Manatt on Health Reform: Weekly Highlights - September 2016 #3

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

Study finds that Marketplace premiums are lower than employer-based premiums, even without federal subsidies; New York regulators move to shield insurers from outsized federal risk adjustment payments; and Missouri will seek CMS approval to charge Medicaid enrollees for missed appointments.


Unsubsidized Marketplace Premiums Are Lower Than Employer-Based Premiums, Study Finds

Unsubsidized premiums for Marketplace benchmark plans (the second-lowest-cost silver plan for single coverage) were lower than average premiums for employer-sponsored insurance (ESI) (single coverage) in more than 75% of states and more than 80% of metropolitan areas studied in a new Urban Institute report. The national average benchmark premium was 10% lower than the national average ESI premium after adjustments were made to Marketplace premiums for actuarial value (AV), AV’s estimated impact on utilization and age distribution. Half of states’ Marketplace premiums were lower than their average ESI premium by double-digit percentages. Only four of the 32 large metropolitan areas studied had higher benchmark premiums than their average ESI premium, and in 14 of the 32 metropolitan areas, Marketplace premiums were at least 20% lower than the corresponding ESI premiums. The authors note that Marketplace plans may have narrower provider networks and that some Marketplace insurers may have initially underpriced their products.

Marketplace Enrollment Associated With Lower Out-of-Pocket Spending, Report Finds

A new Commonwealth Fund report comparing changes in out-of-pocket (OOP) spending between states with high Marketplace enrollment and states with low Marketplace enrollment found that states with the largest increases in Marketplace enrollment from 2013 to 2014 (measured as a share of the adult population) had the largest decreases in OOP spending. Marketplace enrollment was associated with an approximately two-percentage-point decline in the share of Americans spending more than $500 on OOP expenses and a one-percentage-point decline for those spending more than $2,000 on OOP expenses. Individuals earning between 250% and 399% of FPL saw the greatest percentage reductions in their OOP spending between 2013 and 2014. The authors cite Marketplace subsidies and cost-sharing protections as the reason for reduced OOP and premium spending for Marketplace enrollees.

GAO Undercover Testing Suggests Marketplaces Vulnerable to Fraud

Undercover testing by the Government Accountability Office (GAO) indicated that federal and selected State-based Marketplaces’ eligibility and enrollment processes were vulnerable to fraud in coverage years 2015 and 2016. The Marketplaces approved subsidized coverage for 17 of 18 fictitious applicants created by GAO in 2015, eight of whom initially applied for Medicaid coverage. In 2016 testing, the Marketplaces approved subsidized coverage for all 15 fictitious applications, though coverage for three was not effectuated due to lack of payment. GAO notes that 2016 was the first year applicants who previously received a federal subsidy were required to file a federal tax return and reconcile advanced premium tax credits in order to retain their subsidies. Four of the test applicants approved for 2016 subsidies had been approved for subsidies during 2014 testing and had not filed a 2014 tax return. Marketplace officials told GAO that they allowed applicants to attest to filing their taxes due to the time lag between tax filing and when filings are reflected in the IRS system. To better protect enrollees, CMS said it is in the midst of implementing new procedures to recheck 2014 tax-filing status, send notifications to individuals who have not filed taxes, and conduct a final review of 2014 tax-filing status to end subsidies for applicants who have not filed a 2014 return. CMS anticipates completing this process by October 2016.

Five National Surveys Find QHP Enrollees Satisfied With Their Coverage and Provider Choice

Most qualified health plan (QHP) enrollees were satisfied overall with their coverage and choice of providers between 2014 and 2016, according to a Government Accountability Office (GAO) review of five national surveys. One national survey found that in 2016, 74% of QHP enrollees were satisfied with their choice of primary care doctor and 59% were satisfied with their choice of specialists. Approximately half or more of QHP enrollees surveyed also reported satisfaction with their plan’s affordability, though some found their out-of-pocket costs too expensive. GAO also concluded that cost was a major driving factor in QHP enrollees’ plan selection, citing the popularity of high-deductible plans and an analysis by the U.S. Department of Health and Human Services that found enrollees tended to select QHPs with the lowest premiums among offerings with similar coverage levels. Only half of QHP enrollees surveyed in 2015 had a good understanding of their plan benefits and total coverage costs at the time of enrollment, according to one national survey, which GAO says may be attributed to enrollees being previously uninsured. The GAO report also documents how CMS and states monitor the post-enrollment consumer experience through call centers and assisters, noting that CMS conducts weekly and monthly case examinations.

Arkansas: Marketplace Committee Endorses Plan to Charge Carrier Fee

Arkansas’s Marketplace Legislative Oversight Committee endorsed the Marketplace Board's plan to charge carriers a 3% fee on premiums as part of the transition from a State Partnership Marketplace (SPM) to a State-based Marketplace on the Federal Platform (SBM-FP), which is lower than the 3.5% currently in place. The State’s new carrier fee will replace the current 3.5% federal assessment imposed on carriers as part of the State’s designation as an SPM. The new fee will fund Marketplace operations (1.5%) and the federal assessment on plan premiums (1.5%) charged to SBM-FP states for use of the eligibility and enrollment platform. The Marketplace notified insurers in an August 19 letter that it will begin collecting the fee on December 1, though the State may refrain from collecting the fee until the Legislature clarifies the collection process in January, according to the Arkansas Democrat-Gazette.

California: SHOP to Increase Rates and Expand Coverage Options for 2017

“Covered California for Small Business” announced an average rate increase of 5.9% for the 2017 coverage year—smaller than the 7.2% increase in 2016. All six SHOP carriers plan to continue participation in 2017, and two carriers—Blue Shield of California and Kaiser Permanente—will expand offerings. The State’s SHOP covers more than 28,000 individuals and has a nearly 90% year-over-year retention rate.

Washington: Marketplace Board’s Final Approvals Result in 4% Average Rate Increase for 2017 Silver Plans

The Washington Health Benefit Exchange board approved 2017 Marketplace premium rates for two issuers after previously approving rates for seven other issuers, which has doubled the number of qualified health plans (QHPs) available through the Marketplace. The average premium increases across all nine issuers will be 12.8% for gold plans, 3.9% for silver plans, and 5.8% for bronze plans. Average deductibles will increase 6.5% for gold plans, 8.3% for silver plans, and 5% for bronze plans. In addition to the 98 QHPs that will be available, three issuers will offer five family dental plans for the first time.


States' Share of Medicaid Spending Down Between 2013 and 2014

States’ Medicaid spending as a percentage of total revenue fell slightly in FY 2014—from 17% to 16.8%—despite increases in enrollment and total Medicaid spending, according to the Pew Charitable Trusts. Total Medicaid spending (a combination of state and federal dollars) rose by $39.6 billion (or 8.6%) in 2014 as nearly 8 million people enrolled in the program due to implementation of the ACA. According to the report, Medicaid expansion states were shielded from much of this cost increase because of the enhanced federal match (100%) for expansion adults. Fifteen of the 20 states that experienced a decline in the state’s share of Medicaid spending expanded Medicaid in 2014.

Alabama: State Will Request 8-Month Delay for Managed Care Implementation

The State Medicaid agency will request CMS approval to postpone the start date of its transition to managed care delivered through Regional Care Organizations from October 1, 2016 to July 1, 2017. The requested delay is a result of an $85 million Medicaid funding shortfall for the current fiscal year that was resolved earlier this month during a special legislative session. The original start date in October 2016 was specified in the State’s CMS-approved 1115 waiver that authorized the transition and also required the State make available adequate resources for a successful transition, which the State indicated would not have been possible if the budget shortfall had not been resolved. The State Medicaid agency projects it will need an additional $80 million in funding for the next fiscal year.

Missouri: Legislature Requires Department to Seek Approval for New Medicaid Co-Payments

The State Senate voted to override Governor Jay Nixon’s (D) veto of SB 608, which directs the Department of Social Services (DSS) to seek a federal waiver to allow fee-for-service (FFS) Medicaid providers to charge enrollees for missing—or failing to cancel within 24 hours—more than one appointment within a three-year period. If approved, the waiver would permit the following fee structure: $5 for the second missed appointment within a three-year period; $10 for the third; and $20 for the fourth and each subsequent missed appointment thereafter. FFS Medicaid providers could prohibit a patient from scheduling another appointment until outstanding fees are collected. The bill also requires DSS to seek a waiver requiring Medicaid enrollees to pay an $8 co-pay for using hospital emergency departments for non-emergent conditions.


Census Finds 9.1% Uninsurance for 2015

The percentage of people uninsured for all of 2015 decreased 1.3 percentage points between 2014 and 2015, from 10.4% (33 million people) to 9.1% (29 million people), according to the U.S. Census Bureau. Nearly 91% of the population had coverage for all or part of 2015, up from 89.6% in 2014, and private health coverage remained more prevalent than public coverage—at approximately a two-thirds to one-third ratio. The greatest change by coverage type was for direct-purchase coverage, which increased by 1.7 percentage points to cover 16.3% of the population. The uninsurance rate in expansion states decreased 2.4 percentage points between 2014 and 2015, compared to 2.1 percentage points in non-expansion states. Massachusetts had the lowest uninsurance rate in 2015 (2.8%) while Texas had the highest (17.1%). The report also provides changes in coverage rates between 2013 and 2015 and breaks down coverage rates by age, marital and family status, race and ethnicity, education, income, work experience, immigration status and disability status.

Illinois: Cook County Pilots Program for Uninsured Who Are Ineligible for Medicaid

Officials in Cook County approved an ordinance that will extend coverage for healthcare services to county residents who are currently uninsured and ineligible for Medicaid. Program enrollees will present a membership card to access primary and specialty care at no cost (except for a handful of nominal co-pays) at two acute care hospitals and several clinics within the Cook County Health and Hospitals System (CCHHS). During the program’s first year, the County will target the 40,000 uninsured individuals already enrolled in CCHHS’s financial assistance initiative, CareLink, but the initiative will eventually expand to all eligible residents earning up to 200% of FPL. The program is intended to control the high costs of patients presenting with potentially preventable conditions at the emergency room. The County expects to pay for the program through existing funding.

New York: Department of Financial Services Proposes Emergency Market Stabilization Regulation

The Department of Financial Services (DFS) has published an emergency regulation aimed at rectifying "certain unintended consequences of the federal risk adjustment program" that have adversely affected New York health insurers in the small group market. Under the emergency regulation, if DFS determines that CMS risk adjustment calculations for the 2017 plan year have an adverse impact on the New York small group health insurance market, insurers receiving payments from the federal risk adjustment program would be required to place a share of their payments into a market stabilization pool, which would then be distributed back to insurers who were required by CMS to pay outsized amounts. DFS maintains that CMS’s risk adjustment transfer calculations takes into account unnecessary factors, such as administrative expenses and profits, and does not account for the way in which New York’s rating structure counts a member’s children. The DFS regulation only applies to the small group market, though the agency said it will continue to monitor the federal risk adjustment program's impact on the individual market as well.


Maryland: State Appoints New Acting Marketplace Director

Jonathan Kromm, the deputy director of the Maryland Health Benefits Exchange (MHBE), has been named acting executive director by the MHBE board of directors. Kromm has served since January 2014 as deputy to the current executive director, Carolyn Quattrocki, who is leaving the position on September 27 to become a deputy attorney general with the Maryland Attorney General's Office.

Oklahoma: Health Care Authority Names New CEO

State Medicaid Director Becky Pasternik-Ikard has been named the new chief executive officer of the Oklahoma Health Care Authority (OHCA), beginning in October. Pasternik-Ikard has been with the Medicaid agency since its inception 22 years ago. Former OHCA CEO Nico Gomez resigned earlier this month to become the president and CEO of the Oklahoma Association of Health Care Providers.

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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