Manatt on Health Reform: Weekly Highlights - February 2016 #2

Manatt, Phelps & Phillips, LLP

CMS details requirements for Kentucky's transition to; a new special enrollment period is established for subsidy-eligible individuals who failed to file their 2014 taxes; and President Obama sends his final budget proposal to Congress.


16 Million Fewer Individuals Are Uninsured Nationwide; Several States See Significant Reductions in Uninsured Rates

The national uninsurance rate decreased from 14.4% in 2013 to 9.1% in 2015, a difference of 16 million individuals, according to a report from the Center for Disease Prevention and Control's National Center for Health Statistics. In Medicaid expansion states, the uninsurance rate decreased from 18.4% to 10.0%, compared to 22.7% in 2013 to 17.3% in 2015 in non-expansion states. Of the eight states with the most significant drops in their uninsurance rates between 2013 and 2015, all but one—Florida—opted to expand Medicaid under the Affordable Care Act. The greatest decrease in uninsurance was in Kentucky (6.5 percentage points), where Governor Matt Bevin (R) is currently taking steps to replace the State's Medicaid expansion program with an alternative model requiring a federal waiver and to dismantle the State-based Marketplace, through which Kentucky residents can sign up for Medicaid. Arizona's 5.9-percentage-point decrease was the second largest.

Obama's Final Budget Proposal Includes Funds for Expansion, Aims to Soften Impact of "Cadillac Tax"

Among the many initiatives covered in President Obama's $4.1 trillion budget proposal presented to Congress today is the provision of three years of enhanced federal funding to non-expansion states for the cost of expanding Medicaid regardless of when a state takes up the option. Under current law, funding for Medicaid expansion will be reduced to 95% in 2017 and will phase down to 90% by 2020 for all states. The proposed budget would also change the threshold for the so-called "Cadillac tax" (the excise tax on high-cost employer-sponsored insurance) to target employer plans with higher costs than the law's current threshold, though Congress postponed implementation of the tax in December until 2020. Additionally, the Government Accountability Office would be required to investigate the impact of the tax on companies with a large number of sick employees. The budget plan also has an "aggressive reform agenda" to change how doctors and hospitals are paid, which the White House says would save more than $180 billion over 10 years. Other proposed budget items include extending CHIP through 2019, allowing Medicaid providers to negotiate prices for certain high-cost drugs, and allowing competitive bidding for medical equipment.

No Evidence of Negative Economic Impact of ACA, New Report Finds

A review of the Affordable Care Act's (ACA) impact on the United States economy over the last five years found no evidence that the ACA had a negative effect on economic growth or employment, and that the ACA likely acted as an economic stimulus, according to The Commonwealth Fund. Compared to March 2010 when the ACA passed, 13.4 million more people were employed in December 2015, almost all in full-time private sector jobs. In terms of change in gross domestic product, the nation's economy grew by 21% in that same timeframe and inflation-adjusted cumulative "real" growth exceeded 13% by the third quarter of 2015. According to the report, growth in per person public and private healthcare spending slowed consistently for five years, leading to downward revisions of the projected federal deficit. The authors flag that without targeted efforts to sustain slowed spending growth, these trends could be reversed, particularly by rising drug costs and higher prices caused provider and insurer consolidations.

Massachusetts: State Releases Draft 1332 Waiver Application

The Massachusetts Health Connector, Massachusetts's State-based Marketplace, released its draft proposal for a 1332 waiver that would permit small group insurance to be sold with quarterly premium rate setting and non-calendar-year plan years, while preserving the State's merged individual and small group market risk pools. The State argues that without the waiver it would be required to make changes that would destabilize the market. The proposal is open to public comment through March 4.

Washington: Insurance Commissioner Reports on Decreases in Uninsured Rate and Uncompensated Care Costs

According to an Office of the Insurance Commissioner report, more than 300,000 residents have gained coverage under the Affordable Care Act, dropping the uninsured rate from 14.5% in 2012 to an estimated 7.3% in 2015. Insurance Commissioner Mike Kreidler touts federal reforms—such as premium tax credits and the ability for young adults to stay on their parents' health plans up to age 26—and the State's decisions to implement a State-based Marketplace and expand Medicaid as instrumental to increasing coverage rates. Additionally, the State's uncompensated care costs have dropped by almost half, from $2.35 billion in 2013 to $1.2 billion in 2014. The Commissioner notes that challenges persist, including the rising costs of prescription drugs and increasing out-of-pocket costs.


CMS Announces New Special Enrollment Period for Failure to Reconcile 2014 Tax Credits

CMS created a new special enrollment period (SEP) for individuals who did not enroll in 2016 Marketplace coverage because they were determined ineligible for federal premium tax subsidies by for failure to file 2014 tax returns. To be eligible for the new SEP, individuals must file a 2014 tax return, reconcile any advanced premium tax credits received for that year, and attest to doing so on Eligible individuals must not currently be enrolled in coverage but they must have previously attempted to enroll for 2016. The SEP runs from February 1 to March 31. CMS recently eliminated six SEPs in response to insurers' concerns over SEP enrollees' eligibility and selection.

12.7 Million Individuals Enrolled in 2016 Marketplace Coverage

Approximately 12.7 million individuals selected a plan for 2016 coverage through the State and Federal Marketplaces before the close of open enrollment on January 31, 2016, according to the Department of Health and Human Services (HHS). Of those 12.7 million, approximately 9.6 million enrolled through, while 3.1 million enrolled through a State-based Marketplace. An additional 400,000 individuals signed up for New York's Basic Health Program (BHP) and 33,000 signed up for Minnesota's. (BHPs provide coverage to low income individuals who would otherwise be eligible to purchase qualified health plans on the Marketplaces.) Four million of the enrollees are new, and of the 5.6 million who re-enrolled, nearly 70% (3.9 million) selected a new plan and 30% (1.7 million) were automatically reenrolled. While total enrollment numbers have been revised downwards in previous years, coverage cancellations were tracked in real-time for the first time this year, making downward revisions less likely.

Kentucky: CMS Details Requirements for Transition to

CMS sent Governor Matt Bevin (R) a letter detailing the immediate steps his administration must take in order to shut down kynect, the State-based Marketplace, and transition its approximate 81,000 customers to The State must facilitate conversations with kynect's insurers to assure they understand the transition process and the requirements for selling on, including the 3.5% issuer fee. The State must also produce a detailed plan for how kynect will continue to meet its legal and regulatory obligations through the end of 2016, including how it will maintain the ability to process enrollees' changes in circumstances or special enrollment period sign-ups. Kentucky must also build a new system that will send and accept application transfers between the State's Medicaid/CHIP system and, and must ensure individuals can apply for Medicaid directly to the State. Kentucky may not use its remaining $57.5 million in CMS establishment grant funding to finance the transition.

Oregon and Alaska: Moda Health Returns to the Marketplace Two Weeks After Exit

Moda Health Plan (MHP) will resume selling and renewing policies in Oregon and Alaska after the Oregon Department of Consumer and Business Services (DCBS) and Alaska's Division of Insurance (DOI) lifted their January 27 supervision orders. MHP must take specific steps to raise capital and stabilize its financial position, including: set aside $15 million to protect Alaska policyholders if MHP were to fail (no measure is required in Oregon because the State has the ability to seize MHP assets if needed); sell a portion of money owed to MHP by the federal government; sell assets, including those owned by its parent company Moda, Inc.; and borrow money by issuing surplus notes. DCBS approval will also be required for increases to executive compensation. Enrollees' premiums, cost-sharing, and benefits will remain the same and DOI will ask the federal government for a special 10-day open enrollment period for Alaskans affected by MHP's suspension. Alaska's individual Marketplace would have had only one insurer issuing new policies if MHP's supervision order had been maintained, and MHP is the third largest insurer in Oregon.


New Hampshire: Governor Points to Medicaid Expansion as Lever to Address Heroin and Opioid Crisis

In her final State of the State address, Governor Maggie Hassan (D) urged lawmakers to reauthorize the State's Medicaid expansion program past its current December 31, 2016 end date, citing its positive impact on the State's economy, public health, and capacity to deliver substance abuse and behavioral health treatment to combat the State's heroin and opioid crisis. The Governor deemed the crisis "the most urgent public health and public safety challenge facing New Hampshire" and called Medicaid expansion an essential tool in the State's comprehensive approach to addressing it. Since New Hampshire's Medicaid expansion went into effect in April 2014, 46,000 residents have received coverage under the program, including thousands who have obtained substance abuse and behavioral health services. A bill to continue expansion through 2018 was approved by the House's health committee and is now headed to the House Finance Committee. If the bill makes it out of committee, Senate passage is all but ensured, according to the New Hampshire Union Leader.

New Mexico: Study Finds Medicaid Expansion Is "Paying for Itself"

A report by the University of New Mexico Bureau of Business and Economic Research (BBER) updating a 2012 analysis finds that the State's Medicaid expansion costs are offset by increased revenue and economic gains, and that the program will have a projected total surplus of more than $300 million between fiscal years 2014 and 2020. The analysis considered current and projected enrollment, federal revenue, changes in federal and State uncompensated care programs, and current and projected economic impact of expansion. The study projects deficits from expansion of $21 million in fiscal year 2020 and $51 million in 2021, though the author notes that the study used conservative revenue estimates. In 2014, New Mexico's Medicaid expenditures totaled $4.2 billion.


Arkansas: Governor Names New Director of Human Services

Governor Asa Hutchinson (R) named Cindy Gillespie, previously the healthcare advisor to former Massachusetts Governor Mitt Romney (R), as the new director of the Department of Human Services (DHS) effective March 1, 2016. Gillespie will replace current DHS Director, John Selig, who announced his resignation in October.


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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