Tag: Health Law

Obama Administration Delays Until 2015 Large Employer Shared Responsibility Requirements, Reporting and Tax Penalties

Dickinson Wright LogoOn July 2, 2013, the Department of Treasury announced a one-year delay in the employer shared responsibility mandate under the Affordable Care Act (“ACA”) and related information reporting.

Complexity Leads to Delayed Reporting Implementation

The Department said that over the past several months, the Administration engaged in dialogue with businesses about the new employer and insurer reporting requirements under ACA. It took into account employer concerns about the complexity of the requirements and their need for more time to implement them effectively. Based on this, the Administration announced that it will provide an additional year, to January 1, 2015, before the ACA mandatory employer and insurer reporting requirements begin. It said the delay is designed to meet two goals. First, it will allow the Department to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. The Department said that within the next week, it will publish formal guidance describing the transition. In doing so, it said it is working hard to adapt and be flexible about reporting requirements as it implements the law.

More specifically, the Department said that the ACA includes information reporting (under Code Section 6055) by insurers, self-insured employers, and other parties that provide health coverage. It also requires information reporting (under Code Section 6056) by certain employers with respect to the health coverage offered to their full-time employees. The Department expects to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders – including responsible employers that already provide their full-time work force with coverage that exceeds the minimum employer shared responsibility requirements – in an effort to minimize the reporting, consistent with effective implementation of the law.

Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. It said that real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.

Delayed Implementation of Shared Responsibility and Tax Penalties

The Department said it recognizes that this transition relief will make it impractical to determine which applicable large employers owe the shared responsibility tax payment for not providing minimum essential coverage that is affordable and provides minimum value (under Code Section 4980H) for 2014. Accordingly, the Department is extending transition relief on the employer shared responsibility payments. Under the transition relief, applicable large employers will not owe either the $2,000 tax or the $3,000 tax for 2014. Any employer shared responsibility tax payments will not apply until 2015. During the 2014 transition period, the Department strongly encourages employers to maintain or expand the health coverage they provide to their employees.

Importantly, the Department said its actions do not affect employees’ access to the premium tax credits available under the ACA, although without employers reporting on who they provide coverage to, it is hard to see how the government will know which individuals qualify for a tax credit. Without more, this suggests that the Department intends that marketplaces for individuals will still be available January 1, 2014. It also suggests that most Americans will still have to obtain health benefits coverage or pay the individual tax. It is not clear if the notice employers are required to send to all employees by October 1, 2013 advising them of the marketplaces will still be required. The upcoming guidance should address this and other requirements. The Department also said that this delay does not change the compliance requirements under any other provision of the ACA. This suggests that the PCORI fee payable by July 31, 2013 is still due, the 90-day maximum waiting period for benefits eligibility in 2014 still applies, etc.

Hopefully, the upcoming guidance will provide more detail on on-going employer responsibilities. Until then, it appears that, presuming there are no additional delays or relief:

  • Employers will not have to count full-time employees and full-time equivalents in 2013 to determine if they are applicable large employers beginning January 1, 2014.
  • Applicable large employers will not have to determine their full-time employees for purposes of providing minimum essential coverage in 2014.
  • Applicable large employers who do not provide minimum essential coverage to all full-time employees in 2014 will not owe the $2,000 tax times all full-time employees (minus 30) if one full-time employee purchases coverage through a marketplace and obtains a tax credit or subsidy.
  • Applicable large employers that provide minimum essential coverage that is not affordable or does not provide minimum value in 2014 will not owe the $3,000 tax times all full-time employees who purchase coverage through a marketplace and receive a tax credit or subsidy.
  • Employers will not have to report to the government on their full-time employees and health plan coverage in 2014, although the government will urge voluntary reporting.
  • Employers that have been considering adjusting the structure of their workforces to minimize the number of their full-time employees appear to have additional time in which to analyze and implement workforce changes.
Article By:

 of

New Requirement for Long-Term Care (LTC) Facilities That Arrange Hospice Services through a Medicare-Certified Hospice

McDermottLogo_2c_rgb

Effective August 26, 2013, the Centers for Medicare & Medicaid Services require that a long-term care, or LTC, facility that chooses to arrange for the provision of hospice services through a Medicare-certified hospice must have a signed agreement with the hospice delineating the services that will be provided by each.

New Condition of Participation Requirement for Long-Term Care Facilities

The Centers for Medicare & Medicaid Services (CMS) has added a new Condition of Participation (CoP) that requires that long-term care (LTC) facilities (that is, Medicare-certified skilled nursing and Medicaid-certified nursing facilities) that choose to arrange for the provision of hospice services through a Medicare-certified hospice must have in place a written agreement delineating the respective roles and responsibilities of each.  The CoP requires that the agreement, signed by an authorized official of the LTC facility and the hospice, must be in place before any hospice services can be provided through the arrangement by the hospice.  The new CoP requirement is effective August 26, 2013.

In its description of the requirement, published in the June 27, 2013, Federal Register, CMS explains that where LTC facilities and hospices provide many of the same services to residents who have elected the hospice benefit, the purpose of the agreement is to ensure that duplicative or conflicting services are not provided to the resident as part of the hospice benefit, and that there will be no missing hospice services.  CMS believes that the written clarification of the responsibilities of the LTC facility and the hospice will increase coordination of care for patients as well as foster communication between the two providers assisting patients and their families.  CMS also believes that the clear division of responsibilities and increased communication required by this new rule will help address the duplication of services criticized by the Office of Inspector General in a July 2011 report, and address situations where neither the LTC facility nor the hospice are providing a needed hospice service.

Options and New Requirement

An LTC facility has two options under the newly added CoP: it may arrange for the provision of hospice services through a written agreement with a Medicare-certified hospice specifying the services to be provided by the LTC facility and the hospice, or it may assist the resident in transferring to a facility that will arrange for the provision of hospice services when a resident requests a transfer.

If the hospice care is furnished in an LTC facility through an agreement with a Medicare-certified hospice, the agreement must ensure, among other things, that the hospice services meet professional standards and principles that apply to individuals providing services in the facility and to the timeliness of the services.  The regulations prescribe what must be addressed in the agreement.  For example, the agreement would specify that it is the LTC facility’s responsibility to furnish 24-hour room and board care, meet the resident’s personal care and nursing needs in coordination with the hospice representative, and ensure that the level of care provided is appropriately based on the resident’s needs.  The hospice’s responsibilities are delineated to include providing medical direction and management of the patient, nursing, counseling (including spiritual, dietary and bereavement), social work and medical supplies and drugs necessary for palliative care associated with the terminal illness.  The final regulation and CMS’ commentary published in the Federal Register provide considerable guidance to providers in developing new agreements, or amending existing agreements with hospices, to address the new requirement.

LTC facilities choosing to provide hospice services through arrangements with hospices without the required written agreement can face sanctions for their failure to meet the requirement of this new CoP.  While one commenter suggested extending the deadline for implementation of the rule to allow hospices and LTC facilities more time to develop agreements, CMS believes that the August 26, 2013, effective date is an adequate timeframe.

Article By:

 of

Health Care Reform Update – Week of June 24, 2013

Mintz Logo

Leading the News

CMS Releases Guidance on State Alternative Applications for Health Coverage

On June 18th, the Centers for Medicare and Medicaid Services (CMS) released guidance on state alternative applications for health coverage through the ACA that will determine eligibility for enrollment in Qualified Health Plans (QHPs). In alternative applications, states must:

  • Request information necessary for determining eligibility for coverage in a QHP.
  • Minimize the burden on the applying household.
  • Rely primarily on electronic information, and only request paper documentation when necessary.

Supreme Court Rules Generic Drugmakers Not Liable for Defects

On June 24th, the Supreme Court issued a 5-4 ruling that generic drugmakers cannot be held liable for defective products as the drugs and warning labels must be exactly the same as brand name products. The case, Mutual Pharmaceutical Co. v. Bartlett, posited that even though generic companies cannot make changes to the label, they do have the discretion to pull the drug from the market. The majority, led by Justice Alito, found that federal generic law preempts state “failure to warn” law in this case. In two dissenting opinions, justices argued that the responsibility to remove the drug from the market was valid and that Congress’ intent was to preserve a role for state law in drug regulation.

Implementation of the Affordable Care Act

On June 14th, the Jobs and Premium Protection Act (H.R. 763), which would repeal a tax on health insurance plans, gained the 218 cosponsors necessary to pass the House.

On June 17th, Rep. Mark Meadows (R-NC) introduced legislation to delay implementation of the ACA until all activity by the IRS since the beginning of 2010 is audited.

On June 17th, the House Oversight and Government Reform Committee subpoenaed HHS for information on the CO-OP program of the ACA.

On June 17th, the five Democratic members of Pennsylvania’s House delegation wrote to Governor Tom Corbett (R) to urge him to expand Medicaid in the state.

On June 17th, Senators Claire McCaskill (D-MO) and Tom Coburn (R-OK) sent a letter to colleagues urging a repeal of an ACA provision that they say creates a disparity in the Medicare hospital wage index system.

On June 18th, Enroll America launched its “Get Covered America” campaign to provide uninsured individuals with more information about the ACA enrollment process.

On June 19th, Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) introduced legislation to extend the definition of a full-time worker under the ACA from 30 hours to 40 hours.

On June 19th, Republicans on the Senate HELP Committee sent a letter to FDA Commissioner Margaret Hamburg with questions on why the agency is able to promote the ACA.

On June 20th, the Obama administration issued a state-by-state list of rebates that consumers will receive from insurers across the country that failed to meet ACA efficiency rules.

On June 20th, a 95-52 vote in the Maine House of Representatives fell three votes short of overriding Gov. Paul LePage’s (R) veto of Medicaid expansion.

On June 21st, four hospital organizations sent a letter to members of Congress urging for a delay to reductions to the Medicare and Medicaid Disproportionate Share Hospital (DSH) program.

Other HHS and Federal Regulatory Initiatives

On June 18th, CMS issued a bulletin for state Medicaid agencies on when funding is available for certain administrative costs related to the activities of a state Long-Term Care Ombudsman.

Other Congressional and State Initiatives

On June 17th, former CMS administrator Don Berwick announced he will run to be governor of Massachusetts.

On June 17th, the Senate unanimously passed a bill to end the ban on organ donations between people who are HIV positive.

On June 18th, the Congressional Budget Office (CBO) projected that immigration legislation currently under consideration in the Senate would result in an additional $110 billion in health care spending over 10 years.

On June 18th, the House passed a bill that would ban most abortions after 20 weeks. The legislation is expected to die in the Senate, and the White House has threatened to veto.

On June 19th, bipartisan legislation introduced in the Senate and House would allow Medicare to cover prescription drugs for chronic weight management.

On June 19th, a study published in the Journal of Infectious Diseases indicated that the human papillomavirus vaccine reduced the prevalence of HPV among teen girls by more than half.

On June 20th, Senate Majority Leader Harry Reid (D-NV) said sequester cuts to the NIH must be eliminated. He said an inconsistency of funds at NIH is discouraging organizations from applying for grants and pursuing vital research.

On June 20th, the House Ways and Means Health Subcommittee held a hearing on the 2013 Medicare Trustees Report.

Other Health Care News

On June 17th, Susan G. Komen issued a press release that Executive Director of the IOM Judith Salerno will serve as the organization’s new CEO.

On June 18th, former HHS Secretary Tommy Thompson announced the formation of the Working Group on Pharmaceutical Safety, an organization focused on compounding reform.

Hearings and Mark-Ups Scheduled

Senate

On June 24th, the Senate Homeland Security and Governmental Affairs Committee will hold a hearingtitles “Curbing Prescription Drug Abuse in Medicare.”

On June 26th, the Senate Finance Committee will hold a hearing to examine health care quality.

On June 26th, the Senate Committee on Aging will conduct a hearing on respecting patients’ wishes and advanced care planning.

House of Representatives

On June 26th, the House Energy and Commerce Subcommittee on Oversight and Investigations will hold a hearing titled “Challenges Facing America’s Businesses Under the Patient Protection and Affordable Care Act.”

On June 26th, the House Energy and Commerce Subcommittee on Health will hold a hearing titled “A 21st Century Medicare: Bipartisan Proposals to Redesign the Program’s Outdated Benefit Structure.”

On June 27th, the House Veterans’ Affairs Committee will hold a hearing to assess the VA’s capital investment options to provide veterans’ care.

On June 27th, the House Committee on Education and the Workforce will conduct a hearing to address school lunch regulations and the consequences for schools and students.

On June 27th, the House Small Business Committee will hold a hearing on mobile medical app entrepreneurs.

On June 28th, the House Energy and Commerce Subcommittee on Health will hold a hearing titled “Examining Reforms to Improve the Medicare Part B Drug Program for Seniors.”

David Shirbroun also contributed to this update.

Article By:

of

Increased Availability of Health Care Data Means More Oversight and More Litigation

Mintz Logo

The increasing availability of health care claims and payment data may portend the future of government and private health care enforcement and litigation.

Data is the lifeblood of health care fraud enforcement efforts.  For many years, Medicare enforcement was hampered by CMS’s use of multiple Medicare contractors to pay and process Medicare claims.  In late 2010, I wrote about how this could change with the allocation of more than $350 million to create integrated Medicare and Medicaid databases designed to enhance government health care fraud detection and enforcement efforts.  It now appears that the future is here.

OIG Report on Medicare Part D Data

Last week, the OIG issued a Report analyzing 2009 Medicare Part D data.  The Report finds that of 1.1 million individual medical practitioners who had prescribed drugs paid for through Part D, 736 general practitioners were “extreme outliers” in terms of five key measures:

  • The average number of prescriptions written per beneficiary;
  • The number of pharmacies filling that provider’s prescriptions;
  • The percentage of prescriptions for Schedule II drugs;
  • The percentage of prescriptions for Schedule III drugs; and
  • The percentage of prescriptions for brand name drugs.

The data analysis uncovered some eye-popping statistics.   One physician was responsible for prescriptions filled by 872 different pharmacies located in 47 states and Guam, another averaged more than 71 prescriptions per individual beneficiary, and another ordered more than 400 prescriptions for each of 16 beneficiaries.  In 2009, Medicare paid more than $352 million on prescriptions written by the 736 physicians identified as extreme outliers.

The Report provides government prosecutors with a roadmap for potential enforcement.  It also illustrates what may be the future of public and private health care fraud enforcement as more and more health care payment data becomes publicly available.  Not only government prosecutors, but also individuals with their own agendas, will be able to analyze the data for aberrations and outliers.

CMS Release of Medicare Claims Processing Data

In recent months, CMS has begun publicly releasing Medicare claims processing data, including hospital charge data for specified outpatient and inpatient treatments.   Multiple media reports have already pointed out discrepancies in the hospital prices reflected in the data.  CMS promises that more health care data will be forthcoming.

Injunction on Release of Physician Payment Information Overturned

On May 31, 2013, a federal judge overturned an injunction that had been in place for 33 years, which had prevented the release of information on what Medicare pays individual physicians.   The injunction was initially issued at the request of the Florida Medical Association, which argued that release of information on what Medicare paid the physicians constituted an unwarranted invasion of personal privacy, reasoning the judge found “no longer equitable.”

Medicare Data Access Bill Introduced

After this injunction was lifted, legislation was introduced in the Senate to make Medicare payment data publicly available in a free, searchable database.  The Medicare Data Access for Transparency and Accountability Act would also affirm that data on Medicare payments to physicians and suppliers is public information, not exempt from disclosure under the Freedom of Information Act.  The bill does not address whether publication of the data constitutes public disclosure for purposes of qui tamsbrought under the federal or state false claims acts.

It is clear that through integrated databases, government investigators are gaining enhanced access to Medicaid and Medicare data that will be mined and analyzed to develop future health care enforcement cases.  It is also clear that insurers, the media, class action counsel, and potential qui tam whistleblowers also may soon be mining this newly available data to identify potential outliers and develop their own health care based litigation efforts.

Article By:

 of

Details of Health Insurance Exchanges: Health and Human Services (HHS) Releases Proposed Rule

vonBriesen

On Wednesday, June 19, 2013, the U.S. Department of Health and Human Services (HHS) published a proposed rule that sets forth several new polices related to implementation of the Affordable Care Act’s (ACA) health insurance exchanges (Exchanges) (also known as Health Insurance Marketplaces).

The proposed rule focuses in large part on program integrity with respect to qualified health plans (QHPs) offered through state-run Exchanges and federally-facilitated Exchanges (FFE). The proposed rule also addresses the resolution of certain QHP-related grievances and correction of improperly allocated premium tax credits and cost-sharing reductions, provides states with new flexibility to operate only a Small Business Health Options Program (SHOP) Exchange, and makes certain notable technical corrections. Significant changes proposed by the rule are:

Program Integrity

  • State Exchanges: The proposed rule establishes oversight and financial integrity standards for state exchanges, including reporting and auditing requirements aimed at ensuring that consumers are properly given their choices of available coverage, qualified consumers correctly receive advance payments of the premium tax credit or cost-sharing reductions, and Exchanges otherwise meet the standards of the ACA.
  • FFE: The proposed rule provides details regarding oversight functions of the FFE, including records retention requirements and compliance reviews to be conducted by HHS and proposes the bases and processes for imposing civil monetary penalties in the FFE, as well as for decertifying plans from participation.

Resolution of Grievances

The proposed rule establishes a process for resolving “cases” received by a QHP issuer operating in an FFE (i.e., grievances regarding the operation of the plan, other than advance benefit determinations). While such cases generally must be resolved within 15 days, “cases involving the need for urgent medical care” must be resolved no more than 72 hours after they are received by the QHP, unless a stricter state standard applies. A determination regarding benefit tiers or plan design may fall within HHS’ proposed definition of a “case” for these purposes, so long as it is not a claim denial, which is subject to a different process.

Correcting Improper Allocation of Premium Tax Credits and Cost-Sharing Reductions

The proposed rule specifies the actions a QHP must take if it does not provide the appropriate premium tax credit payments or cost-sharing reductions. The proposed rule prohibits QHPs from recouping excess funds paid on behalf of a consumer or to a provider and requires QHPs to refund any excess payments made by enrollees within certain, specified timeframes.

State Flexibility to Operate Only a SHOP Exchange

The proposed rule allows states to operate only a SHOP exchange, leaving the operation of the Exchange serving the individual and small group markets to the federal government. To implement this change, HHS proposes to allow states that have received conditional approval to operate a state-based Exchange to modify their proposal to offer solely the SHOP Exchange.

States that have not received conditional approval do not have the option of operating only a SHOP in the 2014 plan year. However, for plan years 2015 and beyond, HHS will consider new proposals from states wanting to operate only the SHOP.

Technical Change

  • The proposed rule also amends the applicable definitions of “small employer” and “large employer” for purposes of the Exchanges to those that with an average of at least one, but not more than 100 employees and those with an average of at least 101 employees, respectively.

Supreme Court Holds That Reverse Payment Patent Settlements Are Subject to Antitrust Scrutiny

MintzLogo2010_Black

For over a decade, the antitrust enforcers at the Federal Trade Commission have challenged the type of patent settlement where a brand-name drug manufacturer pays a prospective generic manufacturer to settle patent challenges, and the generic manufacturer agrees not to bring its generic to market for a specified number of years. The lower federal courts have over the years rejected the challenges. However, on June 17, 2013, the Supreme Court addressed the issue in Federal Trade Commission v. Actavis, and in a 5-3 decision held that such settlements are subject to rule of reason antitrust scrutiny. However, beyond that conclusion, the Court left the questions of how to structure and resolve the rule of reason issue to the lower courts and future cases.

As Justice Breyer’s majority opinion summarized the issue and its holding:

Company A sues Company B for patent infringement. The two companies settle under terms that require (1) Company B, the claimed infringer, not to produce the patented product until the patent’s term expires, and (2) Company A, the patentee, to pay B many millions of dollars. Because the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement agreement is often called a ‘reverse payment’ settlement agreement. And the basic question here is whether such an agreement can sometimes unreasonably diminish competition in violation of the antitrust laws.

In this case, the Eleventh Circuit dismissed a Federal Trade Commission (FTC) complaint claiming that a particular reverse payment settlement agreement violated the antitrust laws. In doing so, the Circuit stated that a reverse payment settlement agreement generally is ‘immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.’ And since the alleged infringer’s promise not to enter the patentee’s market expired before the patent’s term ended, the Circuit found the agreement legal and dismissed the FTC complaint. In our view, however, reverse payment settlement such as the agreement alleged in the complaint before us can sometimes violate the antitrust laws. We consequently hold that the Eleventh Circuit should have allowed the FTC’s lawsuit to proceed. (Citations omitted.)

The Court reasoned that even if the settlement agreement’s anticompetitive effects fall within the scope of the exclusionary potential of the patent, that fact or characterization cannot immunize the agreement from antitrust attack. Justice Breyer found that “it would be incongruous to determine antitrust legality by measuring the settlement’s anticompetitive effects solely against patent law policy, rather than by measuring them against procompetitive antitrust policies as well” and that “patent and antitrust policies are both relevant in determining the ‘scope of the patent monopoly’ — and consequently antitrust law immunity — that is conferred by a patent.”

Justice Breyer acknowledged that a conclusion of antitrust immunity would find some degree of support in a general legal policy favoring the settlement of dispute. However, he concludes that this factor should not “determine the result here” but is offset by five sets of considerations:

First, the specific restraint at issue has the potential for genuine adverse effects on competition. To the Court, even though the settlement permitted the challenger to enter the market before the patent expired, the settlement also entrenched the patent holder for the period the challenger agrees to stay out of the market in exchange for a payment, delaying the potential for lower prices. As the Court put it, “The patentee and the challenger gain; the consumer loses.”

Second, these anticompetitive consequences will at least sometimes prove unjustified. To be sure, in some circumstances, the reverse payment may amount to no more than a rough approximation of the litigation expenses saved through the settlement, or compensation for other services the generic has promised to perform. In such circumstances, a patentee is not using its monopoly profits to avoid the risk of patent invalidation or a finding of no infringement. In the antitrust proceeding, the Court concludes, the patentee should have to show that such legitimate justifications are present.

Third, where a reverse payment threatens to inflict unjustified anticompetitive harm, the patentee likely possesses the power to bring that harm about.

Fourth, the majority believes that an antitrust action would be administratively feasible. The majority did not believe that it would be necessary to litigate patent validity to normally answer the antitrust question — an unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent’s survival. “In a word, the size of the unexplained reverse payment can provide a workable surrogate for a patent’s weakness, all without forcing a court to conduct a detailed exploration of the validity of the patent itself.”

Fifth, the fact that a large, unjustified reverse payment risks antitrust liability does not prevent litigating parties from settling in some other way, without the potential to maintain and share patent-generated monopoly profits.

The FTC advocated that the Court adopt a rule that reverse payments are “presumptively unlawful” and that they be analyzed under a “quick look” approach, requiring the patentee to show empirical evidence of procompetitive effects. The Court rejected this position, instead instructing the issue undergo a full rule of reason analysis. In doing so, it left to the lower court the structuring of this and other rule of reason antitrust litigation on the issue.

In practical terms, the decision leaves many difficult issues to be grappled with, and the majority’s apparent confidence that the antitrust question is answerable without getting into the patent issues themselves may prove more aspirational than practical. Chief Justice Roberts’s dissent exposes one flaw:

The majority seems to think that even if the patent is valid, a patent holder violates the antitrust laws merely because the settlement took away some chance that his patent would be declared invalid by a court. …This is flawed for several reasons.

First, a patent is either valid or invalid. The parties of course don’t know the answer with certainty at the outset of litigation; hence the litigation. But the same is true of any hard legal question that is yet to be adjudicated. Just because people don’t know the answer doesn’t mean that there is no answer until a court declares one. Yet the majority would impose antitrust liability based on the parties’ subjective uncertainty about that legal conclusion.

The Court does so on the assumption that offering a ‘large’ sum is reliable evidence that the patent holder has serious doubts about the patent. Not true. A patent holder may be 95% sure about the validity of its patent, but particularly risk averse or litigation averse, and willing to pay a good deal of money to rid itself of the 5% chance of a finding of invalidity. What is actually motivating a patent holder is apparently a question district courts will have to resolve on a case-by-case basis. The task of trying to discern whether a patent holder is motivated by uncertainty about its patent, or other legitimate factors like risk aversion, will be made all the more difficult by the fact that much of the evidence about the party’s motivation may be embedded in legal advice from its attorney, which would presumably be shielded from discovery.

The FTC has hailed the decision:

The Supreme Court’s decision is a significant victory for American consumers, American taxpayers, and free markets. The Court has made it clear that [reverse payment] agreements between brand and generic drug companies are subject to antitrust scrutiny, and it has rejected the attempt by branded and generic companies to effectively immunize these agreements from the antitrust laws. With this finding, the Court has taken a big step toward addressing a problem that has cost Americans $3.5 billion a year in higher drug prices.

The FTC’s “victory lap” is probably premature. To be sure, we now know that blanket antitrust immunity for reverse payment settlements does not exist. However, everything else remains up for grabs. Until there are additional decisions grappling with the actual issue of liability issued, and reviewed, the extent and circumstances of antitrust liability is unclear. The risk-averse patent holder to whom Justice Roberts alluded might well be motivated to avoid utilizing reverse payments in structuring settlements in the future. In addition, the Competition Office of the European Union actively continues to examine reverse payments settlements, and there have been renewed calls for federal legislation banning such settlements.

Article By:

 of

 

Tri-Agencies Release Final Rules on Wellness Programs

SchiffHardin-logo_4c_LLP_www

On May 29, 2013, the U. S. Departments of Labor, Health and Human Services and the Treasury (the Tri-Agencies) issued final regulations (the final rules) implementing the changes that the Patient Protection and Affordable Care Act (PPACA) made to wellness programs. The final rules apply to both grandfathered and non-grandfathered group health plans and are effective for plan years beginning on or after January 1, 2014.

The final rules do not change the basic distinction between “participatory” wellness programs and “health-contingent” wellness programs. The final rules, consistent with the proposed rules, focus largely on revisions to health-contingent wellness programs. The key PPACA changes to the 2006 wellness regulations include:

  • Increases in the maximum allowable rewards under a health-contingent wellness program from 20% of the cost of coverage to 30% for non-smoking related programs and a 50% maximum for smoking related programs;
  • Clarifications of what constitutes a “reasonably designed” health-contingent wellness program; and
  • Additional guidance on reasonable alternatives that must be offered under any health-contingent wellness program so that the program remains non-discriminatory.

Participatory wellness programs are programs that either do not provide a reward or do not require an individual to meet a standard related to a health factor in order to obtain a reward. Participatory wellness programs are presumed to be nondiscriminatory if participation is made available to all similarly situated individuals, regardless of their health status. Examples include programs that reimburse employees for the cost of membership in a fitness center, or reward employees who complete a health risk assessment. These programs are easier to administer and not subject to the more exacting criteria that apply to health-contingent wellness programs.

Health-Contingent wellness programs require an individual to satisfy a health-related standard to obtain a reward. Examples include programs that provide a reward for smoking cessation, or programs that reward achievements for specified health-related goals, such as lowering cholesterol levels or losing weight. The final rules subdivide health-contingent wellness programs into two types: activity-only and outcome-based. An activity-only wellness program requires an individual to perform or complete an activity related to a health factor (e.g., a diet or exercise program), but it does not require the individual to reach or maintain a specific health result. In contrast, an outcome-based wellness program requires an individual to reach or maintain a specific health outcome (such as not smoking or attaining certain results on biometric screenings).

Modification to Maximum Rewards

All health-contingent wellness programs must satisfy five requirements to ensure compliance with the HIPAA non-discrimination rules. The final rules, as noted above, increase the maximum rewards allowed under a health-contingent wellness program. The five requirements are listed below and reflect the PPACA increases in the maximum rewards:

  1. The reward must be available to all similarly situated individuals;
  2. The program must give eligible individuals the opportunity to qualify for the reward at least once a year;
  3. The program must be reasonably designed to promote health and prevent disease;
  4. The reward must not exceed 30% of the cost of coverage (or 50% for programs designed to prevent or reduce tobacco use); and
  5. The program must provide a reasonable alternative standard to an individual who informs the plan that it is unreasonably difficult or medically inadvisable for him or her to achieve the standard for health reasons and therefore will not get the reward.

Clarifications to Reasonable Designs

Consistent with the 2006 regulations, the final rules continue to require that health-contingent wellness programs be reasonably designed to promote health or prevent disease. A program will meet this standard if it has a reasonable chance of improving health or preventing disease; is not overly burdensome; is not a subterfuge for discrimination based on a health factor; and is not highly suspect in the method chosen to promote health or prevent disease. The rules provide plan sponsors with a great deal of flexibility to design a wellness program.

Guidance on Reasonable Alternatives

The final rules modify the structure of the 2006 requirements with respect to providing reasonable alternatives for those individuals who are unable to attain the health-related goals of a health-contingent wellness program.

First, to satisfy the reasonable alternative requirement, the same full reward must be available to individuals who satisfy the reasonable alternative as is provided to individuals who are able to satisfy the standard program. As noted in the Preamble to the final rules, this means that the reasonable alternative must allow the individual a longer period to complete the program, and the reward earned must be the same as that given under the standard program.

The final rules do not require that the reasonable alternative be determined in advance and, consistent with past practice, allows the alternative to be set on an individual-by-individual basis. The final rules reiterate that, in lieu of providing a reasonable alternative, a plan or issuer may waive the otherwise applicable standard and simply provide the reward. Although in general a doctor’s verification is not needed for an individual to qualify for the reasonable alternative, the final rules do permit a doctor’s verification to be required under the activity-based reasonable alternative.

 of

Health Care Obligations of Employers Under the Affordable Care Act

Giordano Logo

For most employers, the most important part of the Patient Protection and Affordable Care Act (commonly referred to as the “ACA” or “Obamacare”) will be the section known as the employer shared responsibility provision.  Many media outlets continue to incorrectly suggest that this provision requires employers to provide health insurance to all of their employees.  This is not actually the case.  Instead, this provision subjects employers to taxes or penalties if they fail to offer “adequate” and “affordable” health insurance to their employees.   Another fact commonly misunderstood is that for now, the only employers who need to be concerned about this issue are those who employ 50 or more “full time” employees (the ACA uses a very specific formula to determine who is considered full time) or those who employ under 25 employees and are looking to take advantage of the small business tax credit.

The employer shared responsibility provision goes into effect on Jan 1, 2014.   In most cases, in order to determine who is a full time employee, the employer reviews each employee’s full time status by “looking back” at a past employment period of between three (3) and twelve (12) months.   As a result, it is critically important that employers start thinking about their obligations under the ACA right now so they can be prepared for January 1, 2014.

Determining who is considered a full time employee under the ACA can be complex.  Under the ACA, a full time employee is someone who works 30 or more hours per week, on average.  Also taken into consideration are full time equivalent employees (“FTE”).  The number FTE employees are determined by adding up the total number of hours worked in a given month by part time employees and dividing than number by 120.  So for example, 10 part time employees working 60 hours per month would be counted as 5 FTE employees (10×60 = 600; 600/120=5).  Special rules also apply for seasonal employees, temporary employees, etc.

For those employers who have 50 or more full time employees under the ACA, the employer shared responsibility provision leaves the employer with several options:

Option 1– Provide health care coverage that is both “adequate” and “affordable” under the ACA.  Determining if coverage meets these requirements requires analysis of the costs of the plan to full time employees and the number of full time employees eligible under the plan.  The employer must also determine if providing coverage is more costly than the fines it would be subject to if it chose not to provide coverage.

Option 2 – Do nothing and provide no coverage to the employees, potentially subjecting the employer to a $2000 fine per employee.  Rather than simply rejecting this option of out of hand, the employer needs to determine the potential fine it faces and whether or not certain exemptions are applicable that could greatly reduce, if not eliminate the fine entirely.

Option 3 – Provide coverage that is not considered “affordable” under the ACA, subjecting the employer to a $3000 fine for each employee who chooses not to partake in the employer offered health plan and who instead purchases coverage through an insurance exchange and receives a tax credit or subsidy.  Before taking this route, an employer must carefully consider whether it believes its employees will seek coverage through an exchange and whether the savings it will gain from not paying its portion of the employee’s health care coverage will offset any potential penalty.

Article By:

 of

2013 Medicare Trustees’ Report

DrinkerBiddle

On Friday, the Medicare Trustees released their annual report, which projects the solvency of the Medicare program.  According to the Trustees, the Medicare Part A program will remain solvent until 2026 — two years later than the trustees projected last year.  (Additional information on the 2012 Medicare Trustees’ Report is available here.)

The report presents a non-partisan snapshot of the state of the Medicare program, but also contains a wealth of interesting information about the overall Medicare program, such as:

  • In 2012, Medicare covered 50.7 million people – 42.1 million of whom were age 65 or older and 8.5 million of whom have disabilities.
  • In 2012 Medicare spent $574.2 billion and received $536.9 billion.  Since 2008, Medicare has been spending more than it is taking in, but is able to meet its financial obligations because it is using funds available in the trust fund (estimated to be $287.6 billion).
  • The Medicare Trustees project that Medicare will become insolvent in 2026, at which time Medicare will be spending more than it is receiving in revenues.  Interestingly, the Trustees project the Medicare program will continue to run a deficit until 2014, and between 2015 and 2014 the program will run a surplus, after which it will return to a deficit.
  • Most Medicare beneficiaries (about 73 percent) are enrolled in “traditional Medicare” – in other words, the sign up for Medicare Part A and B.  More than one quarter (27 percent) of Medicare beneficiaries are enrolled in Medicare Advantage (MA) – a private plans that deliver Medicare benefits.  In 2012, the Trustees estimated that 25 percent of beneficiaries were enrolled in MA.  This is interesting in part because there was concern that the Affordable Care Act’s (ACA) changes to the Medicare Advantage (MA) payment rates would result decreased enrollment in MA plans.  Today’s Trustees’ report suggests that concern is not being realized (at least in the short term).
  • Most Medicare beneficiaries are also enrolled in Medicare Part B, which primarily pays for services provided by physicians and other health care professionals.  Currently most beneficiaries pay $104.90 per month for their Part B premium.  Each year the Centers for Medicare & Medicaid Services (CMS) calculates the amount of the Part B premium.  However, the Trustees project that the Part B premium will not increase next year.

It is also important to note that in making their projections, the Medicare Trustees have to assume current law.  Thus, if Congress were to make further changes – like addressing the impending SGR cuts (more information available here – then that would have an impact on the Trustees’ projections.

More information on the Medicare Trustees, including past reports, is available here.

 of

Top 10 Affordable Care Act Compliance Tasks for Employers in 2013

Dickinson Wright LogoWith apologies to David Letterman, here are the top 10 Affordable Care Act compliance tasks for employers in 2013:

  1. Continue tracking for purposes of reporting the value of health plan coverage provided during 2013 on Form W-2 issued in January 2014 (for employers who issue more than 250 Forms W-2).
  2. The maximum reimbursement from a health flexible spending account for plan years beginning on or after January 1, 2013 is $2,500.  Make sure employees are aware of any reduction from prior years.
  3. An additional Medicare tax of 0.9% must be withheld from the wages of employees making more than $200,000 beginning in 2013.
  4. The summary of benefits and coverage (“SBC”) must be distributed to eligible employees during the open enrollment period.  Any changes to the SBC must generally be distributed at least 60 days before the effective date.
  5. The first payment of the Patient-Centered Outcomes Research Institute fee (the “PCORI” fee or the “comparative effectiveness” fee) is due July 31, 2013, regardless of the plan year of the health plan.  This fee is $1.00 per covered member (including employees and dependents) for the first year and is reported to the IRS on Form 720.  Health insurers will file the form and pay the fee for insured plans; a plan sponsor of a self-insured plan is responsible for filing and payment with respect to any self-insured plan.
  6.  A notice of availability of the Health Insurance Marketplace (formerly called the Exchange) must be given to current employees on or before October 1, 2013 and to all employees hired on or after October 1, 2013.  Model notices are available on the DOL website.
  7. The DOL has also published new COBRA model notices. It is unclear when the updated notices must be issued, but it appears to be no earlier than October 1, 2013, as the new COBRA notices refer to the availability of the Health Insurance Marketplace as an alternative to COBRA coverage.
  8. Establish the measurement period, administrative period, and stability period for purposes of determining whether employees are “full-time” for purposes of eligibility for the health plan and for purposes of the “pay or play” penalty.  For current employees, these periods will start in 2013 for purposes of 2014 eligibility determinations.  Determine how and when you will communicate the rules – in the SPD?  During open enrollment? As part of the employee handbook?
  9. If you are not sure whether your business is a large employer, count the number of full-time employees and full-time equivalents for at least a 6-month period in 2013 to determine if the business has more than 50 full-time/full-time equivalent employees as of January 1, 2014.
  10. If you are a large employer and you wish to avoid “pay or play” penalties in 2014, evaluate plan design and employee contributions to determine if the lowest cost option provides minimum value and is affordable.  Make sure waiting periods are not longer than 90 days.

Last word of advice: stay on top of continuing developments and be prepared for questions from employees.  It is a time of great change and uncertainty for employees as well as employers.

Article By:

 of