SZD Health Law Scan : Health Care Lawyers & Attorneys : Schottenstein Zox & Dunn Law Firm : Strategic Planning, Managed Care, Insurance : Columbus, Cleveland, Cincinnati, Central Ohio

Presenters:
Stephen Kleinman, Schottenstein Zox and Dunn, Partner, Health Care Practice Group
Robert Cochran, Schottenstein Zox and Dunn, Of Counsel, Health Care Practice Group

The Patient Protection and Affordable Care Act (PPAC) is anticipated to expand insurance coverage to 32 million people. As a result, the specific legislative changes discussed in this podcast will impact millions of Americans and the way health insurance companies do business. Listen as Steve and Bob discuss these changes.

This podcast is part of the Law Firm Alliance – 2010 Health Care Reform podcast series, which can be accessed in its entirety by clicking here.

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The Centers for Medicare and Medicaid (CMS) released its annual report on national health spending. According to the CMS press release, 2008 had the "the slowest rate of growth since [CMS] started officially tracking expenditures in 1960." The rate slowed to 4.4 percent down from 6.0 percent in 2007.

However, despite the decelerated growth, health spending's share of the gross domestic product increased from 15.9 percent in 2007 to 16.2 percent in 2008.

CMS also reports the following statistics:

• Hospital spending in 2008 grew 4.5 percent to $718.4 billion, compared to 5.9 percent in 2007, the slowest rate of increase since 1998. 
• Physician and clinical services’ spending increased 5.0 percent in 2008, a deceleration from 5.8 percent in 2007. 
• Retail prescription drug spending growth also decelerated to 3.2 percent in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns.
• Spending growth for both nursing home and home health services decelerated in 2008.   For nursing homes, spending grew 4.6 percent in 2008 compared to 5.8 percent in 2007. 
• Total health care spending by public programs, such as Medicare and Medicaid, grew 6.5 percent in 2008, the same rate as in 2007. 
• Health care spending by private sources of funds grew only 2.6 percent in 2008 compared to 5.6 percent in 2007. 
• Private health insurance premiums grew 3.1 percent in 2008, a deceleration from 4.4 percent in 2007.

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On November 19, 2009, the House of Representatives passed the Medicare Physician Payment Reform Act of 2009 ("H.R. 3961"). The bill reforms the Medicare physician payment formula, called the Sustainable Growth Rate ("SGR"). Under the current formula, Medicare payment rates for physicians' services will be cut by about 21 percent in 2010 and additional cuts would occur annually.

The Congressional Budget Office ("CBO") summarized H.R. 3961's changes to the SGR as follows:

• The update for 2010 would be the percentage increase in the Medicare economic index (MEI), which is 1.2 percent, as specified in the final rule.
• Beginning in 2011, there would be separate target growth rates and conversion factor updates for two categories of service: evaluation, management, and preventive services, and all other services.
• The new SGR formula would take into account spending for each category of service since 2009 or—beginning in 2014—for the past five years. (The current SGR formula takes into account spending since 1996.)
• Finally, only physician services, and not other services provided incident to the physician visit (such as laboratory services), would be counted in each category.

As noted above, consistent with the Centers for Medicare and Medicaid final rule for the 2010 physician fee schedule (publication date: November 25, 2009), H.R. 3961 amends 42 U.S.C. 1395w–4(d)(4)(A) to eliminate the discretion of the Secretary of the Department of Health and Human Services to include physician-administered drugs within the definition of "physicians' services" for the purposes of SGR calculations. Physicians' services are currently defined to include:

"other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

Under the proposed definition, such services would be defined to include only:

"other items and services for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services), but does not include services furnished to a Medicare+Choice plan enrollee." (emphasis added)

The CBO estimated that H.R. 3961 would increase physician payments over the next 10 years by about $195 billion.

H.R. 3961 was received in the Senate on November 20, 2009.

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On November 18, 2009, the Senate released a draft health insurance reform bill, entitled the "Patient Protection and Affordable Care Act."  Like the House bill, the Senate's bill proposes to establish Exchanges, or marketplaces for individuals to shop for insurance when insurance is not available through their employers. The bill contains a public option (referred to in the Senate's bill as the "community health insurance option") but differs from the House bill in that it permits states to "opt out" or prohibit that state's Exchange from offering a community health insurance option.  This bill will expand Medicaid coverage for those people earning less than 133% of the federal poverty line and will provide subsidies for the purchase of health insurance for people earning less than 400% of the FPL.

The Senate's bill stops short of the House's proposed ban on public health insurance options providing coverage of abortion services but it does prohibit the use of federal funds for abortion services.

To pay for some of the costs of the bill, the bill proposes an excise tax on high cost employer-sponsored health coverage (i.e., plans worth $8,500 for individuals and $23,000 for families).  The bill also proposes a tax on elective cosmetic surgeries and an increased hospital insurance tax on high-income taxpayers that would increase the Medicare deduction from 1.45% to 1.95% for incomes over $200,000 for individuals and $250,000 for couples.

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The Senate Finance Committee has approved its health care reform legislation, entitled "America's Healthy Future Act." This legislation will now have to be merged with the version approved by the Senate Committee on Health, Education, Labor and Pensions (the "HELP Committee").

The two bills share many common concepts, such as penalties for individuals who fail to obtain health insurance, expansion of Medicare and requirements for insurance plans that, for example, include prohibitions on exclusions for pre-existing conditions.

However, the Finance Committee's version differs from the HELP Committee's in some significant ways. First, the Finance Committee's version does not establish a government-run health insurance plan, commonly referred to as a "public option," that would compete in the health insurance exchanges with private health insurance plans. Second, it does not mandate employers to provide health insurance. Third, it proposes different methods for financing the cost of the legislation. For example, the Finance Committee's version proposes assessing fees on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).

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The October 7, 2009 edition of the Federal Register will publish interim rules implementing the Genetic Information Nondiscrimination Act’s prohibition against discrimination in the administration of health insurance coverage and group health plans. The federal agencies involved (Labor; Health and Human Services; IRS) are requesting comment on the interim rules, which will take effect 60 days after their publication (December 6, 2009).

The interim rules implement GINA’s prohibition against health benefit plans and health insurance companies increasing rates based on genetic information; requesting or requiring genetic tests; and requesting, requiring or purchasing genetic information for use in connection with enrollment or underwriting. These interim rules follow upon the EEOC’s proposed rules regarding GINA’s application to employment practices, which were issued earlier this year.

In our prior article, “The Surprising Breadth of GINA’s Protections,” we noted that the definition of “genetic information” in the EEOC’s regulations includes family medical history information. This information may not itself be genetic in nature but may reveal the occurrence of a genetically-based disease in the individual’s family. That same broad definition is incorporated into the interim regulations for health insurance coverage and group health plans. 

Comments on these interim rules may be submitted through the federal eRulemaking portal. Comments are due 90 days following the publication of the interim rules, or by January 5, 2010. For questions regarding the application of these interim rules to health insurance coverage and group health plans, please contact David Ball or any member of SZD’s Health Law Practice Group.

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On September 16, 2009, Senate Finance Committee Chairman Max Baucus released the Chairman's Mark for the committee's health care reform legislation, entitled America's Healthy Future Act.

The Chairman's Mark differs from the legislation passed by the Senate Committee on Health, Education, Labor and Pensions (the "HELP Committee") on July 15, 2009, in a number of ways such as:

1. Does not include a public insurance plan option. Rather, The Chairman's Mark proposes a Consumer Operated and Oriented Plan (CO-OP) program to create non-profit, member-run health insurance companies. These companies will be limited to competing in the individual and small group insurance markets.
2. Does not include an employer mandate. However, the Chairman's Mark provides for a fee capped at $400 per employee for certain employers who do not provide health insurance.
3. Expands Medicaid to non-elderly, non-pregnant (childless adults) with incomes up to 133% of the federal poverty line. The HELP Committee's bill expands Medicaid to such individuals up to 150% of the federal poverty line.
4. Provides tax credits (on a sliding scale basis) for individuals and families with incomes between 134-300% of the federal poverty line to offset the cost of private health insurance premiums. The HELP Committee's bill provides such credits for individuals and families up to 400% of the federal poverty line.

The Chairman's Mark is scheduled for markup at the committee's open executive session on September 22, 2009.
 

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CGI Technologies and Solutions, Inc. is the RAC contractor for Region B, which includes Ohio.  Provider outreach started in September and, according to CGI's website, will be done by the end of September.  CGI is already operational in Indiana, Michigan, and Minnesota, so expect RAC audits to start in Ohio before the end of the year.  CGI's RAC website is located at racb.cgi.com/Default.aspx

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Senate Finance Committee Chairman Max Baucus has been reported as circulating to members of the committee a document entitled "Framework for Comprehensive Health Reform."

The Framework represents "many of the policies" discussed by the committee but is "not a final product . . . and does not include everything that might be in the [Chairman's Mark]." It most notably does not include a public insurance option. Rather, it proposes a Consumer Operated and Orientated Plan (CO-OP) program to create nonprofit, member-run health insurance companies that service individuals in one or more states.

Also, it does not propose an employer mandate. However, as discussed below, while there is no employer mandate, certain employers may be fined for not providing health insurance coverage.

Some other highlights of the document include:

• Penalizing US citizens and legal residents who fail to obtain health insurance coverage up to $3,800 per year.
• Fining employers with more than 50 full-time employees (30 hours and above) that do not offer health insurance coverage to their employees up to $400 annually for each employee who receives a tax credit for health insurance through an exchange.
• Establishing state-based exchanges to assist individuals and small groups to more easily compare health insurance plan benefits and premium costs for four benefit options that would be available.
• Permitting health insurance premiums to vary based on only four factors: tobacco use, age, family composition and geographic differences.
• Prohibiting health insurance plans in the individual market from excluding coverage for pre-existing health conditions or rescinding health coverage.
• Levying an excise tax of 35% on insurance companies and insurance administrators for any health insurance plan that is above $8,000 for singles and $21,000 for family plans.
• Assessing fees that would be generally allocated by market share on pharmaceutical manufacturing companies ($2.3 billion), medical device manufacturers ($4 billion), health insurance providers ($6 billion), and clinical laboratories ($750 million).
• Permitting states to form "health care choice compacts" between two or more states to allow the purchase of non-group health insurance across state lines.
• Expanding Medicaid coverage to include individuals who are not currently eligible (e.g., non-elderly individuals (childless adults) at or below 133% of poverty).
• Reducing a state's allotment for Medicaid Disproportionate Share Hospital Payments by 50% once the number of uninsured individuals in the state is reduced by 50%.

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The loudest objection we hear to a government funded public option is that it would compete unfairly with the private plans and eventually cause many employers to drop coverage for their employees. But despite extreme views on either side of this issue, some health policy experts believe that the health insurance marketplace could be structured so that both public and private health plans compete on a level playing field. See "A Modest Proposal for a Competing Public Health Plan" by Len M. Nichols and John M. Bertko of the New American Foundation (2008).

At a minimum, it would require that all rules apply equally, i.e., benefit package requirements, insurance regulations and pricing for risk adjustment. There is some precedent for this in other areas of the economy (e.g., federal flood insurance and private homeowners insurance; high risk state insurance pools). A level playing field would also require both providers and payers to seriously address the issue of cost containment, once and for all. By using the most modern health information technology, clinically proven "best practices" and other protocols, as well as incentives for patients to achieve and maintain good health care, it is not unreasonable to argue that the United States could re-allocate what it currently spends on health care to cover virtually all Americans without the need for burdensome taxes or rationing. Like any issue of this importance, there will always be winners and losers no matter how the health reform debate concludes. Those who oppose the co-existence of public and private plans in principle would do better to direct their criticism toward any proposal that fails to address the underlying causes of our health care dilemma.

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On April 8, 2009, President Obama signed an executive order establishing a White House Office of Health Reform (OHR) that will spearhead the Obama Administration's policy agenda for health care. The principal functions of the OHR include providing leadership for and coordinating the development of the Administration's agenda; working with Congress, various executive departments and agencies, and State, local and community policymakers and public officials; and monitoring the implementation of the agenda.  If requested by the OHR Director, executive departments and agencies are required to designate a liaison to work with the OHR.

The executive order also requires the Secretary of Health and Human Services to establish its own Office of Health Reform within the Department of Health and Human Services to coordinate closely with its White House counterpart.

President Obama has appointed Nancy Ann Min DeParle as the first Director of the OHR. During the Clinton Administration, DeParle served as the Associate Director for Health and Personnel at the White House Office of Management and Budget and as the Administrator of the Health Care Financing Administration, which is now the Centers for Medicare and Medicaid. Before joining the Clinton Administration, she served as the Tennessee Commissioner of Human Services and worked as a lawyer for a law firm in Tennessee. Since leaving the Clinton Administration, DeParle is reported to have served on the board of directors of various medical device companies, such as Boston Scientific and MedCo.

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Any health insurance company or health insuring corporation (“HIC”) doing business in the State of Ohio must report significant changes to their provider networks to the Ohio Department of Insurance, according to the Insurance Bulletin 2009-01 issued by the Ohio Department of Insurance on January 20, 2009.

More specifically, the Bulletin requires that at least fifteen (15) days prior to contacting policyholders about the expiration of a contract with a hospital or major physician group, health insurers and HICs must provide to the Department’s Office of Risk Assessment a written submission including the following: (1) the process and procedures by which subscribers or insureds and any affected participating providers will be notified of any impending contract termination and resulting changes in the health plan provider network, including providing to the Department copies of written or electronic communications, such as letters to be sent to subscribers or insureds and any affected participating providers notifying them of the impending change in network; (2) the options and rights, including all continuity of care provisions, to be provided to subscribers or insureds; and (3) all company contacts for information and assistance, including telephone numbers and e-mail addresses, to be provided to subscribers or insureds and any affected participating providers.

“Major physician group” means a physician group that provides services to a large population of the health insurer's or HIC’s membership in a specific geographic area and/or that receives a substantial portion of its reimbursement from the health insurer or HIC.   

Health insurers and HICs may comply with this Bulletin by annually submitting the documentation described above and subsequently providing the required 15 day notice, including written confirmation that the documentation previously filed will be sent to subscribers or insureds and any affected participating providers. 

Before the Bulletin, insurers and HICs were not required to notify the Department of any change to its provider network and often shift the burden of notifying policyholders of termination of provider agreements onto participating providers. Providers find it impossible to comply with such requirements because they do not necessarily know who the policyholders are. Also, complying with such requirement means higher administrative costs to providers. Providers often do not have the staff or software to handle such tasks.

The Bulletin has changed such practices. It not only requires health insurers and HICs to notify the Department of termination of a hospital or major physician group, but expressly requires that the insurers and HICs notify subscribers and insureds and participating providers impacted by the change of provider networks. Also, the Bulletin is not limited to just termination, but also expiration of provider agreements. 

However, the Bulletin fell short of some necessary clarity. Despite the definition of “major physician group,” it is not clear whether any particular physician group falls within the definition as a health insurer and HIC would not know for sure whether any particular group has received a substantial portion of its reimbursement from the health insurer or HIC.

Further, the Bulletin excludes Medicaid managed care plans (in addition to supplemental or specialty health care services only providers), but not Medicare managed care plans. So, it is unclear whether any insurer or HIC that offers Medicare managed care plans will be required to comply with the Bulletin.

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On October 3, 2008, Congress passed and President Bush signed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 as part of the Emergency Economic Stabilization Act of 2008 (the bailout bill).  It amends the Mental Health Parity Act of 1996 (29 U.S.C.A. § 1185a). 

According to the new legislation, if an employer’s group health plan provides mental health and substance use disorder benefits (“mental health benefits”), then it may not discriminate in its coverage between those benefits and the medical and surgical benefits.   The plan may not have higher deductibles, copayments, coinsurance, or out-of-pocket expenses for mental health services.  Neither may the plan have more restrictive treatment limitations, such as limitations on the frequency of treatment, number of visits, days of coverage, or other limits on the scope or duration of treatment.  Also, if the plan provides coverage for medical and surgical benefits provided by out-of-network providers, then it must similarly cover mental health benefits provided by the out-of-network providers.  The law applies to employers health plans with more than 50 enrolled employees.

Congress had previously tried to pass this legislation on multiple occasions in 2007 and 2008, but had yet to overcome disagreements between the House and Senate versions, partly revolving around paying for the costs of the legislation.  In the end, the new legislation contains no provision to directly pay the estimated $3.4 billion dollar cost of the new legislation.  In the context of a $700,000,000,000 bailout, however, Congress was apparently no longer concerned.

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Ohio HealthCare Simplification Act creates a new Chapter 3963 in Ohio Revised Code.  ORC 3963.04 is the provision governing material amendments to a health care contract.  Under ORC 3963.04, if an amendment to a health care contract is not a material amendment, the contracting entity is only required to give providers a notice of amendment at least 15 days prior to the effective date of the amendment.   

For a material amendment, the contracting entity must provide the participating provider the material amendment in writing at least 90 days prior to the effective date of the material amendment. The notice shall be conspicuously entitled “Notice of Material Amendment to Contract.” 

The provider must object within 15 days if it does not accept the material amendment. If the parties cannot resolve the objection, either party may terminate the health care contract.  If the participating provider does not object to the material amendment in the manner described above, the material amendment shall be effective. 

The issue is whether the material amendment will become effective if the parties cannot reach a resolution on the provider’s objection. 

Some payors have taken the position that if the parties cannot resolve their differences, the proposed material amendment becomes effective.  

This has caused confusion to some providers. In some cases, it has even taken away the benefit of providers' original contract provision.  Nor is it clear if this interpretation is consistent with the legislative intent of ORC 3963.04.   Many in the industry agree that this issue would benefit from clarification from the Ohio Department of Insurance.

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An interesting Government Accountability Office report was posted recently regarding the problems that CMS and the SSA (Social Security Administration) have had with implementing systems to withhold Medicare Advantage ("MA") and Part D Plan ("PDP") premiums from social security checks. 

Amidst a chronicling of the difficulties and problems encountered, and the efforts of the government to address them, are the executive recommendations.  One of the GAO's suggestions is that CMS consider allowing plans to bill beneficiaries directly until the premium withholdings are processed.  If this suggestion is implemented, it could have a significant impact on managed care providers operating MA or PDP plans.

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As many of you know, the Healthcare Simplification Act, one of the most significant managed-care laws in Ohio’s recent history, went into effect on June 25. From a legal perspective, this law is particularly significant because of the degree to which it directly affects the provider/payor contract terms, an area Ohio has previously been hesitant to legislate. 

The next step in the development of this law is for the Ohio Department of Insurance (“ODI”) to issue rules and regulations to address the questions and fill in some of the details under the new law.  ODI’s website has a page dedicated to the Healthcare Simplification Act, where you can link to the law, submit questions and suggestions for rule-making, and it even has a FAQ section where ODI answers common questions. If you are dealing with a Simplification Act issue, it is worth checking out here.

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A recent story from Healthcare IT News presents an interesting intersection between the managed care and health information technology areas.  New Jersey's Horizon Blue Cross is apparently providing funding for electronic medical record implementation in network hospitals.  

For those of you thinking on a national scale, EMRs for eight hospitals may be a relatively small step, but one that may foreshadow more intriguing possibilities.  After all, who else has as much to gain from, and is in a better position to support electronic health information exchange, as the payors?  Not to mention the impact that a program like that could have on payor contract negotiations.

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