Monday, June 25, 2018

DOL Finalizes Rule to Expand Associated Health Plans

On June 19, 2018, the Department of Labor (DOL) released a final rule that provides greater flexibility for small businesses to join together to form Association Health Plans (AHPs). The final rule largely, but not entirely, adopts the provisions of a proposed rule issued in January of this year. DOL received over 900 comments on the proposed rule. A summary of the final rule is below and more detail can be found in our Legislative Alert.

Health coverage through associations and similar groups has actually been in existence for years in the form of Multiple Employer Welfare Associations (MEWAs). Under existing rules, however, DOL and other regulatory agencies treated participating employers in these MEWAs as if each employer sponsored its own plan. Under the Affordable Care Act (ACA) this meant that many employer members of the MEWA would be treated as if they were in the small group market and subject to those rules for rating purposes as well as the requirement that small group market policies provide essential health benefits (EHBs). Under these rules, in order for an association plan to be considered a single large group plan with respect to its employer members, there were a number of requirements including: that self-employed individuals could not participate; a very strict community of interest standard; and operational as well as structural rules for the association sponsoring the plan. Prior DOL guidance referred to these entities sponsoring “plan level” MEWAs as “bona fide” employer groups or associations.

The final rule relaxes many of those requirements for AHPs and provides an additional mechanism for an association sponsored MEWA to be treated as a single large group plan. The community of interest standard was modified so that AHPs can be formed on the basis of either:

Employers being in the same trade/industry/line of business/profession or
Employers having the principal place of business in a single State, part of a State (such as a city or county) or in the same metropolitan area even if the metropolitan area includes more than one State.

Conceivably, under the final rule, a local chamber of commerce could sponsor an AHP for employers in a specific city.

Also AHPs will be open to the self-employed (working owners) if they meet certain hours worked requirements or have a level of income from self-employment that supports the cost of the individual’s coverage. The proposed rule would have allowed an AHP to simply accept the certification of the working owner that he/she met those qualifications. The final rule, however, deleted this provision and in its place offers flexibility while at the same time making it clear that AHP fiduciaries have a duty to reasonably determine and monitor that working owners meet the final rule’s conditions for coverage.

In another change from the proposed rule, the final rule requires that the group or association have at least one substantial business purpose unrelated to offering health coverage even if the primary purpose of the AHP was to provide such coverage. The proposed rule provided that the sole purpose of the AHP could be to provide such coverage. The final rule states that a business purpose includes promoting common business or economic interests of the members of the AHP. DOL also provided a safe harbor that “substantial business purpose is considered to exist if the group or association would be a viable entity in the absence of sponsoring an employee benefit plan.”

While not limited to small employers, the primary benefits of participating in an AHP are the ability to offer benefits under the ACA large group market rules and to avoid the small group market rating rules and EHB requirements. Large employers already have these advantages but could enjoy any increased buying power that an AHP might bring.

How AHPs do (or do not) develop will be determined by a number of factors. First, the final rule has non-discrimination requirements where an AHP cannot discriminate among employers for eligibility, benefits, or premiums based on the health status of the employer’s employees or their claims experience. This could present a challenge for insurers in underwriting AHP coverage. Second, nothing in the final rule affects the ability of States, under existing rules, to regulate AHPs as MEWAs. In the proposed rule DOL solicited public comments on whether to exempt self-insured MEWAs from certain State regulations but ultimately took no action in the final rule on limiting the regulatory power of the States. Significantly, many states have very strict rules on self-funded MEWAs that would severely limit or even prohibit the formation of self-funded AHPs. So, formation of self-insured AHPs may be limited. State regulation of fully-insured AHPs is more restricted (although States can still regulate the terms of the underlying insurance policies).

Our Legislative Alert contains more information on the final rule including: action steps, a summary of the requirements and conditions applicable to AHPs and an explanation of the final rule’s staggered applicability dates based on whether an AHP is a new or existing plan and whether the AHP is fully insured or self-insured.

Wednesday, June 20, 2018

On Armstrong and Getty Today re: Current State of U.S. Healthcare

Where are we now with American Healthcare? 
  • We’ve passed more laws and regulations on healthcare in the last 8 years than in the prior 50, combined.   
  • Employee benefits are the 2nd or 3rd largest expense for every US Business behind rent and payroll.  
  • PPACA itself is 2,400 pages in laws and another 40,000 in regulations so far.  It will likely be 80K to 100K pages when done.   
  • PPACA still set to cost just under $2T. However when government bean counters projected the cost of Medicare and Medicaid into the future (20 years out) they missed by a factor of nine ($12B vs. $107B).  
  • Taxpayers in California now fund 70% of all healthcare via Medicare, Medicaid, CHIP, the VA, Tricare, County/Local Health Programs, PPACA Exchanges and state, local and fed gov’t employees.  Other states are generally 60% to 65%.   
  • PPACA was passed without being read and instead of enforcing all of the “pay fors” in the law, politicians in both parties have worked to erode all of the vegetable eating required by the ACA.  Some of the 21 taxes, mandates and penalties have been suspended, repealed or eroded significantly.  For this reason, I suspect the law will cost more like $2.5 or $3T 10 years out.   
On cost and government efficiency in healthcare, from the Hill:
When the Obama administration restructured private individual insurance, it created bloated policies that people would not voluntarily purchase. Not counting the money spent on state and federal exchanges, the federal government spent $341 billion from 2014 through 2016 on subsidizing individual coverage so that people would buy it. 
All this spending managed to increase private coverage by just 1.7 million people, slightly less than half of the natural increase in the civilian labor force. That’s $200,000 per person. The feds could have saved money by closing the exchanges and giving people who qualified for subsidies a check for $50,000 for each of the three years. Those people could then have paid $20,000 for their own unsubsidized policy and used the rest to either cover their out-of-pocket costs or buy a nice used car.

Tuesday, June 19, 2018

Dine and Dash Healthcare: Approximately Half of PPACA Enrollees Dropped coverage by the End of Their Plan Year - Many After One Month

From BenefitsPro
A new analysis raises concerns about the survival of the Affordable Care Act marketplace due to people strategically enrolling and dropping out of ACA plans.  A paper by Stanford University researchers finds evidence that people are buying plans to address a health concern or discretionary care and then ditching the plan. 
“Our analysis shows that many consumers are strategically signing up for insurance to help defray the costs of non-chronic, potentially discretionary, health care needs and then dropping coverage once they have satisfied these needs,” says Rebecca Diamond, a Stanford professor of economics. 
The paper examined over 100,000 households that enrolled in ACA plans during the first year of the ACA marketplace, in 2014. It found that a large percentage of enrollees of all income levels stopped paying premiums during that year. In California, according to their research, in 2014 and 2015, approximately half of enrollees had dropped coverage by the end of the year, with many dropping after just one month. 
Those with the lowest incomes were most likely to drop coverage. 
“Among 2014 open enrollment households with less than $20K of income, approximately 35 percent drop coverage by July 2014,” the authors write. “The rates of drop-out among high income households were similarly high, around 30 percent. By the end of 2014, approximately 50 percent of lower income households stop paying their premiums. The drop-out rates of the highest income households are only slightly lower.” ...
The Obama administration also sought to discourage people from going without insurance or dropping their plans by raising the tax penalty for being uninsured. Those efforts, however, were undone at the end of last year, when President Trump signed tax legislation that repealed the individual insurance mandate entirely. ...

Astounding Story of Fraud and Dysfunction in Our Healthcare System

Health insurance giant Anthem Blue Cross has filed suit against Sonoma West Medical Center, accusing the Sebastopol hospital of conspiring with an out-of-state medical laboratory in a billing scheme that Anthem claims defrauded it and its members of $16 million. 
The lawsuit, filed June 1 in U.S. District Court, alleges that Sonoma West Medical Center knowingly allowed Florida-based Reliance Labs to use it as a drug testing front. Reliance allegedly used the hospital provider’s credentials to bill for testing on urine samples taken from Anthem members who were not local patients and had never visited the Sebastopol facility, according to the lawsuit. 
Billing through the hospital allowed the “co-conspirators” — Reliance and Sonoma West Medical Center — to increase insurance payments for each drug test by 100-fold, the lawsuit said. 
“With that simple deception, they could transform a $32 claim into a $3,500 claim, because hospitals were paid as a function of their billed charges,” the lawsuit claims. ...
Full story here, absolutely worth the time to read. 

23.3% of Premium Spending Goes Towards Prescription Drugs, an Amount That Even Astonished Researchers

From FierceHealthcare:
Prescription drugs make up nearly a quarter of health insurance premium costs, with doctor visits not far behind, according to new research. 
A report (PDF) released on Tuesday by America's Health Insurance Plans (AHIP) found that a hefty 23.3% of premium spending goes towards prescription drugs, an amount that even astonished researchers. ...

The study also found that about 22.2% of premium dollars go to physicians and doctors. An additional 20.2% goes towards other office or clinic costs, including nurses' salaries and equipment and supplies, while hospital stays make up 16.1%. 
The research was conducted using data between 2014 and 2016 from five for-profit and 25 nonprofit insurer plans, which Burns said is representative of the sector as a whole.

A separate report by Altarum pointed to hospital spending and drugs as some of the main drivers of healthcare price growth, which is currently at a record high 2.2% compared to last year. ...
Operating costs and taxes make up 15.9% of premium costs, the AHIP research found. Meanwhile, MACPAC has pinned operational spending under Medicaid to less than a third that, at about 5%.

Quietly, the CBO Revised its Projection of How Many Would "Lose" (Choose Not to Buy) Obamacare Due to the GOP Tax Revisions

CBO just reduced that estimate by 34% in a few short months. That's all, just a third!

From the Washington Examiner:
The government's scorekeeping agencies revised their controversial estimate for how many more people would be uninsured as a result of changes Republicans and the Trump administration made to Obamacare. 
The latest estimates project that zeroing out Obamacare's fine for going uninsured alone will result in roughly 8.6 million more people becoming uninsured by 2027 than if the fine had been kept in place, compared to the 13 million figure the agencies had released several months ago. 
The study, which comes from the Congressional Budget Office and the Joint Committee on Taxation, makes various projections about different ways that people are expected get health insurance, using different baselines than in previous iterations and taking into account other consumer and health insurance behavior observed during the past year. 
The agency arrives at an even lower number of projected uninsured, 5 million, by taking into account other changes that the Trump administration plans to make, including by offering plans outside of Obamacare. 
One of the main provisions it takes into account is Republicans' eliminating Obamacare's mandate penalties for being uninsured in the tax bill President Trump signed into law last year. The CBO now believes that removing the individual mandate's penalties will be less consequential than it did previously. 
In arriving at the previous 13 million figure for people who would be uninsured as a result of the fine's repeal, the agencies took into account different ways that people obtain health insurance coverage: through Obamacare marketplaces, through a job and through government-funded Medicaid. 
Left unchanged in the latest report is the assumption that 2 million people who have the option to receive health insurance from a job would choose to go without it now that there is no fine for being uninsured. 
But other assumptions changed or were influenced by various actions from the Trump administration and states. Previously, the agencies estimated that 5 million fewer people would be enrolled in Medicaid, which is almost fully paid for by the government. Fewer people would enroll, they assumed, because a portion of enrollees who think they have to buy health insurance or otherwise face a fine head to the exchanges. There, they learn they qualify for no-cost Medicaid coverage instead. 
The agencies still believe some of that behavior will be at play, but they have lowered their projections to 1 million fewer people enrolled in Medicaid. Within that estimate, however, is incorporated the fact that the agencies believe more states will move to expand the Medicaid program. By 2028, about two-thirds of the people who are eligible for Medicaid under Obamacare will be enrolled throughout the country, the report said. Currently, 55 percent of the eligible population is enrolled, because people who do not have it live in states where it is not available. 
For the Obamacare exchanges, the CBO had projected 5 million fewer people would be enrolled, and instead uninsured, because analysts expected that healthier people would choose to go uninsured rather than purchase coverage once the fine was gone. In the latest estimate, the projection dropped to between 2 and 3 million, partly because people would choose to go uninsured or would be unable to pay for the higher costs of health insurance that result from healthier people abandoning the market. ...