Health Care Reform Implementation Update

by Cozen O'Connor

This week, the Centers for Medicare and Medicaid Services (CMS) announced that in May Jonathan Blum would be leaving his post as Deputy Administrator for CMS and Danielle Moon who leads CMS’ Medicare Advantage division would be leaving as well. Though Congress has been recess, the wheels of the Affordable Care Act (ACA) continued to turn this past week. On April 21, Senator Ron Johnson (R-Wis.) filed a lawsuit against the Obama administration’s decision to subsidize congressional staff insurance premiums, the Government Accountability Office (GAO) released a report regarding Kathleen Sebelius’s fundraising activities for Enroll America, and the Obama administration announced another enrollment extension for individuals participating in the Pre-Existing Condition Insurance Plan (PCIP). Also this week, Oregon said it would abandon its state-run online exchange marketplace, the American Hospital Association (AHA) asked CMS’s Innovation Center to modify the Medicare Shared Savings Program (MSSP), and on April 21 America’s Health Insurance Plans (AHIP) submitted a letter CMS in response to a rule regarding the risk corridors program. 


On April 21, Senator Ron Johnson (R-Wis.) and 38 Republican congressional members filed a lawsuit against the Obama administration regarding an Office of Personnel Management (OPM) decision regarding employee contributions to congressional staff health care. The lawsuit was filed in Wisconsin federal court and claims that OPM is giving “special privileges” to congressional staffers by allowing them to receive federal subsidies to assist with the costs these staffers will now accrue enrolling in ACA exchanges. The lawsuit also claims that OPM violated the law by allowing staffers to obtain health care through the Small Business Health Options (SHOP) exchanges. The U.S. Department of Justice is requesting that the lawsuit be dismissed on the grounds that Senator Johnson is not being “directly injured” by OPM’s decision.


On April 22, CMS announced that Jonathan Blum, CMS’s Principal Deputy Administrator, will be leaving his post. Blum’s last date on the job is May 16. Blum joined CMS in 2009 and oversaw major reforms in the Medicare program, including those related to the Medicare prescription drug benefit and the development of accountable care organizations (ACOs). It has not been announced where he is going next. Sean Cavanaugh, the current Deputy Director at the Centers for Medicare and Medicaid Innovation (CMMI), will take Blum’s position. 

On April 25, Danielle Moon, the head of the Medicare Advantage program at CMS, also announced that she would be leaving her post at the end of May. Kathryn Coleman, the current Deputy Director of the Medicare Drug & Health Plan Contract Administration Group, will become the Acting Director of CMS’s Medicare Advantage program after Moon’s departure.

On April 21, the Government Accountability Office (GAO) released a report on Kathleen Sebelius’s efforts to raise funds for Enroll America, a private nonprofit organization created to assist individuals with enrolling for health coverage under the ACA. The report found that the soon-to-be-departing Secretary of Health and Human Services (HHS) had contacted chief executive officers of five corporations and asked them to provide financial support to the nonprofit. Before contacting the executives, Sebelius sought guidance from HHS’s Office of the General Counsel, which concluded that HHS officials are permitted to encourage the public to support certain organizations assisting with ACA enrollment. GAO itself did not analyze the legality of Sebelius’s actions.


On April 24, the Obama administration announced that it would extend the enrollment period for individuals that participate in the Pre-Existing Condition Insurance Plan (PCIP) program to June 30. The PCIP program was designed as a temporary program for individuals that had been rejected by insurers due to their pre-existing conditions. ThePCIP is being discontinued due to rules in the ACA that went into effect January 1, 2014, which prohibit insurers from denying coverage based on an individual’s medical record. The PCIP had been slated to end on December 31, 2013, but has been extended three times. The administration now says that PCIP benefits will expire on April 30 and that anyone who enrolls in an exchange plan by June 30 will have his or her benefits retroactively effective from May 1.  The Obama administration has expressed that patients in the PCIP are the most “vulnerable” and therefore deserve special consideration.


Oregon’s chief information officer, Alex Pettit, recommended that the state close its online ACA exchange and join the exchange marketplace managed by the federal government. Oregon’s state run exchange has been plagued by technical issues since its inception.

Utah Governor Gary Herbert announced that Medicaid expansion talks are “moving forward” with the Obama administration. Governor Herbert attended a meeting at the White House on April 17 and continues to pursue his private-sector plan for Medicaid expansion. This three-year “pilot program” would include lump-sum payments from the federal government for low-income Utah residents.

Hawaii extended the period for its citizens to enroll through the state ACA online exchange until April 30.

Idaho and New Mexico are the only two states that used the federal online marketplaces this year that are currently planning to set up their own online exchange marketplaces for the next open enrollment period. 

The success of the Small Business Health Options (SHOP) plans created by the ACA varies in state exchanges across the country. Connecticut’s SHOP plans have only attracted 78 small businesses and will only cover 330 people. Connecticut exchange officials have attributed these small numbers to poor management by the company contracted to handle the state exchanges and the seemingly high cost of the plans. Rhode Island, on the other hand, has reported an overall success for its SHOP plans, and officials there tout their early marketing efforts and robust support for these plans as the reasons for success.

In Kansas last week Governor Sam Brownback (R) signed into law a measure that would require the state legislature to approve any Medicaid expansion.  The Kansas state legislature has ended its regular session for the year and therefore any Medicaid expansion could not be approved until sometime in 2015.  


On April 21, America’s Health Insurance Plans (AHIP) filed a comment letter in response to a CMS final rule regarding CMS’s risk corridors program. The program is funded through risk corridor collections from qualified health plans. CMS announced earlier this year that the risk corridors program would be budget neutral, meaning that payments to health plans through the program would be limited by incoming collections. Last November, the Obama administration also announced a transitional policy that permits health plans that do not meet ACA requirements to continue to be sold until 2017. In the letter, AHIP commented that the transitional policy will result in lower enrollment in exchanges and lead to adverse selection. Because of the additional risk faced by exchange plans, AHIP commented that additional relief should be provided to these plans by way of a risk corridors program that is not constrained by a budget neutrality requirement.

The American Hospital Association (AHA) asked CMS’s Innovation Center to modify the MSSP so that more ACOs can receive bonuses. In the letter, dated April 17, the AHA commented that the financial risks for hospitals participating in the MSSP outweighed the financial incentives. It stated that more hospitals would participate if CMS made modifications. Under the current configuration of the program, ACOs contract with CMS to decrease health care expenditures and increase the quality of care provided. If successful, the ACOs receive a share of the savings. Some ACOs also contract to be at risk for losses, and as an incentive these ACOs receive larger bonuses if spending is below certain benchmarks. As part of its requested modifications, the AHA asked CMS to change the time period for which ACOs would not be required to be at risk from three to six years and to delay penalizing ACOs that increase rather than decrease expenditures. The AHA also noted that CMS has had problems providing data to ACOs that could be used to better manage patient care. Finally, the AHA commented that changes are needed to the Pioneer ACO program so that more providers participate. 

On a related note, an article published this week in the Journal of the American Medical Association similarly concludes that certain changes to the ACO program may be necessary to provide productive incentives to participants and to ensure ACOs can improve care efficiency. One of the authors, Dr. Michael Chernew, is the second in command at the Medicare Payment Advisory Commission (MedPAC).

The National Alliance of State Health CO-OPs (NASHCO) reported that more than 400,000 people have enrolled in the ACA-established Consumer Operated and Oriented Plans (CO-OP) Program. The CO-OP Program was intended to foster the creation of qualified nonprofit health insurance issuers to offer competitive health plans in the individual and small group markets. According to NASHCO, these numbers illustrate “that CO-OPs are indeed making a real impact on health insurance marketplaces in their states.”

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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