centers for Disease Control and Prevention (CDC), another agency within HHS, by establishing a state block grant program “to increase State flexibility and focus on the leading public health challenges specific to each State.” While this change would lessen categorical funding restrictions, like other block grant mechanisms, it likely would have the effect of reducing federal funding for such programs.

Notwithstanding the proposed cuts, the Administration plans to continue funding for the Global Fund to Fight AIDS, Tuberculosis and Malaria, and the President’s Emergency Plan for AIDS Relief. The budget outline also requests an additional $500 million for HHS to “expand opioid misuse prevention efforts and to increase access to treatment and recovery services.”

Trump Administration’s First Budget Battle; Implications for FY 2018 Proposal

While President Trump’s budget proposal sheds some light on his Administration’s priorities, it also faces an uphill battle in gaining acceptance in Congress. While lack of support for the budget proposal from congressional Democrats is unsurprising, several GOP leaders have already come out and voiced their opposition to the budget cuts. Rep. Hal Rodgers (R-KY), former chairperson of the House Appropriations Committee, has called the proposed cuts “draconian, careless, and counterproductive.” Rep. Tom Cole (R-OK), a member of both the House Appropriations and Budget Committees, described the cuts to NIH and CDC as “short-sighted.”

Still, some biomedical industry leaders have expressed confidence that Congress will not end up moving forward with the proposed cuts. “Congress has a long bipartisan history of protecting research investments,” noted Rush Holt, CEO of the American Association for the Advancement of Science (AAAS). “We are grateful and encouraged that members of Congress have already spoken out about the importance of keeping NIH funding at healthy levels,” added David Arons, CEO of the National Brain Tumor Society.

One additional development to keep in mind in connection with President Trump’s proposed budget for FY 2018 is how Congress will address the FY 2017 continuing resolution. The continuing resolution currently maintains government spending at FY 2016 levels, but is set to expire on April 28. By this date, Congress must pass an appropriations bill to keep the government running for the remainder of FY 2017. How President Trump and Congress address this issue could give an indication on whether Congress is willing to work with the President’s FY 2018 budget outline.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

The American Health Care Act – A Side-by-Side Comparison to Existing Law

As reported in our January 23, 2017 post entitled “Status of the Affordable Care Act Repeal Efforts,”1 on January 12 and 13, 2017, the Republican-controlled Congress took the first step toward repealing certain provisions of the Patient Protection and Affordable Care Act (“ACA”) (Public Law 111-148) by adopting a fiscal budget resolution containing a “reconciliation directive” to House and Senate committees to prepare ACA repeal legislation by January 27, 2017.2  In addition, one of President Donald Trump’s first actions upon taking office was to implement an Executive Order stating an intent to repeal the ACA and directing Congress “to minimize the unwarranted economic and regulatory burdens of the [ACA] and . . . to afford the States more flexibility and control to create a more free and open healthcare market.”3

On March 6, 2017, the House Committees on Ways and Means and Energy and Commerce proposed the American Health Care Act (“AHCA”) pursuant to the budget-resolution process.  As previously discussed, the budget-reconciliation process allows Congress to repeal provisions of the ACA that directly impact government taxes and revenue and only requires a simple majority vote.  A full repeal of the ACA, and any comprehensive replacement legislation involving provisions that extend beyond tax and revenue, would require 60 votes in the Senate, necessitating Democratic support.4  Set forth below under “Next Steps” is a discussion of the applicable procedural requirements for the AHCA to become law.

Summary of Key Changes

The following is a summary comparing the significant changes the AHCA would effect to current law:

MEDICAID & OTHER GOVERNMENT FUNDING PROGRAMS

Provision The ACA/Current Law Proposed Law
Medicaid Expansion & Safety Net Funding The ACA expanded Medicaid coverage to individuals under 65 with incomes up to 133% of the Federal poverty level who were previously ineligible for Medicaid and provided funding for such coverage.  Several states chose not to expand their Medicaid programs. Would allow States that elected to expand Medicaid to continue receiving Federal funding, which will be phased out by 2020.5  Would provide $10 billion over the 2018-2022 period to States that elect not to expand Medicaid.
Provision of Federal Funds to the States The Federal government matches State funds. Would provide block grants beginning in 2020 and impose a per capita-based cap.
Other Funding Sources Established Prevention and Public Health Fund6 to provide grants to the States to aid in prevention and public health, including community and clinical prevention initiatives, research, surveillance and tracking, public health infrastructure, immunizations, screenings, tobacco prevention and public health workforce and training. Would repeal Prevention and Public Health Fund in 2018.  Would establish Patient and State Stability Fund to provide funds to the States to assist high-risk individuals who do not have access to health insurance enroll in coverage, promote access to preventive services and reduce out-of-pocket costs.
Eligibility of Aliens Certain lawful immigrants are eligible to receive Medicaid. Would deny Medicaid benefits to individuals who lack proof of U.S. citizenship.
Frequency of Eligibility Determinations Eligibility re-determinations conducted annually. Would require the re-determinations every six months.
Retroactive Eligibility Allows for retroactive coverage after enrollment for up to 90 days Would limit this “grace period” to only the month in which application is made beginning October 1, 2017.
Allowable Home Equity Limits Grants States the option to expand the limit on the amount of home equity a Medicaid applicant can shield from reporting for disqualification from Medicaid eligibility for nursing home services. Would repeal this provision effective 180 days after enactment.
Other Restrictive Provisions Would allow States to disenroll certain lottery winners.

INDIVIDUALS[7]

Provision The ACA/Current Law Proposed Law
Individual Mandate The ACA requires individuals to pay penalties for failure to maintain health insurance. Would repeal the penalties effective immediately, but would increase the monthly premium rate by 30% for those who do not maintain continuous health-coverage beginning in 2019.
Health Savings Accounts For individuals with a high-deductible plan, the ACA caps contributions to a tax-free health savings account. Contributions are still capped, but the AHCA would increase the annual limit on health savings account contributions in 2018.  An individual could now choose to pay up to $6,550 in deductibles in 2018, up from $3,400 in 2017, and a family can pay $13,100 in 2018, up from $6,750 in 2017.
Medical Expense Deduction Medical expenses, to the extent that the expenses exceed 10% of the taxpayers’ adjusted gross income (“AGI”), are allowable itemized deductions. Would lower the medical expense deduction to 7.5% of taxpayers’ AGI.
Dependent Child Coverage until 26 Allows children under 26 years old to remain covered under their parents’ insurance. Would retain this provision.
Pre-Existing Condition Exclusion Prohibits insurers and group health plans from denying insurance to individuals with pre-existing health conditions. Would retain this provision.
Ban on Annual and Lifetime Coverage Caps Prohibits any health plan from establishing lifetime limits on the dollar value of benefits for any individual exceeding certain thresholds. Would retain this provision.
Premium Subsidies Provides subsidies for individuals meeting income threshold to buy insurance in the Marketplace. Would repeal the subsidies in 2020.
Tax Credits Provides tax credits to help people pay deductibles and make co-payments when purchasing Exchange plans in the Marketplace. Would repeal the tax credits starting 2020 and replace with income and age-based tax credits ranging from $2,000 for a person under 30 to $4,000 for a person over 60, which they can use when purchasing either Exchange plans in the Marketplace or private plans.
Repayment of Excess Health Insurance Coverage Credit Individuals who receive excess tax credits must repay the excess amounts subject to a cap for individuals with incomes under 400% of the Federal poverty level. Would remove the income-related caps applicable to excess credit repayments for 2018 and 2019.
Tax on Net Investment Imposes a tax on net investment income for persons earning over $200,000 or families earning over $250,000 beginning in 2013. Would repeal the tax starting 2018.
Use of Flexible Spending Accounts to Purchase Over-the-Counter Medications Cost of over-the-counter medications cannot be reimbursed on a pre-tax or tax-favored tax basis. Would repeal the prohibition in 2018.
Repeal of Medicare Tax Increase The ACA imposes a 0.9-percent increase in the Medicare payroll tax for individuals who meet certain income thresholds. Would repeal in 2018.
Coverage for Abortion Services Private insurance carriers may offer plans in the Marketplace that cover abortion services provided the plans comply with the requirement to segregate Federal funds.  At least one plan within a State Marketplace must not cover abortions beyond those permitted by Federal law (to save the life of the woman and in cases of rape and incest).  Abortion coverage cannot be required as part of the Federally-established essential health benefits package.  States can prohibit coverage for abortions by all plans in their State Marketplace. Would retain ACA provisions but limit the use of tax credits to purchase insurance that covers abortion services.  Any insurance plan, private or Exchange in the Marketplace, that covers abortion, will not be eligible for tax credits, unless the pregnancy is the result of rape or incest.

EMPLOYERS

Provision The ACA/Current Law Proposed Law
Employer Mandate The ACA requires employers to pay an assessable payment for failure to provide health insurance that is affordable and provides minimum value. Would repeal the penalties immediately.
Cadillac Tax The ACA imposes a 40 percent excise tax on employer plans exceeding $10,200 in premiums per year for individuals and $27,500 for families beginning in tax years after December 31, 2019.  The thresholds would have been updated when the tax went into effect in 2020, and adjusted for inflation in years thereafter. Would delay the effective date until 2025.
Reporting Requirements Requires employers to file IRS Forms 1094 and 1095 and to report the total cost of employer-sponsored coverage on each employee’s IRS Form W-2. Would retain the reporting requirements and add additional requirement to specify each month in which the employee was eligible for group coverage in a W-2.
Small Business Tax Credit Provides a credit to small businesses wishing to provide their employees insurance. Would repeal the tax credit in 2020.

INSURERS

Provision The ACA/Current Law Proposed Law
“Tiered” Classification of Plans Exchange plans in the Marketplace are classified by tiers (“Bronze, Silver, Gold, and Platinum”) according to health benefits, actuarial value and pricing. Would repeal the tiered designations and allow insurers participating in the Exchange Marketplace to offer a variety of different plans.
Essential Health Benefits Identified “essential health benefits” all Marketplace plans had to provide. The essential health benefits requirement would sunset in 2020 for all Exchange plans in the Marketplace.8 States could still decide to make certain health benefits a requirement under State law.
Variation of Health Insurance Premium Rates Insurers may charge people over 60 no more than 3 times what they charge people under 30 (a 3:1 ratio). Would change the permissible health insurance premium rate ratio to 5:1.
Limitation for officer and director health insurance Imposes a cap on tax deductions for health insurance providers that paid over $500,000 to an officer, director, or employee. Would repeal the cap in 2018.
Insurer Reporting Requirement Requires certain insurers to report the net premiums written for health insurance of United States health risks to the IRS on Form 8963. Would repeal penalties for non-reporting in 2018.

PROVIDERS

Provision The ACA/Current Law Proposed Law
Allotments for Disproportionate Share Hospitals The ACA would reduce Medicaid allotments to States for hospitals that disproportionately serve uninsured people from 2018-2025. Would eliminate those cuts for States that have not expanded Medicaid under the ACA in 2018 and all other States in 2020.
Hospital Acquired Conditions The ACA adjusted government payments to lowest performing hospitals with respect to risk-adjusted hospital acquired condition quality measures. Would retain this provision.
Planned Parenthood The charity currently receives more than $500 million annually from the Federal government. Would defund this organization for the 1-year period immediately after enactment.

MEDICAL DEVICE MANUFACTURERS

Provision The ACA/Current Law Proposed Law
Medical Device Excise Tax Imposes a 2.3 percent medical device excise tax on the sale of certain medical devices by the manufacturer or importer. Would repeal the tax in 2018.

Next Steps

On March 13, 2017, the Congressional Budget Office (“CBO”) and the staff of the Joint Committee on Taxation released an estimate of the budgetary effects of the AHCA.9  The CBO estimated that the AHCA will save $337 billion dollars over the 2017 to 2026 period and result in lower deficits, reduced Federal spending and tax cuts.  The report concluded that the health insurance market would remain stable because other provisions of the bill would lower premiums “enough to attract a sufficient number of relatively healthy people to stabilize the market.”  The report determined that average premiums would be initially higher by 15 to 20% but thereafter drop around 10% by 2026.  The report estimates that in 2020, 21 million more non-elderly people would be without health insurance and that this number will increase to 24 million people by 2026 to 52 million people.

The AHCA has been approved by the Ways and Means Committee and the House Energy and Commerce Committee.10  On March 16, 2017, the Budget Committee likewise voted to approve the AHCA after recommending some amendments for the Rules Committee to consider.11  The Rules Committee will consider amendments by the Budget Committee and other party leaders before a full House vote.12  President Trump has also proposed amending the AHCA before the House vote via a Manager’s Amendment.13  After House approval, the AHCA would need to be approved by a simple majority of the Senate, at least 51%, before it is presented to the President for signing.

ARTICLE BY Alejandra Contreras, Pamela Landman, Stephanie Marcantonio & Paul W. Mourning of Cadwalader, Wickersham & Taft LLP
© Copyright 2017 Cadwalader, Wickersham & Taft LLP

1   http://www.cadwalader.com/resources/clients-friends-memos/status-of-the-affordable-care-act-repeal-efforts.

2   https://www.congress.gov/115/bills/sconres3/BILLS-115sconres3es.pdf.

3   https://www.whitehouse.gov/the-press-office/2017/01/2/executive-order-minimizing-economic-burden-patient-protection-and.

4   2 U.S.C. § 644.

5   See discussion in row entitled “Allotments for Disproportionate Share Hospitals” in “Providers” section below.

6   https://www.hhs.gov/open/prevention/.

7   This section does not address effects of proposed changes in Medicaid reimbursement and other payment changes on individuals, including the increase in rates insurers may charge individuals over 60 set forth under “Variation of Health Insurance Premium Rates” in the Insurers section below.

8   Although the requirement that private plans maintain essential health benefits would remain, as noted in the “Employers” section above, the AHCA would repeal penalties for failure to provide essential health benefits.

9   https://www.cbo.gov/publication/52486.

10  https://waysandmeans.house.gov/ways-means-republicans-take-historic-action-repeal-obamacare-ensure-americans-access-affordable-care/; https://energycommerce.house.gov/news-center/press-releases/energy-and-commerce-committee-advances-legislation-repeal-and-replace.

11  http://budget.house.gov/news/documentsingle.aspx?DocumentID=394574.

12  http://www.businessinsider.com/house-budget-committee-trumpcare-ahca-vote-2017-3; https://www.theguardian.com/us-news/2017/mar/09/republican-healthcare-plan-house-approvals-obamacare; http://www.ajmc.com/newsroom/hhs-secretary-tom-price-responds-to-ahca-questions-and-concerns-during-town-hall; https://www.washingtonpost.com/graphics/politics/obamacare-replacement-next-steps/.

13  http://www.reuters.com/article/us-usa-obamacare-amendment-idUSKBN16L2FS?il=0.

Congressional Budget Office Releases Report on American Health Care Act

Trumpcare American Health Care ActThe Congressional Budget Office (CBO) released its cost estimate of the American Health Care Act (AHCA) as reported by the Committees on Ways and Means and Energy and Commerce. CBO estimates that AHCA would reduce federal deficits by $337 billion over ten years. The total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. The outlays would be reduced by $1.2 trillion over the same period, and revenues would be reduced by $883 billion.

CBO and the Joint Committee on Taxation estimate that 14 million more people would be uninsured under the AHCA in 2018. CBO further projects that “following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026.” By 2026, CBO estimates 52 million people would be uninsured, as compared with 28 million who would lack insurance that year under current law.

CBO and JCT estimate that average health insurance premiums in the individual market would be 15 percent to 20 percent higher than under the ACA. This is because the individual mandate penalties would be eliminated, leading to fewer healthy people signing up for insurance.

JCT and CBO estimate that the AHCA would result in private sector mandates totaling $156 million in 2017, adjusted annually for inflation. Finally, CBO is uncertain about part of its estimates as it cannot determine “the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation…”

Next Steps

In accordance with the Congressional Budget and Impoundment Control Act of 1974, the House Budget Committee is scheduled to meet this week to report the reconciliation bill. The Committee’s role is simply to package the two bills from the Energy and Commerce and Ways and Means Committees.

Following the Budget Committee’s action, the House Rules Committee will meet to develop a rule, which would govern floor debate for the American Health Care Act. It is possible the Rules Committee may fold bills reported by the Education and the Workforce Committee into the reconciliation package. The House Majority Leadership plans to take the AHCA to the floor next week.

In the Senate, Majority Leader Mitch McConnell [R-KY] plans to skip the committee process and take up the House-passed bill. As this legislation works its way through the Congress, we will provide further client alerts as necessary.

ARTICLE BY Julius W. Hobson, Jr. of Polsinelli PC
© Polsinelli PC, Polsinelli LLP in California

Trump Administration Takes First Steps to Support Healthcare Exchanges, but Key Questions Remain

healthcare exchangesIn an effort to stabilize the Exchanges and encourage issuer participation, the Centers for Medicare & Medicaid Services (CMS) recently extended the federal Exchange application and rate filing deadlines and published a proposed rule affecting the individual health insurance market and the Exchanges. While issuers will likely see these actions as encouraging signs of the Trump administration’s willingness to support the Exchanges, these actions do not resolve the political uncertainty regarding the Affordable Care Act’s fate or whether cost-sharing reductions will be funded for 2018. These outstanding questions will likely be a key factor in Exchange stability going forward.

In Depth

On February 17, 2017, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule in the Federal Register outlining a series of proposals intended to stabilize the individual health insurance market and the Exchanges created by the Affordable Care Act (ACA). Comments on the proposed rule are due to CMS on March 7, 2017.

On the same day as the proposed rule was published, CMS announced that it was extending the federal Exchange application and rate filing deadlines with the apparent goal of ensuring that the proposed rule changes could be finalized and taken into account when issuers make Exchange participation and rate decisions for 2018. Although issuers are likely to support the proposed rule and delayed federal filing deadlines, it is not clear what effect these changes will have since they do not resolve the ongoing uncertainty regarding the fate of the ACA repeal effort in Congress and federal funding of cost-sharing reductions in 2018.

CMS believes that the proposed “changes are urgently needed to stabilize markets, to incentivize issuers to enter or remain in the market and to ensure premium stability and consumer choice.” The agency’s urgency is underscored by recent reports that Humana would exit the Exchanges entirely for 2018 and other companies have publicly stated that they are uncertain about the extent of their participation in 2018. Looking just at states using healthcare.gov, there are 960 counties with only one issuer in 2017. Additional issuer defections for 2018 would increase the odds that certain counties will have no issuers participating on the Exchange. This would result in residents of such counties being unable to utilize premium or cost-sharing subsidies for which they otherwise qualify.

The proposed rule addresses long-standing issuer concerns about special enrollment periods and perceived gaming of the 90-day grace period available to enrollees receiving premium subsidies. Looking beyond the specific proposals, the proposed rule is significant for the simple fact that it is the Trump administration’s first concrete step to support and stabilize the Exchange market. This likely provides a measure of relief for industry stakeholders that were unsure whether Republicans would be willing to support the Exchanges, which were a key focus of Republican opposition to the ACA. There had been mixed signals during the Trump administration’s first weeks about how it would approach ACA implementation. President Trump issued an executive order his first day in office directing the Secretary of Health and Human Services (HHS) and other agencies to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of” ACA requirements, creating uncertainty regarding how this broad directive would be implemented. In addition, the administration reportedly pulled back on advertising healthcare.gov during the final weekend of open enrollment, leading some to speculate that the Trump administration would be less supportive of Exchange stability than the Obama administration. In the proposed rule, however, CMS tries to make clear that it shares issuers’ goals of “improv[ing] the risk pool and promot[ing] stability in the individual market.”

The question remains whether the proposed changes (and the directional signal of Trump administration support) are sufficient to achieve their stated policy goals. That question is significantly influenced by the status of the ongoing legislative process seeking to quickly repeal the ACA. Although CMS has in this proposed rule endorsed the goal of Exchange market stability in anticipation of CY 2018 open enrollment proceeding as planned, a Republican-led Congress and the Trump administration have continued to signal their commitment to repeal the ACA. Even with the recent delay in Exchange product and rate filing deadlines, the political process (and the related uncertainty about the ACA’s fate) may not be resolved by the time issuers need to begin developing their rates and making decisions on CY 2018 participation. The proposed rule also does not resolve lingering questions related to Exchange funding, such as the availability of cost-sharing reductions for 2018, that will likely be a key factor in Exchange stability going forward.

Summary of Proposed Rule Changes

The proposed rule changes are largely designed to close potential avenues of adverse selection and improve the overall risk pool by encouraging healthier individuals to enroll in coverage.

Open Enrollment

CMS proposes shortening the 2018 open enrollment period from November 1, 2017, through January 1, 2018, to November 1 through December 15, 2017. CMS originally proposed that the shortened open enrollment period would be effective for the 2019 open enrollment period, but the agency is now proposing to move this up by one year. CMS expects that this change would improve the risk pool by reducing enrollments late in the open enrollment period spurred by an applicant’s recent discovery of a need to access health care services. This policy would also increase premium payments to plans, as more enrollees would begin the year’s coverage in January instead of February.

CMS likely would need to extensively market the shortened enrollment period to ensure public awareness. It remains to be seen whether the Trump administration is comfortable with such a commitment to marketing the program given the pull back on marketing efforts for the end of CY 2017 open enrollment.

Special Enrollment

CMS proposes a series of limitations on special enrollment periods intended to reduce adverse selection. Previously, issuers had complained that many healthy individuals were forgoing coverage until they were sick, taking advantage of lax special enrollment period rules to enroll in coverage only when it was needed.

To limit gaming, CMS proposes to expand an enrollment verification pilot program for states using healthcare.gov, planned to begin in summer 2017. CMS proposes that applicants enrolling in coverage under a special enrollment period would have their enrollment pended until they provide documentation that they actually qualify for the special enrollment period. Where providing and processing documentation would result in a delay in coverage after the requested coverage effective date, this policy would result in retroactive coverage. As such, where verification results in a delay in coverage of two months or more, CMS proposes to permit enrollees to request a later effective date.

Guaranteed Availability

CMS also proposes to reinterpret the “guaranteed availability” standard, which requires health plans in the individual market to sell coverage to any willing buyer during open or special enrollment periods. CMS proposes to create an exception to guaranteed availability for individuals with unpaid premiums due to the issuer from which the individual is seeking to purchase new coverage. In part, this proposal seems to address issuers’ concern that some individuals have taken advantage of generous grace periods to discontinue premium payment towards the end of a benefit year only to reenroll with the same plan for the next benefit year. Individuals could still enroll in coverage without coming due on unpaid premium amounts by enrolling with a different issuer (if there is more than one issuer participating in the service area).

Accepting Comments on Continuous Coverage Proposals

CMS requests comments on potential policies it could implement to promote continuous coverage, but the agency is not proposing any specific policies at this time. A continuous coverage requirement is a central feature of many Republican ACA replacement proposals as an alternative to the ACA’s individual mandate. The ACA’s statutory guaranteed availability protections are broad, so adoption of a generally applicable continuous coverage requirement would likely require a legislative change. This is, however, a signal that CMS, under HHS Secretary Price and congressional Republicans, is considering similar policy solutions.

De Minimis Variation

CMS proposes to expand the definition of de minimis variation, the amount by which a qualified health plan’s (QHP’s) actuarial value may vary from the statutorily mandated value. CMS proposes to increase the amount of permissible variation to -4/+2 percentage points from the +/-2 percentage points currently permitted. CMS argues that this policy will promote market stability by permitting plans to maintain the same plan design year over year. CMS additionally argues that this policy may promote competition and put downward pressure on premiums, encouraging healthier individuals to participate in the plan.

Network Adequacy

CMS also proposes to defer to states with respect to network adequacy for Exchange plans in federally facilitated Exchange (FFE) and state-based Exchange states. In past years, CMS has proactively verified that QHPs in FFE states have an “adequate” network of providers. Through such reviews, CMS has enforced “maximum time and distance standards” requiring, for at least 90 percent of enrollees, that certain types of providers be within a specified distance and travel time. These quantitative standards mirrored the Medicare Advantage program requirements. CMS proposes to discontinue its analysis of QHP time and distance, instead deferring to state regulators and accrediting bodies.

Network adequacy requirements vary significantly across states, so this change will affect issuers differently. While the National Association of Insurance Commissioners has adopted a new Health Benefit Plan Network Access and Adequacy Model Act, it has not been adopted in any states and defers to individual states to set applicable time and distance standards. Thus, CMS’s deferral of network adequacy to states may permit narrower networks than under CMS’s quantitative standards.

Executive Order on Significant Regulatory Actions

Also of note is CMS’s approach to President Trump’s recent executive order, which requires that any “significant regulatory actions that [impose] costs” be offset through the elimination of costs associated with at least two prior rules. The proposed rule offers an early opportunity to examine how the administration will implement this executive order. CMS determined that the proposed rule “is not a significant regulatory action that imposes cost” under the recent executive order. The basis for this finding appears to be CMS’s belief that the proposed rule results in a net cost reduction. Thus, while CMS characterized the rule as “significant” for creating separate costs and benefits that exceed $100 million, the net cost reduction allows the agency to avoid eliminating two rules. Industry stakeholders should continue to monitor how CMS implements President Trump’s recent executive order.

 Embed from Getty Images

 

ARTICLE BY Ankur J. Goel, Jeremy Earl & Seth Schneer of McDermott Will & Emery

© 2017 McDermott Will & Emery

Fifth Circuit Judge Blocks Rule That Would Ban Arbitration in Nursing Home Disputes

nursing home arbitrationA federal district court recently issued a preliminary injunction barring enforcement of a rule prohibiting the use of pre-dispute arbitration agreements with patients in long-term care facilities that participate in Medicare and Medicaid programs.

The new rule, promulgated by the Centers for Medicare and Medicaid Services (CMS), would have taken effect on November 28, 2016. It would have prohibited (1) entering into pre-dispute arbitration agreements and, (2) requiring the signing of an arbitration agreement as a condition of admission. The injunction was granted by U.S. District Court Judge Michael P. Mills, who sits in the Northern District of Mississippi, at the request of members of the nursing home industry to stop the rule from taking effect while it is being challenged in court. In their lawsuit, the American Health Care Association and four other state and local health care groups are claiming that CMS and the Department of Health and Human Services are overstepping their authority in issuing the rule. Specifically, the plaintiffs contend that Congress has repeatedly rejected legislation to invalidate arbitration agreements, and further argue that the rule isn’t necessary to protect the health and safety of nursing home residents.

In entering his order, Judge Mills did concede that the CMS rule does appear to be based on “sound public policy.” As some residents of nursing homes suffering from ailments such as dementia and the like might not have the capacity to grasp what an arbitration agreement entails, in addition to the fact that there is stress upon nursing home residents and their families that is inherent to the admissions process, it can be argued that arbitration and the nursing home admissions process do not belong together.

However, in granting the injunction, Judge Mills stated that, as sympathetic as the court may be to the public policy considerations that motivated the rule, it is not willing to allow the federal agency to overstep its executive authority and “engage in a rather unprecedented exercise of agency power. The court is unwilling to play a role in countenancing the incremental ‘creep’ of federal agency authority beyond that envisioned by the U.S. Constitution.”

The nursing home industry has said that arbitration offers a less costly alternative to court. Facilitating more lawsuits, the industry has said, could drive up costs, forcing some nursing homes to close. Lawyers representing residents, however, state that people being admitted to nursing homes are often at the most stressful juncture of their lives, and are not equipped or capable of understanding what it is they are being asked to sign. Regardless of whether one believes striking down the rule would help the nursing home industry reduce its legal costs, or that the rule assists the families of nursing home residents in getting justice, it is clear that the court’s grant of the injunction as well as the impending decision in the underlying case will have an impact upon the future of the nursing home industry.

ARTICLE BY Amee Lakhani of Heyl, Royster, Voelker & Allen, P.C.

© 2016 Heyl, Royster, Voelker & Allen, P.C

How Does the 21st Century Cures Act Affect Employee Benefits?

21st century curesThere are two key benefits takeaways for employers in the bipartisan 21st Century Cures Act, which President Obama signed into law on December 13, 2016.

The act, which passed both houses of Congress by large majorities, is designed to increase funding for medical research, ease the development and approval of experimental treatments, and reform federal mental healthcare policy.

Mental Health Parity Rules

Employers can expect increased enforcement, along with stricter interpretations, of the existing federal mental health parity rules in coming months and years.

Though the act does not expand requirements under the Mental Health Parity and Addiction Equity Act, Title XIII of the act directs the secretaries of the Department of Health and Human Services, the Department of Labor, and the Treasury to issue guidance within 12 months related to compliance with the mental health parity rules. The act also calls for increased coordination between federal and state authorities in enforcing the mental health parity rules.

In addition, when a group health plan or insurer is found to have violated the mental health parity rules five times, the secretaries are directed to audit the plan’s or insurer’s documents the following year to “help improve compliance” with the rules. By including such specific compliance measures directly within the act, Congress appears to be encouraging increased enforcement of the mental health parity rules in the coming months and years.

The act does make one substantive “clarification” to the existing mental health parity rules. If coverage is offered for eating disorder treatment, then the treatment (including residential treatment) must be provided consistent with the mental health parity rules.

Standalone HRAs for Small Employers

The Affordable Care Act effectively prohibited employers from offering employees health reimbursement arrangements that were not integrated with other group health plans (standalone HRAs).

The act rolls back that rule slightly—though only for employers that are not “large employers” for ACA purposes (generally, those that have 50 or more full-time equivalent employees) and that do not offer any health plan to employees.

Title XVIII of the act creates qualified small employer health reimbursement arrangements (QSEHRAs) which are available for plan years starting after 2016. A QSEHRA is an arrangement funded solely with employer money that provides for payment or reimbursement of medical care expenses, up to $4,950 per year for individuals ($10,000 per year for families). In addition, a QSEHRA must generally be provided to all eligible employees of the employer on the same terms, and the employer must provide notice to the eligible employees. These QSEHRAs could permit reimbursements for individual health insurance premiums, which is also generally not permitted under the ACA. In addition, QSEHRAs are not subject to the Consolidated Omnibus Budget Reconciliation Act’s (COBRA) continuation coverage requirement.

These rules will take effect on January 1, 2017, which means that eligible employers could begin offering a QSEHRA next month. For small employers that offered a standalone HRA before January 1, 2017, the act will extend certain transition relief. HRAs that qualify under Notice 2015-17 will continue to qualify for transition relief through the end of 2016.

ARTICLE BY Timothy J. Stanton & Jessica E. Kuester of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

© 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Obama Administration Will Not Finalize Laboratory Developed Tests Framework Guidance

aboratory Developed TestsOn November 18, 2016, the U.S. Food and Drug Administration (FDA) announced that it would not finalize the draft guidance entitled Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs) (Draft Guidance) prior to the end of the Obama administration.

As we previously reported, FDA issued the Draft Guidance on October 3, 2014. The document describes the Agency’s shift from enforcement discretion policy for LDTs to a risk-based framework under which LDTs would be regulated as medical devices pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA).  In particular, the Draft Guidance outlined a phased-in approach for both premarket review and postmarket requirements, including registration and listing, medical device reporting, and Quality System Regulation (QSR) requirements.

Section 1143 of the Food and Drug Administration Safety and Innovation Act (FDASIA) required FDA to provide notification to Congress of its intent to finalize the Draft Guidance at least 60 days prior to the issuance of a final guidance. Although agency officials had stated that FDA would finalize the Draft Guidance by the end of 2016, the Agency had not provided this notification to Congress.  Had the Obama administration intended to move forward with a final guidance before the end of the administration, the notification required by FDASIA would had to have been issued by November 19, 2016.  At the same time, lawmakers had threatened to use the Congressional Review Act to block FDA from finalizing guidance documents imposing the FDCA on LDTs.

On Friday, an FDA spokesperson confirmed that the Agency would not finalize the Draft Guidance during the Obama administration:

“The FDA believes that patients and health care providers need accurate, reliable, and clinically valid tests to make good health care decisions — inaccurate or false test results can harm individual patients. We have been working to develop a new oversight policy for laboratory developed tests, one that balances patient protection with continued access and innovation, and realize just how important it is that we continue to work with stakeholders, our new Administration, and Congress to get our approach right. We plan to outline our view of an appropriate risk-based approach in the near future. It is our hope that such an approach will help guide continued discussions.”

ARTICLE BY Christopher Hanson of Covington & Burling LLP

© 2016 Covington & Burling LLP

Will Republicans Embrace Center for Medicare and Medicaid Innovation’s Authority?

Center for Medicare and Medicaid Innovation (CMMI) The Affordable Care Act (ACA) and the Medicare and CHIP Reauthorization Act (MACRA) provided the Centers for Medicare & Medicaid Services (CMS) and the newly created Center for Medicare and Medicaid Innovation (CMMI) tremendous authority. With Republicans set to take control of both the White House and Congress, the future of that authority is very much in question.

The ACA created CMMI to test innovative payment and service delivery models to reduce program expenditures and improve care.  To carry out this goal, the ACA allows CMMI to waive any Medicare provision of the Social Security Act, as well as select Medicaid provisions, that may be necessary to carry out and evaluate demonstration policies.  If the demonstrations prove effective, CMS may implement the program nationally.

Over the past few years, CMS has implemented numerous demonstration projects under CMMI’s authority.  These include delivery reform demonstrations such as the Medicare Shared Savings Program and Pioneer ACO program, as well as the Financial Alignment Initiative, which integrates care for dual-eligible individuals in select states. Demonstrations such as the Medicare Advantage Value-Based Insurance Design Model have focused on encouraging the use of high-value clinical services, while others, such as the Diabetes Prevention Program, have focused on preventive service models.  In July of this year, CMS proposed expanding the Diabetes Prevention Program nationally.

While there have been successes, CMS’s use of this authority has not been without controversy and criticism.  In September of this year, Rep. Tom Price, along with over 150 members of Congress, sent a letter to CMS condemning CMMI’s large mandatory demonstrations, citing that “CMMI has exceeded its authority, failed to engage stakeholders, and has upset the balance of power between the legislative and executive branches.”  This letter specifically attacked the Cardiac Bundled Payment Model, the Comprehensive Care Joint Replacement Model, and notably, the Part B Drug Payment model as problematic programs.  Further, the House Budget Committee held a hearing criticizing the authority granted CMS and CMMI to effectively usurp the role of Congress in creating public policy.  With Rep. Tom Price, current Chairman of the House Budget Committee, reportedly under consideration for HHS secretary in the Trump Administration, the future for CMMI is very much in question.

It is possible that Republicans will now move to defund or otherwise limit CMMI’s authority given their recent attacks on it.  However, CMMI provides an avenue to test and garner buy-in for new models of care that otherwise did not exist.  Republicans may realize the opportunity that CMMI could provide as they transition away from the Affordable Care Act.  If Republicans want to maintain this authority or provide states greater authority to demonstrate coverage models, they could leverage CMMI’s authority to do so.

ARTICLE BY Eli Greenspan, Lauren M. Moldawer & Rodney L. Whitlock of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

The Unknown Future Of The Affordable Care Act

Donald Trump Affordable Care Act

Donald Trump’s victory to become the next president of the United States, and the Republican Party’s continued control of the United States Senate and House, will likely have a significant impact on the future of the Affordable Care Act (ACA). President-elect Trump (Trump) has vowed to immediately dismantle the ACA. To date, Trump has provided only a broad outline of what exactly he plans to replace the law with, such as the following:

  • Eliminating ACA requirements which generally require (1) individuals to maintain health insurance, and (2) employers with more than 50 full time employees to offer affordable major medical plan coverage or run the risk of paying penalties;

  • Eliminating tax subsidies that eligible individuals can use to purchase coverage and/or offset costs under health insurance exchanges;

  • Expanding the use of health savings accounts to pay deductibles, copayments, etc.;

  • Establishing tax breaks to allow taxpayers to deduct premiums they pay for individual health insurance policies;

  • Allowing health insurance across state lines;

  • Allowing states to manage Medicaid funds;

  • Modifying or eliminating the ACA’s “essential health benefits” requirements;

  • Expanding age rating bands (increasing the range of premiums that will be allowed); and

  • “Modernizing” Medicare.

Despite his general opposition to the ACA, Trump has expressed support for ACA rules which prohibit insurers and employer plans from excluding coverage for expenses related to preexisting conditions. However, those prohibitions force insurance companies and employer plans to bear significant costs. The ACA’s employer and individual coverage mandates were intended to make the pre-existing condition exclusions more palatable to payers by forcing healthy individuals into the applicable insurance pools. Consequently, it is unclear how Trump would preserve the pre-existing condition exclusions yet eliminate the employer and individual mandates.

In addition, the ACA contains hundreds of provisions affecting hospitals, corporations, Medicare, health care quality and integrity, the health care workforce, biosimilars, health care prevention and other issues unrelated to what most people think of as “Obamacare.” To date, Trump appears not to have taken any public position on these provisions.

ARTICLE BY Molly R. Berkery, Todd M. Cleary, John E. Donahue, Thomas N. Shorter, Charles G. Vogel & Jed A. Roher of Godfrey & Kahn S.C.

Copyright © 2016 Godfrey & Kahn S.C.