A bill that would require Arizona health insurance carriers to provide written claim reports to plan sponsors up to twice a year, upon request, has been favorably amended in the House to make compliance less onerous. Modeled after a Texas law enacted in 2007, the bill originally required the reports to be provided within 30 days of a request. The type of information that can be requested includes aggregate claims and premium by month, the number of employees covered and pending claims.

Republican-sponsored legislation that would permit cross-border sales of individual health insurance remains in play despite strong opposition by the business community and consumer advocates. The bill would require that out-of-state insurers be subject to the jurisdiction of another state’s department of insurance; maintain reserves not less than the amount required in Arizona; register with the Arizona Department of Insurance (DOI); and that the coverage offered meet, at a minimum, the benefit requirements of the state where the company holds a certificate. The DOI would have authority to revoke the foreign insurer’s registration for reasons that include: inadequate reserves; failure to comply with the unfair practices and fraud statute; and violation of the prompt-pay law. The bill was amended in the House and now goes back to the Senate.

COLORADO:

As the deadline for filing legislation approaches, the Division of Colorado health Insurance released drafts of two bills aimed at bringing the state’s preventive coverage and adverse determination appeal requirements into conformity with the federal health reform law. Health insurers will have a small window of opportunity to provide comments before the bills are formally introduced. Also, a bill was filed to reclassify any product containing pseudoephedrine or ephedrine as a prescription drug to help prevent access to the drug by people illegally manufacturing methamphetamines. The bill has raised strong concerns because it would require a prescription for frequently used allergy medicines and drastically increase medical costs. The sponsor has introduced a joint memorial to Congress requesting the federal government address the issue.

CONNECTICUT:

The fiscal note for the Connecticut health insurance Healthcare Partnership bill, which would allow voluntary municipal and small employer pooling with the state employees’ health plan, has been released and indicates the legislation would be costly to the State. Known costs (those concerning the administration of the program) would be hundreds of thousands of dollars. Other costs that could not be precisely determined include those associated with the public option (similar to the SustiNet legislation but on a much smaller scale) and lost tax revenue from the premium tax.

In other action, the Judiciary Committee passed the Cooperative Health Care Agreements bill out of committee. The legislation would permit health care providers to enter into cooperative arrangements that would not be subject to certain antitrust laws, after approval by the Attorney General. In past years, health insurance plans have successfully argued against action on the bill despite support from the committee’s membership, including both Democrats and Republicans. However, this year the new Chairs have brought the bill forward for a vote. It will now go to the House floor where it will assessed for a fiscal note. The bill still has a long road to travel, including through the Insurance Committee.

FLORIDA and GEORGIA:

The Florida Office of Insurance Regulation and Georgia Department of Insurance have both asked health plans for additional information to help support their requests to HHS for a waiver from MLR regulations under ACA. The requests were prompted by an initial response from HHS asking for the additional information.

GEORGIA:

A bill that includes a prompt-pay provision that would
require third-party administrators to pay for service claims in the same timely fashion as primary insurers, or face penalties, has been passed by both chambers. The bill is opposed by the Georgia Chamber of Commerce, as it would erode current employer protections under the federal Employee Retirement Security Income Act (ERISA). The Georgia Chamber will ask Governor Deal to veto this legislation.

MARYLAND:

Governor Martin O’Malley signed several bills into law last week that will impact Aetna insurance and its customers. The Health Benefit Exchange Act of 2011 establishes the Maryland Health Benefit Exchange as a public corporation and an independent unit of state government. The law sets the purposes, powers and duties of the insurance exchange, establishing the Board of Trustees and providing for the qualifications, appointments, terms, and removal of members of the Board. It requires the board to appoint an executive director of the Maryland health insurance exchange, with the approval of the Governor, and determine the executive director’s compensation. The effective date is June 1, 2011. Another law alters the circumstances under which a person has the right to a hearing and to an appeal from an action of the Maryland Insurance Commissioner. The law provides that provisions of federal law apply to specified health insurance coverage issued or delivered by insurers, non-profit health service plans, and HMOs; authorizing the Commissioner to enforce specified provisions of law. The effective date is July 1, 2011.

MICHIGAN:

Newly elected Governor Rick Snyder continues to push for a 1 percent tax on all Michigan health insurance claims, which would require insurers and third-party administrators to pay $400 million in order to generate $1.2 billion in revenue for Medicaid. The tax would replace the existing 6 percent tax on all products among the 14 Medicaid HMOs. The $400 million tax would trigger $800 million in matching funds from the federal government, thereby generating $1.2 billion in total. Should the tax be passed, the Governor promised no cuts to Medicaid reimbursement rates, services or eligibility. The claims tax is the same type being phased out in Maine that was used to fund the Dirigo Health Plan.

MISSOURI:

The attorney general, a Democrat, broke with his party last week and urged a federal judge to invalidate the central provision of the new Missouri health insurance law. The filing of the brief by Attorney General Chris Koster, a onetime Republican state legislator who switched parties in 2007, underscores ACA’s political tenuousness in a critical Midwestern swing state. Koster’s action followed months of pressure from state Republicans that he join attorneys general from other states who are challenging the constitutionality of the law. Instead, Mr. Koster chose to file a “friend of the court” brief in the U.S. Court of Appeals for the 11th Circuit. In Missouri, a ballot referendum aimed at nullifying the law was approved by nearly three to one last year, and the legislature recently passed resolutions urging Koster to join the legal challenges. In a letter to the Republican leaders of the legislature announcing his decision to oppose the law, Koster acknowledged that the legislative resolutions, though nonbinding, were impactful as they give voice to the political will of state residents. His central argument echoed those made by plaintiffs in a number of the lawsuits.

NORTH CAROLINA:

Legislation was introduced last week prohibiting most favored nation clauses in North Carolina health insurance contracts. The Insurance Committee in the House has already held one hearing on the bill.

OKLAHOMA:

Governor Mary Fallin last week joined other state leaders in announcing that Oklahoma will establish an Oklahoma Health Insurance Private Enterprise Network to prevent the establishment of a federal health care exchange in Oklahoma. To address concerns expressed by some, state leaders added specific safeguards into legislation to prevent the implementation of a federal health care exchange, while creating an Oklahoma-based health insurance network.  The Health Insurance Private Enterprise Network, based on a concept by the conservative Heritage Foundation and legislation passed by the legislature in 2009, would increase access to portable, private, affordable health insurance plans through a market-based network featuring competition and offering choice to consumers. The network would be governed by a board made up mostly of private sector members and chaired by the Insurance Commissioner.  The network would be funded through state or private resources. The state will not accept the federal $54 million Early Innovator Grant. The legislation is expected to be amended onto a pending bill and make its way through the legislative process. which is scheduled to end May 27, 2011.

TEXAS:

A bill designed to squeeze savings out of social programs won unanimous approval from a Senate budget subpanel last week. The bill includes about 10 ideas for greater economies – primarily in Medicaid but some in food stamps and the Children’s Texas Health Insurance Program. The biggest single savings — $290 million over the next two years — would come from eliminating a South Texas “island” of fee-for-service payments under Medicaid. Since 2003, Cameron, Hidalgo and Maverick counties have been exempt from the managed care trend at work elsewhere in Texas. The bill also would save $51 million by carving prescription drugs into Texas Medicaid managed care programs and requiring most Medicaid patients to use medicines on a state preferred drug list; save $15.9 million by moving children from the State Kids Insurance Program to the Children’s Health Insurance Program; and save $28 million by requiring Texans with disabilities who receive in-home attendant care services to use a Medicaid state program first at a lower cost to the state. The measure now heads to the full Senate Finance Committee, which is crafting its version of the much-reduced budget for 2012-13.

On March 30, the Food and Drug Administration (FDA) moved unusually quickly and decisively to promote the availability of a safe and effective pre-term birth prevention drug at a fraction of the cost of a new competitor drug.  Three weeks ago, the FDA approved a new drug (Makena) to reduce the risk of pre-term births  Access to the then existing, but not officially approved drug known as 17P, was immediately put in jeopardy because doctors and pharmacies did not want to prescribe or dispense an unapproved drug and face sanctions by the FDA or litigation from the maker of Makena. To make matters worse, access to Makena was cost-prohibitive for most women; the full treatment cost for 17P is about $210 while the treatment cost for Makena is roughly $30,000.  Aetna was the lead insurer in an industry-wide, ad hoc coalition formed to fight for some form of relief from the FDA.  The calls, Hill visits, lobbying, white papers and more paid off as the FDA announced March 30 that it would not take action against pharmacies that continue to dispense P17. CMS followed suit minutes later with a directive to the states, supporting the FDA announcement and advising that state Medicaid programs can continue to pay for P17. For Aetna customers, paying for P17 rather than Makena means a difference of millions of dollars annually – with no difference in efficacy. While Aetna is seeking further clarification on the parameters for promoting and advertising the less expensive drug, the FDA decision is truly stunning in its clarity and impact.

In legislative news, AARP’s proposed legislation to amend California health insurance law to incorporate Medicare Supplement 2010 Standardized Plans M and N will be heard in committee next week. The bill contains provisions that go beyond federal and NAIC requirements by expanding guarantee issue rights to Medicare Advantage (MA) plan enrollees experiencing premium increases, benefit changes or network modifications.  The legislative language specifies that if a MA plan does not offer Medicare Supplement Plan coverage, then these individuals are permitted to enroll on a guaranteed issue basis in a supplement plan from any Medicare supplement carrier. Aetna health insurance has expressed its concern about how broadly the bill is written.

Senator Nelson also jointly filed Senate Concurrent Resolution 14, which asserts states’ rights under the 10th Amendment to the U.S. Constitution.
Senator Nelson also recently filed a bill that would establish the Texas Institute of Health Care Quality and Efficiency to improve health care and study methods of cost containment in the state, including provider collaboratives that closely resemble Accountable Care Organizations (ACOs). It would also require the Institute to study the feasibility and desirability of establishing an all-payer claims database (ACPD) and develop a plan to establish such a database. Since the bill was filed, multiple health plans, physicians, hospitals, and others have attended at least six rounds of negotiations on the bill in order to comply with the fast-track schedule set by the bill’s author. Aetna insurance national trade association also weighed in, expressing its concerns on the antitrust implications of ACOs or health care collaboratives, recommending considerations for developing an ACPD, and making recommendations for transparency of health-related data collected by the Institute. Senator Nelson has requested that all feedback on the bill be provided by March 18, 2011.

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After a lengthy discussion with the private sector, including Aetna health insurance, the Department of Labor has issued favorable guidance on government enforcement of certain internal claims and appeals rules as originally authorized under PPACA.  The current grace period, which runs out in July of this year, has now been extended to plan years beginning on or after January 1, 2012 with respect to four key areas of major insurer and employer concern, including the cultural and linguistic notice requirements, disclosure of treatment and diagnostic codes and their descriptions to members, the urgent care turnaround timeframe for initial requests, and the strict compliance standard. Aetna health insurance is concerned that these requirements could be confusing to members and will be costly and burdensome. These requirements are no longer subject to a good faith implementation requirement during the enforcement grace period, and the DOL has indicated that an amendment will be issued to the original 2010 interim final regulations in this area. For the rules on which the enforcement grace period expire in July (i.e., other required notices on statements of adverse determinations), implementation will take effect on plans written or renewed beginning July 1, 2011.

External review standards continue to be discussed. HHS is expected to issue future guidance on whether a state external review process meets the federal standard for external review.  The scope of federal external review process (for self funded, or the federal-operated process applicable to certain insured business) was not addressed by this guidance but may be addressed in the future.

Federal
In response to various requests for clarification (including from Aetna insurance), federal regulators last week issued a Question & Answer document that further refines the previous proposed rule on student health. In short, this clarification makes it clear that nothing from PPACA applies to student health plans until policy years beginning in 2012 or until academic year 2012-2013. The Q & A also clarified that the proposed regulation must be finalized to show what parts of the PPACA would apply to student health plans. This is welcome news in the college and university community. Aetna is communicating with its clients in a manner that is consistent with last week’s clarification, though many schools were hearing conflicting advice from state regulators.

The House-passed continuing resolution includes language that would “prohibit the use of funds to pay any employee, officer, contractor, or grantee of any department or agency to implement the provisions” of the PPACA. In a letter to Finance Committee Chairman Max Baucus, HHS Secretary Kathleen Sebelius made several claims that, should the de-funding provisions in the resolution be enacted into law, seniors will lose access to Medicare Advantage plans and other services. Senate Republicans were quick to dispute these allegations stating, the scenarios the Secretary envisions are not allowed under Congressional rules, are not assumed by the Congressional Budget Office (CBO), and can be prevented by HHS.  Senator Orrin Hatch and Ways and Means Committee Chairman Dave Camp also sent Secretary Sebelius a letter expressing their disappointment in what they called the letter’s “baseless allegations,” and expressing hope that “the urgency with which this letter was sent to Chairman Baucus is also being applied in answering a growing backlog of serious questions.”  The CBO also released a letter regarding the impact of the resolution, including the impact of the de-funding provisions on Medicare Advantage. The letter shows the de-funding provisions would have a minimal MA budgetary impact of $5.7 billion over 10 years.

States
Governor Jan Brewer’s Special Advisor on Arizona health insurance Health Care Innovations held a meeting last week with the state’s major health insurers, including Aetna insurance, to discuss identifying IT gaps the state must address to develop the online product selection and enrollment mechanism for an insurance exchange. Social Interest Solutions, the organization that developed the enrollment form currently used by Medicaid applicants, provided a demonstration of that application process. Individual interviews will be conducted with the IT staff of each company to obtain recommendations for the new system.

The Real Estate Committee last week voted out a substitute prior-approval rate bill that retains all the problematic sections of the original bill. The sections of concern cover public hearings, new subpoena powers for the Attorney General and Connecticut health insurance Healthcare Advocate, multiple notice requirements, and new definitions of inadequate, excessive, and unfairly discriminatory. The only change is that the Commissioner would have to promulgate regulations to carry out the proposed public hearing process. The full contingent of Republicans and Rep. Linda Schofield (Dem.) voted against the bill, with Schofield stating that she was concerned the bill gets rid of any timeline under which the Department must act and would require public hearings, nonsensically, for group rates. She also said the bill would provide the Attorney General and Advocate with extraordinary subpoena powers. The Chairs indicated that the bill is a work in progress.

Florida health insurance Insurance Commissioner Kevin McCarty has disclosed that he will be submitting a medical loss ration (MLR) waiver request to HHS this week.

Georgia health insurance Insurance Commissioner Ralph Hudgens has indicated he will be submitting an MLR waiver request to HHS within a week.  Aetna insurance continues to work with the Chamber of Commerce and plan sponsors to help defeat legislation that would apply prompt-pay requirements to self funded plans, in violation of ERISA.

Oklahoma health insurance Last week State Rep. Mike Ritze, one of two doctors serving in the Oklahoma legislature, called on state officials to turn down $54 million that would be used to implement the new federal health care law. Shortly thereafter, Governor Mary Fallin joined other state leaders in announcing that Oklahoma will accept the grant to help design and implement the information technology infrastructure to operate an Oklahoma health insurance exchange. Fallin listed the creation of such an exchange as one of her top priorities in her State of the State address earlier this month. She and others announced their support for the grant after working with state agencies to ensure that no unworkable federal mandates were included.

Later in the week, the legislature continued taking steps forward to reduce the number of uninsured Oklahomans. House Speaker Kris Steele authored a bill that defines the membership and appointments to the Health Care for the Uninsured Board (HUB), which is designed to establish a system of counseling, including a website, to educate and assist consumers in selecting an insurance policy that meets their needs.  The seven-member HUB consists of representatives from the Insurance Commissioner’s Office, the Oklahoma Healthcare Authority, insurance companies, agents and also consumers. The purpose of HUB is to implement a market-based insurance exchange.  The bill passed the House Public Health Committee at the end of the week and will proceed to the floor of the House.

Texas health insurance Legislators are wrestling with to what extent they should intervene in what residents eat, drink and breathe. In a state with some of the nation’s highest obesity and diabetes rates, supporters of various proposals say they are trying to give Texans more ways to combat unhealthy decisions by others, as well as make good choices for themselves. The president of the Texas Medical Association testified last week in favor of a bill banning the sale of unhealthful drinks (sugary fruit juices, sodas, whole milk) to students during school hours. Other related bills would allow the state to raise taxes on sweet sodas and fine restaurants for not posting nutritional information.

About 30 percent of Texas schoolchildren are obese or overweight, according to the Texas Public School Nutrition Policy. And last month, Republican Comptroller Susan Combs released a report saying obesity cost Texas businesses $9.5 billion in 2009 — that could rise to $32 billion by 2030 due to the cost of health care services, absenteeism, decreased productivity and disability. Legislators will continue debate on these bills until the session adjourns on May 31.

Federal
Last week a Florida federal judge clarified (at the request of the Obama Administration) his earlier decision back in January 2011 in which he ruled that the PPACA’s individual health insurance mandate is unconstitutional. He also wrote that the mandate could not be severed from the rest of PPACA and, therefore, the whole law had to be set aside as unconstitutional.  In last week’s rather colorful ruling, the judge chided the government for sitting on its hands for weeks before asking for the clarification. He re-emphasized that the mandate and the whole law are unconstitutional and chastised the government both for failing to appreciate, as a matter of law, that the prior Declaratory Judgment was the “functional equivalent” of an injunction (meaning that the government could not proceed with implementation) and for having the temerity to suggest otherwise. The judge did not stop there, which would have halted all implementation of the PPACA had he done so. He instead decided that the government’s motion to clarify was also a motion to “stay” the imposition of the original ruling, and he granted the stay.  But he conditioned it with the requirement that the government file an appeal within seven days seeking an expedited “fast-track” appellate review, either in the Court of Appeals (11th Circuit) or the U.S. Supreme Court. This filing requirement is the major takeaway from last week’s ruling because it accelerates the timeline for the litigation, to the applause of the state and others who oppose the law. The Administration and the proponents of the law are less happy, since stringing out the ultimate decision would make it more difficult, if not impossible, to dismantle.

With House approval (314 to 112) last week, Congress is well on the way to repealing the 1099 provision of the PPACA, which imposes a costly and burdensome reporting requirement on employers.  Earlier this year, the Senate also voted to repeal the 1099 provision; however, the two chambers are worlds apart with respect to paying for the repeal. While the House version pays for the repeal by revising the rules for repayment of excess premium subsidies down the road, the Senate version doesn’t directly pay for it and only gives OMB the authority to go find the money. A House-Senate Conference (or an unofficial compromise) will be needed to resolve this impasse.

The anticipated government shut-down on March 4 was put off last week when both chambers passed (and the President signed) a two-week extension of a continuing resolution to keep the government officially funded until March 18.  This particular resolution actually cuts federal spending for the current fiscal year by $4 billion, which means that the House Republican savings target of $60 billion for FY 2011 is now down to $56 billion. Congress could very well bump along with such short-term resolutions throughout the spring. But at some point, the Republicans in the House and the Democrats in the Senate will have to permanently fund FY 2011 and get on with the FY 2012 budget, which is supposed to be in the works right now.
Multiple health-care-related hearings were held on Capitol Hill last week. In testimony before the House Energy and Commerce Committee, Mississippi Gov. Haley Barbour voiced support for funding Medicaid with block grants, under which the federal government would give states a set dollar amount for Medicaid rather than paying a percentage of costs. Under this system, states would have “total flexibility” to manage their Medicaid programs, according to Barbour.  The panel’s Democrats were quick to dismiss the idea of block grants, saying the change would harm vulnerable beneficiaries. Karen Ignagni, the President and CEO of America’s Health Insurance Plans, testified before the House Ways and Means Committee Subcommittee on Oversight Health Plan Programs to Combat Fraud, Waste, and Abuse. Her testimony addressed two issues: how health plans’ fraud detection units are using cutting-edge techniques to identify practices leading to substandard care – including overuse, underuse, or misuse of medical treatment; and suggestions for improving fraud detection and prevention in both public and private programs.  Part of her testimony also focused on the medical loss ratio (MLR) regulation, which she said will hurt the insurance industry’s efforts to detect and prevent fraud.

The Government Accounting Office (GAO) last week released a study that shows “nearly 10 percent all Medicare payments are fraudulent or otherwise improper, and the government isn’t doing enough to stop them.”  The Medicare “fraud margin” is 9 percent, nearly triple the profit margin for the health plan industry (3.58 percent). The GAO also provided correspondence to the Hill on Medicare Private Sector Initiatives to Bundle Hospital and Physician Payments for an Episode of Care.  As one of the five largest national payers, Aetna insuranceae was interviewed and provided relevant materials. The GAO found that ongoing private sector bundling initiatives that achieve savings are an important consideration, in light of Medicare’s financial challenges. Bundled payments are feasible for Medicare, but there are several obstacles to overcome — such as manual claim processing systems, resistance to limiting provider choice and the lack of standard definitiions.

States

With the California health insurance deadline for the introduction of legislation during the 2011 session looming, and now passed. several health care-related measures were reintroduced, such as a single payer/universal care bill, prior approval and rate regulation, and mandatory autism coverage. In addition, a host of bills are in play that take another step toward implementing federal reform but appear to be inconsistent with PPACA. As in past years, legislators have proposed a host of new mandated benefits – 15 in total. They include several new ones, including the proposed elimination of step therapy for pain medications, fertility preservation services and forensic medical evaluations. The state’s mandate commission is reviewing the cost and public benefit of each of these proposed mandates and will issue a report that should be publicly available by the end of March.

Democratic Senator Irene Aguilar, the sponsor of a Colorado health insurance single-payer bill, engaged in a verbal confrontation last week with a representative of the Colorado Association of Industry and Commerce regarding the potential impact of her bill on employment in the state. Subsequent to a rally on the steps of the Capitol, the bill was voted out of committee, 4 to 3, along party lines. The bill has little hope in the Republican-controlled House and may not reach the Senate floor without some Republican support.

As in the past two years, the Connecticut Health Insurance Committee approved Speaker Chris Donovan’s bill called An Act Establishing the Connecticut Healthcare Partnership. This bill would open the expensive state employee health plan to small businesses, nonprofits and other groups. The goal is to attract a number of new employee groups to the state employee plan – nearly all of whom already have health insurance. In addition, the new state-run health plan would compete directly against the private marketplace. Given the high benefit levels, state employee plans are among the most expensive in the state. As such, this bill would not offer small businesses any real cost relief, achieve intended cost savings or increase the number of people with insurance. It could lead to substantial cost increases for taxpayers. The 11-9 committee vote was mostly along party lines, with most Democrats supporting the measure (except Sen. Joan Hartley and Rep. Linda Schofield), and all Republicans opposing it. This bill passed in 2008 and again in 2009, but was vetoed both times by former Governor M. Jodi Rell.

The Governor and Commissioner of Georgia Health Insurance are considering issuing an executive order that would create an Exchange Review Board. The Board would then consider and possibly develop legislation to implement a state insurance exchange in 2012. A bill is expected to be filed creating this advisory committee and is supported by the Governor’s office. The Governor may then follow with an executive order. Also, Aetna insurance expects an MLR waiver request to be filed by the DOI sometime this month.

The Department of Louisiana Health Insurance has indicated it will file an MLR waiver request this week despite indications from the Governor’s office that he does not approve of the request.

The Senate Appropriations Subcommittee on Oklahoma Health Insurance and Human Services passed a bill last week that would create a website to permit Oklahomans to see approximate pricing information for medical procedures and pharmaceutical products. The bill requires the Insurance Department, in collaboration with the State Department of Health, to establish and maintain an online health care information system that permits consumers to see pricing information from different types of providers and pharmaceuticals. The bill states that the purpose of the website is to serve as a resource for insurers, employers, providers, purchasers of health care and state agencies to continuously review health care utilization, expenditures and performance. It would also enhance the ability of consumers and employers to make informed, cost-effective health care choices. The bill would require that the presentation of data in the system allow for comparisons in the context of geography, demographics, general economic factors and institutional size.

Also of interest is a bill passed by the Senate Rules Committee last week that would allow Oklahoma to opt out of federal health care reform requirements. The bill asserts state control in the regulation of health care, would create a compact between certain states and would set forth formulas for figuring the right to federal funds for each member state. The bill also would create the Interstate Advisory Health Care Commission and establish membership requirements and duties of the commission. Primarily the commission would assist the legislatures of member states in the regulation of health care. It states the formation of this compact is contingent upon approval from the U.S. Congress. Democrats in Oklahoma’s Senate opposed the bill, some saying that it would force Oklahoma to rely on other states for regulating Oklahomans. Both bills will continue through the legislative process, which is scheduled to end in late May.

Rep. John Zerwas’ bill authorizing the creation of a state Texas health insurance exchange encountered mostly smooth sailing last week when it was heard by the House Insurance Committee. Going by the name of the Connector in the bill, the primary purpose of the exchange is to prepare Texas for changes in health insurance markets set to roll out in three years as part of federal health system reform. One important change in the new bill language presented at the hearing was the absence of an individual mandate to buy an insurance product. Groups expressing support for the bill included the Texas Association of Business and the Texas Hospital Association, among others. The bill was left pending by the Committee and will likely see more changes before it is brought to a vote. The Texas legislature continues in its regular session until June 1, 2011.

Federal
Group customers offering Medicare Advantage and prescription drug coverage got some good news from the Centers for Medicare & Medicaid Services last week. Last November, CMS announced that group customers would no longer be allowed to offer a Medicare Advantage-only plan alongside a stand-alone prescription drug plan and that as of January 2012 the customer would have to offer an integrated Medicare Advantage-Prescription Drug Plan (MA-PDP). This set off a scramble to get ready for 2012, which would have been a very difficult, if not impossible, timeframe. Aetna health insurance began working with employers and trade groups to reverse or delay the CMS rule. Last week, CMS issued a favorable ruling to suspend indefinitely its November 2010 decision and not require an MA-PDP as the employer’s only option.

There were two important court developments last week related to health care reform and the constitutionality of the PPACA’s individual health insurance mandate, with more to come in the next week or two. First, a federal judge in Florida two weeks ago invalidated the mandate, striking down the whole statute with a declaratory judgment but stopping short of issuing an injunction directing the conduct of the parties. At the same time he said the declaratory judgment was the “functional equivalent” of an injunction.  The plaintiffs (many of the states) have publicly stated that the law no longer applies to them while the defendant (the federal government) has stated that nothing changes until appellate review is complete.  Last week, the Florida judge ordered legal briefs on this issue and is expected to rule shortly on the impact of his prior ruling on the parties involved.  Second, early last week, as expected, the U.S. District Court for the District of Columbia upheld the constitutionality of the PPACA’s individual mandate, making it the third court to so rule. But the score is 3-2, and this is a best of seven series that won’t be settled before at least one Circuit Court decision and an essential Supreme Court opinion are rendered. Both could be well down the jurisprudential road.

States
A California health insurance bill that would bring state tax law into conformity with new federal tax rules governing the health coverage of adult children passed the Assembly Revenue and Taxation Committee by a unanimous vote last week. This conformity is important to employers, plans, and families because it exempts employee contributions toward covering certain adult children from state personal income taxes. It would also reduce a potential administrative burden for employers. Aetna insurance worked with its trade associations and joined a diverse group of interested parties, including labor, to help achieve a bipartisan outcome. The bill is expected to be fast-tracked and may be heard in Assembly Appropriations in the coming weeks.

In Colorado health insurance the newly released 2010 Annual Health Insurance Report of the Commissioner of Insurance contains a wealth of information — much of it collected from the insurance industry for 2009 — about the cost of health insurance and the factors that drive individual and group premiums in the state. The report notes that an estimated 15.7 percent of Coloradans had no health insurance in 2010, which is a slight improvement over 2009. More than 61 percent of Coloradans were covered by either commercial health insurance or a self-insured employer plan, compared to 54 percent in other states nationwide. Roughly 84 percent of premiums collected in 2009 by carriers went directly to the cost of providing health care services; 13.87 percent of premiums was used for administrative expenses and producer commissions. Not all coverage is regulated by the state — just over 40 percent of Coloradans had coverage regulated by the division of Insurance.

The Colorado Trust, a private grant making foundation, has issued a brief called The Economic Impact of Health Reform in Colorado that projects, as a result of national health care reform, insurance premiums will be nearly $2,000 less per year for individuals and nearly $4,000 less for family coverage by 2019. The projections are in part due to slower health care cost growth. Indeed, costs are expected to grow 5.5 percent to 17 percent less in Colorado by 2019 than without reform. Even after accounting for the costs of financing health care reform, this research projects that the state’s economic output will be nearly 1 percent more in 2019 than without reform, and 19,000 new jobs would be added as a result of coverage expansion.

The Connecticut Health Insurance Exchange Planning Committee held its first meeting under the new Administration of Governor Malloy last week.  Jeannette DeJesus, Department of Public Health Deputy Commissioner and the Governor’s Special Advisor on Health Care Reform led the meeting and stated that Senator Crisco’s insurance exchange legislation is the Administration’s proposal, based largely on the NAIC model act. Speaker Chris Donovan also has introduced an exchange bill in the House. Both proposals call for the establishment of a quasi public governing structure but differ on some timelines and board representation. DeJesus said the Administration would work with the House and solicit input form residents and stakeholders around the state to resolve the differences. Passage of a consensus bill is critical to the state’s ability to access Level II federal funding by June 30th. If legislation is not passed, DeJesus said that Connecticut will fall behind in its planning process. The state recently was awarded a $35.6 million federal grant aimed at helping New England states develop a state-of-the-art, online gateway to health insurance options. While Connecticut and other New England states are directly participating, the project is centered at the University of Massachusetts Medical Center in Worcester and the Massachusetts Executive Office of Health and Human Services, supported by the non-profit New England States Consortium Systems Organization. The first meeting of that group will be in March.

Illinois health insurance advocate Governor Pat Quinn signed into law an Aetna-sponsored piece of legislation relating to insurer payments to certain non-participating providers. The bill applies to individual or group accident and health insurance carriers. Effective on June 1, 2011, when an enrollee utilizes a network hospital or ambulatory surgery center and an in-network provider is unavailable for radiology, anesthesiology, pathology, neonatology or emergency department services, the carrier is to ensure that the enrollee shall not incur greater out-of-pocket costs than for participating providers. The enrollee cannot be balance billed by the provider past the insurers’ in-network rate for these non-participating provider services. In addition, the insurer may pay the billed amount or attempt to negotiate the reimbursement with the out-of-network provider. In the event that the insurer and physician cannot agree on a reimbursement amount, either party can initiate binding arbitration within 30 days of receipt of an explanation of medical benefit. The bill is a major victory for consumers.

Kansas health insurance as a result of budget shortfalls, greater political attention is being paid to the significant cost of state Medicaid programs, and Gov. Sam Brownback has said he wants to get rid of the fee-for-service model. The governor has made redesigning Medicaid a priority in his proposed budget, Dispensing with the fee-for-service model would mean using marketplace tools, such as pharmacy benefit managers, to negotiate lower dispensing rates at pharmacies and communicate with physicians about generics. The Kansas Medicaid program could save $62 million in the next decade by using pharmacy benefit managers and other market-based tools, according to a recent study by The Lewin Group. Missouri could save $282 million. Bryan O’Neal, the assistant director of pharmacy at The Kansas Hospital, recently testified that the real opportunity for savings is getting clinical data and cost of medications in front of doctors at the time of prescribing. He recommended using electronic prescription systems, which allow doctors to see patients’ current medications and drug allergies as well as cost and clinical data. More than 500 pharmacies and 2,400 clinicians in Kansas use e-prescribing systems. But some have said legislation working its way through the Kansas and Missouri Senates could undermine the states’ e-prescribing systems by limiting information and discouraging physicians from using them. The bills would establish a separate set of standards for Medicaid and prohibit the use of “intervening parties” or pharmacy benefit managers. The Kansas bill came under fire during a Feb. 10 committee hearing. The lone proponent of the bill at the hearing was a pharmacy representative.

Michigan health insurance In his first budget, Governor Rick Snyder has proposed that the state’s current HMO-use tax on Medicaid plans be replaced by a 1 percent assessment on paid health claims to raise approximately $400 million. The paid claims would be an obligation on insured and self-insured entities. Details regarding this budget proposal, including operational issues and effective date, are unclear at this time. But the  Michigan budget is predicated on the implementation of this provision. If it fails, then the remaining options will be reductions in Medicaid, largely in provider rates and health plan premiums.

A Missouri health insurance bill that would create a health insurance exchange has been introduced by Representative Chris Molendorp, a Republican and chair of the House Insurance Committee. Despite input from a wide range of stakeholders, the complex bill is not likely to sail through the legislative process quickly or easily. It would 1) establish a health benefit exchange to facilitate the purchase and sale of qualified health plans and qualified dental plans in the individual market, and 2) provide for the establishment of a small business health options program to assist qualified small employers in facilitating the enrollment of their employees in qualified health and dental plans.  The bill would still allow for sales of plans outside the exchange. The exchange would be funded by assessments or user fees charged to health carriers and health benefit plans. The bill would establish the exchange as a quasi-governmental agency within the Department of Insurance, Financial Institutions and Professional Registration (DIFP) and under the direction of a 13-member board of trustees. The governor would appoint five members of the board, including a member from a licensed health insurance carrier. The exchange would also require each health carrier seeking certification as a qualified health plan to submit a justification for any premium increase before implementing that increase. Premium rates and contract language would have to be approved by the director of DIFP. The bill would exempt individuals from the federal PPACA mandate if there is no affordable qualified health plan available through the exchange or the individual’s employer. We expect the bill will be heard in Committee this week, after which drafting and negotiations will continue.

Two North Carolina health insurance exchange bills were filed last week. The bill that will likely move closely mirrors the National Association of Insurance Commissioner model legislation and is expected to be passed as a placeholder for legislation to come in 2012.

The Tennessee health insurance Department of Commerce and Insurance announced its legislative package last week, and it included a rate review bill. The bill is broadly written and gives the Commissioner authority to deny any rebates when the solvency of the company is in question.

The Department of Texas Health Insurance announced last week that it is in the process of reviewing and preparing for implementation of the PPACA MLR and rate review rules. They have invited stakeholders to participate in an informal work session on March 2 to obtain input on these topics. Additionally, since insurance carriers are not required to file rates for small group coverage in Texas, Department staff members are seeking input regarding the best and most efficient method of obtaining premium rate information for the small group market.

Federal
To keep the government operating for fiscal year 2011 (September 2010 through September 2011), Congress has been passing a series of continuing resolutions (CR) that continue the funding for a set period of time. The current CR runs out the first week in March, so the House last week passed yet another CR, shipped it off to the Senate and headed out of town for a President’s Day recess. Included in the just-passed CR are provisions that would de-fund parts of the 2010 individual health insurance reform law, such as prohibiting the use of federal funds to pay government employees to work on or to implement the PPACA.  The Senate will surely reject this CR because of both the de-funding provisions and the $61 billion in spending cuts for the current fiscal year. Congress will once again confront a looming funding deadline when it returns from recess in a week.

While there is increasing health-related “action” in Congress, such as the de-funding effort and the soon-to-be successful effort to repeal the 1099 requirement, the implementation process within the agencies continues unabated. This is where the real action is, with post-regulation guidance likely to be issued on several fronts in the very near future. Sub-regulatory guidance is expected to touch on the following areas or answer certain questions: 1) Whether group plans, as of 2012, will be allowed to offer a Medicare Advantage-only plan alongside a stand-alone PDP;  2) whether and how insurers have to report PBM administrative costs for medical loss ratio (MLR) purposes;  3) FAQs on the parameters (e.g., national vs. state-by-state reporting) of an insurer’s MLR requirement for ex-pat business;  4) revised rules on already-issued claims and appeals rules; and  5) clarification of the length and breadth of the types of “new business’ that can be sold under a limited benefits plan or mini-med waiver. All of these items will have a bearing on operations at Aetna health insurance and Golden Rule insurance.

States
The Obama administration has awarded $241 million in grants to seven states to develop a health insurance exchange. Developing the technology to make such a virtual marketplace work is expected to be costly, however. Administration officials hope the grants awarded last week will allow a few states to build systems as “early innovators” that others will be able to adopt. The states receiving grants, which were appropriated by the law last year, are: Kansas ($31.5 million), Maryland ($6.2 million), Massachusetts ($35.6 million), New York ($27.4 million), Oklahoma ($54.6 million), Oregon ($48.1 million) and Wisconsin ($37.8 million). A sign of the sometimes odd nature of health care politics, Kansas, Oklahoma and Wisconsin have Republican governors who have complained bitterly about the new law and are challenging its constitutionality in federal court.

Arizona health insurance Governor Jan Brewer was advised by HHS Secretary Kathleen Sebelius that the maintenance of effort provision of the PPACA does not preclude the state from removing childless adults from the Arizona Health Care Cost Containment System (Medicaid) because the expansion was part of a demonstration project. The Governor and many legislators support this reduction as a means to help address the state’s significant budget deficit. While many view the development as a positive, a legal challenge at the state level is possible because the coverage expansion resulted from a ballot initiative. Also, the health insurance exchange bill was voted out of the House Banking and Insurance Committee by a 4-2-1 margin. Discussion was robust, with Republican members questioning the need to take any action in light of pending litigation against the PPACA. The view that the bill should continue to move to the floor for a full vote prevailed.

The Connecticut health insurance Committee held a hearing last week on a bill that would require public hearings on rate increases. The bill would compel hearings in some cases, and would give the state attorney general and health care advocate the right to argue on behalf of consumers at the hearings and call witnesses. In addition, the bill would change existing law, which states that rates can’t be “excessive”, by defining excessive as “unreasonably high.” Industry representatives said the legislation would conflict with federal reform laws, add administrative burden on the Insurance Department and, ultimately, increase costs. Keith Stover, lobbyist for the Connecticut Association of Health Plans, testified that rates already have to be actuarially sound and that medical insurance costs are, in fact, increasing. The Insurance Department said lawmakers should hold off on changes until incoming Commissioner Thomas Leonardi reviews the plan.

The Public Health and Insurance committees held a joint hearing on the SustiNet public option bill, the insurance exchange bill, the “pooling” of all public employees bill (to be known as the Connecticut Health Partnership) and a bill to allow the state to pool state employee and Medicaid pharmaceutical purchasing. The most important development of the day was the Malloy Administration’s written testimony. The state’s Budget Director Ben Barnes was not only tepid toward SustiNet as a whole, he was quite clear that the SustiNet bill gives too much budgetary power to a quasi-public agency (almost $8 billion in state health spending) and raises questions about SustiNet’s cost and savings projections. He pointed out that certain Medicaid concepts in the bill are against federal law, including allowing the agency to set Medicaid rates.. Speaker of the House Chris Donovan sat with Hartford Mayor Segarra, and they advocated strongly for the Speaker’s “pooling” bill to allow cities and towns to buy into the state’s health insurance plan. It eventually would allow small businesses and nonprofit organizations to buy in (also part of the SustiNet plan). This bill was vetoed in 2008.

Georgia health insurance John Price, an Aetna insurance local market head, Southeast Region, has been appointed to Commissioner Hudgens health insurance advisory group to help provide the Commissioner with expertise on health insurance issues. Also, the Commissioner of the Department of Community Health announced Friday that the current Managed Medicaid contracts (Wellcare, Amerigroup, Centene) will be extended for 12 months while the new Governor reviews the program.

Ohio health insurance Pooling of Ohio public school district employee health plans will be considered by the General Assembly. A study found that there is the potential for $138 million in savings if the state leverages the greater buying power of pooling 191,000 employees enrolled in 613 public school district health plans. Seventy-two percent of Ohio school districts purchase employee health insurance through consortia, but they are typically composed of 10 or fewer districts and do not result in savings, the study found. The report also calls for the state to find ways to encourage school districts to pursue lower-cost, high-deductible health insurance plans that could reduce district costs up to another 37 percent over current employee health care plans.  As Ohio struggles with the economic downturn and an $8 billion budget deficit, limiting collective bargaining rights is also front and center in the Statehouse so that the Administration ultimately may change the structure of pensions and health care benefits.

Texas health insurance Lt. Gov. David Dewhurst and Sen. Jane Nelson have reintroduced two health care-related bills that died in the House in 2009. One would bring “outcomes-based payments” to Texas’ Medicaid and the Children’s Health Insurance Programs. The other would allow private insurers, major employers and government employees’ insurance plans to experiment with new financial approaches, such as accountable care organizations (ACO). ACOs are an arrangement in which doctors and hospitals share risk, and potential savings, for bringing care costs below targeted levels. The legislation would begin rewarding the state’s health care industry for preventive care and treatments that are coordinated to prevent duplication and waste. The bills will be referred to a committee and debated by both the Senate and House during the current legislative session, ending in late May.

Senators tasked with taking a close look at the Medicaid program got a dose of the difficulties involved in trimming services in a state where services considered optional turn out to be not so optional. They heard testimony on multiple examples of how Medicaid cuts would affect people in the system. Because of the restrictions contained in the federal health care reform law, budget planners have less latitude in where to look for cuts in the Medicaid program. The Senate subcommittee will eventually pass on its recommended budget solutions to the Finance Committee charged with approving an overall budget that makes up a shortfall of more than $20 billion this session.