Health Care Reform Implementation Update - March 2014

by Cozen O'Connor

On Sunday, the Affordable Care Act (ACA) turned four. Unsurprisingly, Democrats celebrated the law’s birthday by touting its many successes and Republicans used it to highlight the problems the law has faced, as well as caused. The Department of Health and Human Services (HHS) extended the ACA’s hardship exemption until 2016; an Office of Management and Budget (OMB) report effectively exempted exchange subsidies from sequestration; and the White House announced that it will continue the federally run Pre-Existing Condition Insurance Plan (PCIP) program for one extra month. Additionally, though significant work has been done over the past few weeks and months to find a way to permanently repeal the Sustainable Growth Rate (SGR), on March 25 the Senate Finance Committee and House Ways and Means Committee advanced a bill that would provide a short-term fix to Medicare provider payment rates through March of 2015, which will prevent doctors who treat Medicare patients from having their payments cut as scheduled for Tuesday April 1, 2014.


On March 26, following negotiations between House Speaker John Boehner and Senate Majority Leader Harry Reid, the House advanced a bill that would temporarily fix the SGR cuts to Medicare providers. Importantly, the bill prevents the 24% cut in reimbursement that would have gone into effect for doctors who treat Medicare patients this coming Tuesday. Congressional leaders say they will continue to work towards a permanent fix for the SGR.

On March 18, leaders of the House Ways and Means and Senate Finance committees released a bipartisan discussion draft that seeks to improve Medicare payments to providers caring for Medicare enrollees who are recovering from injuries and acute illnesses. The "Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014" would require standardized data allowing Medicare to compare the quality of care among different settings and use that information to reform the payment system and specifically would affect long-term care hospitals, skilled nursing facilities, home health agencies and rehabilitation services.

The House passed a few other bills last week that would make certain changes to the Affordable Care Act. TheEquitable Access to Care and Health (EACH) Act, championed by Rep. Aaron Schock (R-Ill.), passed the House. The bill would expand the ACA’s religious conscience exemption, excusing individuals from the individual mandate if they affirm on their tax returns that “sincerely held religious beliefs” would cause them to object to medical health care that would be covered under such coverage.

The House also passed the Hire More Heroes Act of 2013, which was offered by Rep. Rodney Davis (R-Ill.). The legislation would ensure that veterans who already receive medical care through the TRICARE program, the health care program of the U.S. Department of Defense Military Health System, would not be counted towards the 50-person threshold for requiring an employer to provide health insurance to his or her employees.

Finally Rep. Lou Barletta (R-Pa.) introduced the Protecting Volunteer Firefighters and Emergency Responders Act of 2014, which passed unanimously in the House. In an effort to avoid placing an undue cost burden on organizations like volunteer fire departments, the bill would exempt emergency service volunteers from being counted as employees for purposes of the ACA.

The House Ways and Means Committee held a hearing on the president’s FY 2015 budget for HHS. In his opening statement, Chairman Dave Camp (R-Mich.) questioned Secretary Kathleen Sebelius on the cost of the ACA overall, the cost incurred by the inefficient roll-out of the ACA exchange websites, and the number of individuals that have actually made payment towards their ACA exchange health coverage. Secretary Sebelius reported that health care premiums are likely to go up, but she expects that they will be “smaller than we’ve seen prior to the passage of the Affordable Care Act.”

The Medicare Payment Advisory Commission (MedPAC), the independent body that advises Congress on issues affecting the Medicare program, released one of its biannual reports to Congress. The Commission made specific recommendations on payments for hospital inpatient and outpatient services, ambulatory surgical center services, outpatient dialysis services, post-acute care providers, skilled nursing facilities, home health care services, inpatient rehabilitation facility services, long-term care hospital services, hospice services and the Medicare Advantage program.

The Medicaid and Children’s Health Insurance Program (CHIP) Payment and Access Commission (MACPAC), the non-partisan federal agency charged with providing policy and data analysis to the Congress on Medicaid and CHIP, also released one of its biannual reports to Congress. The commission made specific recommendations on pregnancy coverage under the ACA, children’s coverage under CHIP and exchange plans, and Medicaid non-disproportionate share hospital supplemental payments.


On March 5, HHS released a technical bulletin, buried at the end of which was a further delay to the individual mandate’s hardship exemption. There is a paragraph within the bulletin that notes that a delay in enforcement of the individual mandate included in a separate December 2013 bulletin would be extended for two additional years until 2016. The rule allows Americans whose coverage was cancelled to opt out of the individual mandate until 2016.

On March 11, CMS released a final rule, the HHS Notice of Benefit and Payment Parameters for 2015, in which it says: “We intended to propose standardized methodologies to take into account the special circumstances of issuers associated with the initial open enrollment and other changes to the market in 2014, including incurred costs due to technical problems during the launch of the state and federal exchanges.” Though not much more detail was provided on the topic, many have interpreted the rule to signal that the ACA’s Medical Loss Ratio (MLR) provisions will be relaxed. The MLR provision of the ACA required health plans to spend at least 80 percent of premiums on providing medical care. The change in this rule is likely due to insurance company concerns that they have faced and will continue to face increased administrative costs for 2014 due to technological problems and last-minute administrative changes.

On March 14, CMS published a proposed rule, the Exchange Insurance Market Standards rule, which addresses several mostly unrelated issues that involve the exchanges or the ACA’s insurance market reforms. More specifically, the rule proposes standards related to quality reporting, non-discrimination, minimum certification and responsibilities of qualified health plan (QHP) issuers, the Small Business health Options Program, and enforcement remedies in federally facilitated exchanges.

On March 7, CMS released a final rule on the ACA’s Basic Health Program (Section 1331 of the ACA) as well as its methodology for funding it for 2015. The Basic Health Program provides a bridge between the ACA’s expanded Medicaid program and exchange coverage by giving states the option of establishing a Medicaid-like choice for people with incomes too high for the Medicaid expansion but in the lowest income bracket of those on the exchanges. The rule finalizes a proposal to provide funding for states that want to take up the program in 2015.

On March 10, in response to pressure from Congress and various stakeholders, CMS announced that it will not be making some proposed changes to Medicare Advantage and the Medicare Part D program (the Medicare drug benefit program) that the department was considering. CMS had proposed eliminating three drug classes from protected class status (antidepressant, antipsychotic and immunosuppressant). There was widespread concern that eliminating this protected class status could force providers to alter their treatment regimens. The rollback of these changes means that Medicare will continue to require insurers to cover nearly all medications in six classes of drugs and quickly produced praise from many health care groups.

HHS reported that ACA insurance plans have now enrolled about 5 million people. The rate of enrollment in February was not significantly stronger than the January enrollment rate and the administration’s new goal of 6 million enrollees by March 31 will be hard to obtain with only two weeks to go. The administration stated they had “no plans” to extend the enrollment period. First Lady Michelle Obama is working on an initiative to reach out to mothers and encourage them to put pressure on their young adult children to sign up under the exchanges. Healthy young adult enrollees are a key demographic for the successful implementation of the ACA.

Though CMS has named Hewlett-Packard Co. as the replacement for the current host of, Terremark, on March 7 CMS announced that it would extend Terremark’s contract to ensure a smooth transition through the end of open enrollment.


On March 25, the Obama administration said it will extend the open enrollment deadline of March 31 for those who tried to sign up for health insurance but had trouble completing the enrollment process.

Among the items included in a report from the Office of Management and Budget (OMB) detailing the impact on sequestration (the across-the board cuts that arose from the Budget Control Act of 2011), was an exemption from sequestration for 2015 for the ACA’s exchange subsidies. These subsidies reduce the maximum costs that ACA enrollees with household income levels below 250 percent of the federal poverty level pay out-of-pocket for insurance co-payments. The change adds about $560 million to the cost of administering the exchanges.

The Obama administration announced that it will continue the federally run Pre-Existing Condition Insurance Plan (PCIP) (a type of health insurance offered to those who are uninsured and who have been unable to obtain coverage due to a pre-existing health condition) for one extra month, allowing individuals who have not yet found new health insurance through the exchanges to be enrolled in the PCIP through April 30, 2014.


On March 25, the Supreme Court heard oral arguments on the ACA’s requirement that most employers provide contraception in their company health plans. Hobby Lobby and Conestoga Wood argued that providing certain contraceptives required by the ACA violate their religious beliefs and argued further that for-profit businesses can exercise religious rights. The Obama administration is challenging these claims. Though we do not yet know how the justices will rule on the matter, the questions they asked yesterday indicate to many that there is a real possibility that the Supreme Court may decide businesses cannot be required to provide birth control if doing so violates their strongly held religious beliefs.


Florida’s special election race for Florida’s 13th District involved campaigning from both sides on the Affordable Care Act. Republican David Jolly’s win over Democrat Alex Sink was seen by many as a victory for those who oppose the Affordable Care Act. As a result, many Democrats are increasingly worried about their own races in this year’s upcoming elections and are reevaluating how much support or opposition to express for the Affordable Care Act.

California is still the lead in enrollee numbers for Obamacare and has enrolled twice as many people as the next closest state for a total of 868,000. Massachusetts and Nevada, which both had trouble with their initial state run exchange roll-outs, also saw enrollment rates increase for the month of February.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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