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The Medliminal Washington Report 3.5.18

March 5, 2018

The National World War II Memorial Fountains at night at the National Mall in Washington, DC.

Congress reconvened last week after the President’s Day recess, and the House and Senate began a series of hearings focusing on bipartisan efforts to combat the opioid epidemic. Meanwhile, a coalition of six senators launched a price transparency initiative and the House Judiciary Committee held a hearing to consider the impacts of the proposed CVS-Aetna merger. The Administration proposed rules to expand short term insurance plans and finalized rules on the ACA’s health insurance tax, while providing new data on health costs and the uninsured. Finally, state policymakers filed suit to repeal the ACA, while in some cases also strengthening the law in their own states.


Bipartisan Group of Senators Launch Healthcare Price Transparency Initiative

On March 1, a bipartisan group of six senators launched a healthcare price transparency initiative, seeking feedback from provider groups, insurers and patient communities as they develop legislation to empower patients, improve the quality of healthcare, and lower health care costs. The effort is being spearheaded by Senator Bill Cassidy, MD (R-LA), and includes senators Michael Bennet (D-CO), Chuck Grassley (R-IA), Tom Carper (D-DE), Todd Young (R-IN), and Claire McCaskill (D-MO).

As a first step, the senators sent letters to more than a dozen healthcare organizations that include the American Hospital Association, America’s Health Insurance Plans, Blue Cross Blue Shield, American Medical Association and the National Governors Association specifically seeking responses to questions ranging from regulatory barriers to big data to cash prices that contribute to the opaqueness of the health care delivery system and financing.

“Real world experience and evidence-based policies from health care stakeholders and experts will be important to craft a policy that most positively affects consumers and involves best practices from providers and states,” the bipartisan group wrote to stakeholders. “We all agree that health care costs are too high and now is time to move towards a system that is more open, efficient, and accountable to the needs of the modern patient.”

While there is no legislative proposal at this point, the senators have indicated that they will host roundtable discussions with a variety of policy experts and engage federal and state policymakers to develop a comprehensive approach. Senator Cassidy has said publicly that he would like to pursue healthcare transparency legislation this year, and House Energy and Commerce Committee Chair Greg Walden (R-OR) has recently expressed interest in taking up the issue as well.

House Judiciary Committee Holds Hearing on Proposed CVS-Aetna Merger

On February 27, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing to examine the potential competitive impacts of the proposed $69 billion CVS-Aetna merger on consumers, health insurers and PBMs.

Executives from both CVS and Aetna testified separately, vowing that the merger plans would not lead to increased costs or to restrictions on service offerings. Thomas Moriarty, executive vice president, and general counsel, told committee members that CVS will not restrict members’ use of services outside of CVS as a result of the merger, nor would the company end or restrict its PBM relationships with other insurers, as Aetna members make up only about 11 percent of CVS’ pharmacy business. Thomas Sabatino Jr., Aetna’s general counsel, said that cost savings and value realized through the merger would be passed on to consumers through lowered premiums and increased benefits, as well as lower pharmacy prices.

Consumer advocates testified in opposition to the merger, arguing that a lack of transparency on cost savings could keep consumers from seeing any the benefits as increased consolidation in healthcare has not always paid off for patients. The American Medical Association raised similar concerns in written testimony submitted prior to the hearing, saying the deal poses anticompetitive concerns. While the AMA called for close scrutiny to determine if the merger would threaten competition, lower prices and higher quality care for patients, but stopped short of calling on Congress to block the deal.

There were few tough questions from committee members, and not a single lawmaker took the opportunity to urge anti-trust regulators to outright block the deal. CVS even drew praise from Subcommittee Chair Tom Marino for their efforts to help combat the opioid epidemic by adding drug disposal units to CVS stores and limiting initial painkiller prescriptions for some customers to seven days.

In February, the Department of Justice (DOJ) requested additional information to review the potential deal. The companies have not publicly commented on what additional information the DOJ is seeking, but CVS said during its most recent earnings call that the request was not unexpected, and that the merger was still expected to close in the second half of this year. Shareholders are set to vote on the deal March 20.

The Administration

Trump Administration Proposes Rules to Expand Short-Term, Limited Duration Insurance Plans

On February 20, the U.S Departments of Health and Human Services (HHS), Labor and Treasury released a proposed rule that would expand the availability of Short-Term, Limited Duration Insurance (STLDI) by allowing the purchase of plans providing coverage for up to 12 months. The proposed rule follows an executive order the president signed in October, which instructed federal agencies to explore more access to association health plans, expanding short-term limited duration plans and changes to health reimbursement arrangements.

The proposed rule amends the definition of STLDI to allow insurers to offer plans up to a maximum duration of one year. In October 2016, the Obama Administration limited the duration of coverage under STLDI to a maximum duration of three months. Short-term plans would not be subject to several Affordable Care Act (ACA) mandates including the inclusion of essential health benefits, guaranteed issue and community rating. The proposed rule would require insurers to “prominently display” language in the contract and application that the policy is not required to comply with federal health insurance requirements. Insurers would also not be required to guarantee the renewal of short-term plans, although CMS is requesting public comments about what how to best incorporate renewability options.

An associated HHS fact sheet projects that approximately 100,000 – 200,000 individuals would shift from an ACA-compliant individual market plan to STLDI in 2019 based on projections of enrollment trends prior to the Obama Administration’s October 2016 final rule. HHS predicts that most of these individuals switching to short-term plans would be young or healthy, and only about 10 percent would have been subsidy-eligible if they maintained their insurance exchange coverage. The fact sheet also projects that the premiums for these ACA non-compliant plans would likely be lower than those for ACA-compliant plans, citing one report showing a difference of $124 per month vs. $393 per month in average monthly premiums.  

HHS will accept public comments on the proposed rule through April 23, 2018.

IRS Releases Rules on ACA’s Health Insurance Tax

On February 22, the IRS issued final rules to define which entities are required to pay the ACA’s health insurance tax (HIT). Section 9010 of the ACA imposes an annual fee that applies to insurers that offer fully insured health insurance in the exchanges, group market, or public programs. The tax was in effect from 2014 through 2016. Congress approved a one-year moratorium for 2017 but the tax went back into effect for 2018. In the recently-enacted tax legislation, Congress suspended the tax once again for 2019, but it will go into effect again beginning in 2020 without further congressional action.

Section 9010(c) of the ACA includes an exclusion from the tax for self-insured employers, government entities, and certain nonprofit health providers, among others. Under the rule, entities qualify for an exclusion based on an entire data year ending on the prior December 31st or for the entire fee year beginning on January 1st. The rule also includes a consistency requirement, a special rule for an entity that uses the fee year as its test year, and controlled group requirements. IRS and Treasury received only a few comments on the proposed rule and are finalizing the rule without changes.

The IRS initially published temporary and proposed regulations on February 26, 2015; the final regulations adopt the proposed version without any changes. The rules will continue to allow certain entities, such as nonprofits or employers with self-insured plans, to be exempt from the tax.

Critics of the HIT continue lobbying for permanent repeal. With the bipartisan opposition the tax enjoys, it may be a prime candidate for further postponement or repeal.

CDC Finds No Change in Percentage of Uninsured, but Continued Growth in High Deductible Plans

The Center for Disease Control’s (CDC) National Center for Health Statistics’ issued its latest report on health insurance in February, finding that28.9 million (9 percent) of Americans were uninsured in the first nine months of 2017. That’s “not significantly” different from 2016, but 19.7 million fewer persons than in 2010.

Drilling down into those numbers, among adults aged 18 to 64, 12.7 percent were uninsured; 19.5 percent had public insurance; and 69.3 percent had private health plans in the first nine months of 2017. Of the 69.3 percent covered by private health plans, 4.4 percent (8.6 million) had insurance through the federal or or state-based exchanges.

One of the most significant trends identified in the report involve high-deductible health plans (HDHPs). In the first 9 months of 2017, 43.2 percent of those under age 65 with private health insurance were enrolled in an HDHP, including 17.9 percent who were enrolled in a CDHP – an HDHP with a health savings account (HSA) – and 25.3 percent who were enrolled in an HDHP without an HSA. Enrollment in HDHPs has increased dramatically since 2010. The percentage of people enrolled in an HDHP increased 17.9 percentage points – from 25.3 percent in 2010 to 43.2 percent – in the first 9 months of 2017. More recently, the percentage of those enrolled in an HDHP increased, from 39.4 percent in 2016 to 43.2 percent in the first 9 months of 2017. The percentage of people enrolled in a CDHP more than doubled, from 7.7 percent in 2010 to 17.9 percent in 2017.

In the States

Twenty State Attorneys General File Federal Suit to Invalidate the ACA

On February 26, a coalition of 20 state attorneys general brought a lawsuit against the federal government challenging the constitutionality of the ACA after the individual mandate was gutted by last year’s tax reform bill.

In a suit filed in U.S. District Court in the Northern District of Texas, the attorneys general allege that “following the enactment of the Tax Cuts and Jobs Act of 2017, the country is left with an individual mandate to buy health insurance that lacks any constitutional basis. Once the heart of the ACA – the individual mandate – is declared unconstitutional, the remainder of the ACA must also fall.”

Of the 20 state attorneys general in the complaint, only two – Maine and Mississippi– are Democrats. Their argument centers on the 2012 ruling in National Federation of Independent Business v. Sebelius, in which the Supreme Court ruled the individual mandate was allowed because the penalty acted like a tax, but rejected the Obama administration’s position that the requirement fell under Congress’s power to regulate interstate commerce.

“With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all,” Texas Attorney General Ken Paxton said in a press release.

Besides Texas, the states involved are: Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Utah, West Virginia and Wisconsin.

It’s far from certain this case will ever get to the Supreme Court, which has already heard four challenges to the law, However, the state officials behind the suit strategically chose a potentially friendly venue. Judge Reed C. O’Connor, who was assigned the case, ruled in 2016 against ACA regulations prohibiting insurers, doctors and hospitals from discriminating against transgender patients or women who have had an abortion.

The Justice Department will also have to decide whether to defend the law, which the president has already declared “dead.”  The Department has not officially commented on the suit. The attorneys general reportedly informed the Trump administration shortly before they filed the case, but did not collaborate with administration officials.

Texas AG Ken Paxton made clear that the stated goal of the suit is to strike down the ACA so it can be replaced by Republicans in Congress. Several legislative efforts to do just that failed in 2017, and the party’s congressional leaders have expressed little interest in taking up significant healthcare reforms ahead of the midterm elections in November.

Idaho Governor Meets with HHS Secretary to Discuss Noncompliant Health Plans

On February 24, Governor Butch Otter and Insurance Commissioner Dean Cameron met with HHS Secretary Alex Azar, CMS Administrator Seema Verma, and other federal health officials regarding the future of Idaho’s controversial insurance plans that skirt ACA consumer protection requirements. Nothing definite emerged from the meeting, but according to an HHS spokesperson, Secretary Azar “expressed empathy with the challenges that states such as Idaho face with ObamaCare and highlighted the importance of the recently announced HHS proposed regulation that seeks to provide more choice and competition through short-term, limited duration plans.”

Earlier this month, Blue Cross of Idaho filed five new individual market plans that will not comply with ACA. These new so-called “Freedom Blue” plans were filed in response to an executive order signed by Governor Otter and implementing guidance issued by the Idaho Department of Insurance (DOI) in January. Under the DOI guidance, insurers would be able to: use a person’s health status for underwriting purposes, deny coverage for pre-existing conditions, and set annual limits on coverage. Because the plans do not comply with the ACA, insurers that offer them are opening themselves up to significant legal risk and generating additional uncertainty for the market. To avoid this (and attempts by other states that to replicate this approach), HHS could step in to enforce the ACA’s consumer protections, as the agency is required to do so under the Public Health Service Act and federal regulations.

So far, however, HHS has been largely silent. When asked about Idaho’s new guidance during testimony before the House Ways and Means Committee on February 14, 2018, Secretary Azar did not take a definitive position on Idaho. He pledged to enforce federal law, noting that “there is a rule of law that we need to enforce,” but offered nothing more specific.

Wisconsin Governor Scott Walker Signs $200 Million Health Reinsurance Bill

On February 27, Wisconsin Governor Scott Walker signed into law SB 770, a bill that provides $200 million to stabilize the state exchange market. The Republican governor and one-time presidential candidate — a longtime critic of the ACA — signed the bill a day after authorizing state Attorney General Brad Schimel to join the group of 20 states are suing to overturn the law entirely.

The bill creates the Wisconsin Healthcare Stability Plan (WIHSP), a state-based reinsurance program for health carriers, contingent on approval of a federal Section 1332 State Innovation Waiver. If approved by CMS, the government would provide money to insurers to pay for between 50 percent and 80 percent of medical claims costing between $50,000 and $200,000. Wisconsin would join Alaska, Minnesota, and Oregon with state reinsurance programs, following the sunset of the ACA’s federal reinsurance in 2016.

The governor estimates the plan will cost $200 million, with the state picking up between $50 million and $80 million and the federal government paying the rest.

Governors Meet in DC with Healthcare Major Topic of Discussion

The National Governors Association (NGA) held its annual Winter Meeting in Washington February 23-26, and health care was a major topic of discussion, particularly the evolving

Medicaid program and state-level reforms. As many as 10 states have submitted waivers to CMS that included work requirements for Medicaid recipients, and how the Administration responds and works with states on these proposals will be closely watched by other states considering similar proposals.

A bipartisan group of governors also unveiled an ambitious 7-page “blueprint” to reform the nation’s health care system. The plan, drafted by governors John Kasich (R-OH), John Hickenlooper (D-CO), Bill Walker (I-AK), Brian Sandoval (R-NV), and Tom Wolf (D-PA), aims to lower the costs of health care, stabilize insurance markets and give states more flexibility to make changes.

The plan includes some of the typical policy goals that have often been repeated during previous health care debates: improve affordability, restore stability to insurance markets, provide state flexibility to encourage innovation, and improve the regulatory environment. However, the plan does not include any legislative language, or specificity on costs.

Instead, it urges Congress and the administration to work with states and commit to value-based reimbursement, in which providers are paid based on the quality, instead of the quantity, of services they provide; ensure Americans have access to care while creating incentives that encourage patients to live healthier lives and contributing toward their health care costs; combat “anti-competitive behavior,” particularly consolidation between local hospital systems and pharmaceutical companies; and reform the insurance markets by reinstituting the ACA’s reinsurance and risk corridors to maximize insurer participation.

The idea has bipartisan support in Congress, but the outlook is uncertain given the struggles to make any significant strides toward health reform and the fact that bipartisan legislation to stabilize the insurance markets has languished for months.

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of March 5-9.

Congressional Hearings:

March 8: The Senate Health Committee will continue a series of hearings examining the opioid crisis, specifically focused on leadership and innovation in the states

March 8: The House Energy and Commerce’s Subcommittee on Oversight and Investigations will hold a hearing examining public health response efforts to the influence outbreak