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Polsinelli Shughart PC In California, Polsinelli Shughart LLP Health Insurance Marketplaces and Texas Update March 14, 2013 Emily Wey
© 2013 Polsinelli Shughart PC 2 Polsinelli Shughart provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship. Polsinelli Shughart is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements. © 2013 Polsinelli Shughart PC. In California, Polsinelli Shughart LLP. Polsinelli Shughart is a registered mark of Polsinelli Shughart PC
© 2013 Polsinelli Shughart PC 3 PART I: MARKETPLACES GENERALLY
© 2013 Polsinelli Shughart PC 4 Insurance Market Reforms, v. 1.1 Temporary High Risk Pool Programs: state-based Rate Review Standards First-line Coverage Reforms (September 23, 2010) –No Lifetime Limits –Restricted Annual Limits –Restrictions on Rescission –First Dollar Coverage of Preventive Services –Extended Dependent Coverage (age 26) –External Review Organizations: state-regulated –No Pre-Existing Conditions for Children –Disclosure of Justifications for Premium Increases Medical Loss Ratios with Rebates
© 2013 Polsinelli Shughart PC 5 Insurance Market Reform v.2.1: Market Coverage Reforms –Guaranteed Issue –No Pre-existing Condition Exclusion for Adults –Rating Rules No health status ratings 3:1 maximum variation for age 1.5:1 maximum variation for tobacco use –Health Plans must be “Qualified” –No Annual Limits for Essential Health Benefits Health Insurance Marketplaces Essential Health Benefits Premium Subsidies Individual mandate & employer penalties
© 2013 Polsinelli Shughart PC 6 Health Insurance (Exchange) Marketplaces Marketplace for health insurance – like Expedia Provide coverage options for individuals & small businesses – increased transparency Site to manage new federal tax credits for certain individuals who do not have coverage through their employer Enrollment “facilitators” for public programs
© 2013 Polsinelli Shughart PC 7 Marketplace Basics Every state must have a Marketplace) for individuals and small businesses (up to 50 employees), effective January 1, 2014; number will be raised to 100 employees in 2016 “Qualified” health plans must offer a minimum level of coverage Each state must define (and be approved by the government) the “Essential Health Benefits” to be offered by marketplace plans
© 2013 Polsinelli Shughart PC 8 What the marketplaces will be A marketplace and support network for individuals and small employers to: Compare information regarding cost and quality Shop features of plans containing the same base benefits Determine eligibility for federal financial assistance (premium subsidies) Call, text or sit down with someone for help Enroll in a plan
© 2013 Polsinelli Shughart PC 9 Critical Marketplace Dates DateAction of State November 16, 2012Original deadline to declare SBM December 14, 2012State declares SBM & applies to HHS, round 1 January 2013HHS began certification of SBMs February 15, 2013State declares SPM & applies to HHS, round 2 October 1, 2013 – March 31, 2013Initial Open Enrollment Period January 1, 2014Effective Date for Marketplace Coverage January 2015Marketplace must be self-sufficient January 2017States may seek waivers
© 2013 Polsinelli Shughart PC 10 Marketplace Options & State Decisions State-Based Marketplace State Partnership Federally-Facilitated Marketplace State operates all exchange activities; however, state may use federal government services for the following activities: State Operates activities for one or both of the following: Federal government operates the marketplace. State may elect to perform on its own, or can use federal government services, for the following activities: –Premium tax credit & cost sharing reduction – Plan Management –Reinsurance program –Exemptions– Consumer Assistance –Medicaid & CHIP eligibility: assessment & determination –Risk adjustment program –Reinsurance
© 2013 Polsinelli Shughart PC 11 Core Functions of the Health Insurance Marketplace Consumer Assistance Consumer support assistors; education & outreach, including stakeholder & tribal consultation plans; Navigator management & oversight of brokers/agents & web brokers; call center operation; website management; & written correspondence with consumers to support eligibility & enrollment Plan management Plan selection approach (e.g., active purchaser or any willing plan); collect & analyze plan rate and benefit package information; QHP certification, compliance--issuer monitoring and oversight; ongoing issuer account management; issuer outreach and training; and data collection & analysis for quality Eligibility Accept single-streamlined application; conduct verification of applicant information; determine eligibility for enrollment in a QHP & for insurance affordability program, including payment exemption determination; connect Medicaid & CHIP-eligible applicant to Medicaid and CHIP; and conduct re- determinations and appeals Enrollment Enroll consumers for QHPs; transactions with QHPs & transmission of information necessary to initiate advance payments of the premium tax credit and cost-sharing reductions Financial Management User fees; financial integrity, including long-term operational cost, budget & management plan; support risk adjustment, reinsurance, & risk corridor programs.
© 2013 Polsinelli Shughart PC 12 CURRENT STATE DECISIONS 17 & DC State Based Marketplaces: –CA, CO, CT, DC, HI, ID, KY, MA, MD, MN, NM, NV, NY, OR, RI, UT**, VT, WA 7 State Partnership Marketplaces (February 15, 2013): –AR, DE, IA, IL, MI, NH, WV 26 Federally Facilitated Marketplaces –AK, AL, AZ, FL, GA, IN, KS, LA, ME, MO, MS**, MT, ND,NE, NH, NJ, OH, OK, PA, SC, SD, TN, TX, VA, WI, WY * UT wants to operate a small employer group marketplace only **Secretary rejected MS application from DOI because Governor refused to implement SBM letter
© 2013 Polsinelli Shughart PC 13 Essential Health Benefits Health plans participating in the marketplaces (called “Qualified Health Plans”) must offer a certain package of benefits, called “Essential Health Benefits” Each state has chosen an existing insurer’s plan as a benchmark plan Information on benchmark plans for each state available at Member costs may vary for benefits (e.g., “bronze” vs. “platinum” coverage)
© 2013 Polsinelli Shughart PC 14 QHP PLAN LEVELS Qualified Health Plan Actuarial Values –“Metal” Levels Bronze = 60% actuarial value Silver = 70% actuarial value Gold = 80% actuarial value Platinum = 90% actuarial value –Catastrophic Plan
© 2013 Polsinelli Shughart PC 15 Access to premium subsidies Who qualifies? –Individual earning ~ $14,858 to $44,680/ year –Couple earning ~ $20,123 to $60,520/ year –Family of 4 earning ~ $30,657 to $92,200/ year –Small businesses with 25 or fewer employees earning on average less than $50,000, sliding scale up to 50% of premium Managed by the IRS Applied up-front for individuals as a premium reduction
© 2013 Polsinelli Shughart PC Essential Health Benefits Categories Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care
© 2013 Polsinelli Shughart PC 17 Potential Marketplace Effects Subsidies available to help with affordability –Low uptake could lessen the benefit of the subsidies Less cost shifting – result of broader base of insured population Premium increases may result, both in and outside of the exchanges –Underlying medical costs increase because more are covered –Essential benefits mandates may increase costs to insurers Insurer demands on marketplace participants: effects on providers –Payment rates may go down - transparency –Benefit designs (coverage OR payment levels) could disadvantage providers
© 2013 Polsinelli Shughart PC 18 Practical concerns for payers Are we going to play? Answer seems to be “yes”, at least for the Big 5 (Blues, CIGNA, UHC, Aetna, Humana) Increased dealings with the federal government – federal fraud and abuse laws Network Adequacy –Amending current contracts to specify addition of exchange products –Contracting with more providers in the market –Careful network structuring and payment Benefit plan structure – EHBs! If only thinking about this now, very late to the game. Transparency – are payers ready to share pricing?
© 2013 Polsinelli Shughart PC 19 Practical concerns for providers Network Participation –Amending current contracts to specify addition of exchange products –Contracting with new QHPs in the market –Be proactive in approaching payers – avoid network de- selection Relationships with new payers – be open to new QHPs Benefit plan education – knowing new product characteristics Transparency – are providers ready to share pricing?
© 2013 Polsinelli Shughart PC 20 PART II: TEXAS MARKETPLACE
© 2013 Polsinelli Shughart PC 21 Texas Health Insurance Facts Texas has the largest proportion of citizens in the nation without health care at approximately 25%, or 6.2 million people –Roughly equal to the population of Massachusetts Insurance rates are largely unregulated –Texas does not require insurers in the individual market to sell to anyone who applies for a policy, nor does it limit “rating” of customers, where insurance carriers charge more to older subscribers and women, who tend to have higher health care costs Texas legal immigrants tend to have a higher rate of uninsurance than non-immigrants –Of the 1.2 million foreign-born, naturalized U.S. citizens in Texas, 31% are uninsured, compared to 22% of U.S.-born Texans
© 2013 Polsinelli Shughart PC 22 GOVERNOR PERRY-HHS “NEGOTIATION” On July 9, 2012, Governor Perry sent a letter to HHS Secretary Kathleen Sebelius, opposing the expansion of Medicaid and state insurance exchanges –“Neither a ‘state’ exchange nor the expansion of Medicaid under the Orwellian-named PPACA would result in better ‘patient protection’ or ‘affordable care’” On November 15, 2012 deadline, Governor Perry sent another letter to Secretary Sebelius, stating that Texas would not implement a state insurance exchange –“It is clear there is no such thing as a state exchange. Instead, there is a federally mandated exchange with rules dictated by Washington…Our state will not be a party to helping facilitate the taxation of millions of Texans, at an unknown cost, to implement bad policy” Gov. Perry was joined by Mississippi Insurance Commissioner Mike Chaney, who also formally notified the HHS that Mississippi would not proceed with a state-run exchange
© 2013 Polsinelli Shughart PC 23 Behind the scenes practicality – Texas prepares Despite Gov. Perry’s opposition to a state marketplace, officials at Texas’ Department of Insurance (DOI) have been planning for an exchange –“We’ve been going full speed ahead on implementation, doing the due diligence so that we can be on time with what the law says” - John Greeley, Public Information Officer at the Texas Department of Insurance The Texas Department of Insurance received a federal “Exchange Planning Grant” of $1 million in 2010 –However, Texas has since returned $900,000 of the grant to the federal government because of its decision not to run its own marketplace In February 2011, the Texas DOI and the Health and Human Services Commission held an “Exchange Planning Symposium”, seeking guidance from stakeholders regarding the exchange –Should Texas establish an exchange or defer to the federal government?
© 2013 Polsinelli Shughart PC 24 Federal Marketplace Deadlines – Texas States were required to notify the HHS whether they planned to establish a state-based exchange by February 15, 2013 If HHS did not receive notification by that date the state was deemed to have deferred to a federally-facilitated exchange Governor Perry’s final decision was not to implement a state- based health insurance marketplace in Texas, instead deferring to the federal government to set up and run the marketplace –HHS will assume full responsibility for running a health insurance exchange in Texas, beginning in 2014 (but many preparations taking place now) –Note: HHS’ largest contractor (to which it has delegated FFE responsibility) is a UnitedHeathcare subsidiary, QSSI – data hub
© 2013 Polsinelli Shughart PC 25 Federally-Facilitated Exchange (“FFE”) Since Texas declined to set up a state-based exchange or partnership, PPACA will require HHS to establish a “federally-facilitated exchange” (“FFE”) Can be implemented by HHS alone, or a state can enter into a “partnership” combining state and federal operations and functions (IF state applied) Partnerships are considered a subset of an FFE; HHS retains authority over partnerships –Texas did not submit a Declaration Letter or Exchange Blueprint application before the February 2013 deadline, and thus does not have federal approval to operate its own marketplace OR partner with HHS
© 2013 Polsinelli Shughart PC 26 Federally-Facilitated Exchanges, cont. The final rule establishing marketplaces does not include provisions specific to the operation of FFEs – more details to come? FFEs: are required to carry out many of the same functions as state-based marketplaces must adhere to many of the standards outlined in the Affordable Care Act and the final rule are required to offer the same tools to help consumers access an exchange and assess their plan options through an exchange
© 2013 Polsinelli Shughart PC 27 Policy Objectives of the Federally-Facilitated Exchanges HHS has published key core functions of an FFE, including: –Offering a positive consumer experience –Creating an attractive and viable market for issuers –Working quickly and effectively with States –Reducing administrative and operational burdens on all marketplace participants –Developing safeguards and processes to protect and oversee public dollars spent for advance payments of the premium tax credit and cost-sharing reductions
© 2013 Polsinelli Shughart PC 28 Administration of the Federally-Facilitated Exchanges HHS is developing a comprehensive administrative infrastructure capable of addressing a wide range of state needs (“plan management”) Plan management will include: –QHP certification, recertification, and decertification –Eligibility determinations –Accreditation and quality reporting –Benefit and payment parameters –Technical and other assistance through “Account Managers” –General monitoring and oversight of the FFE Again, unprecedented degree of control to actual player in the market
© 2013 Polsinelli Shughart PC 29 Big FFE Consequence: QHP Certification Process HHS will evaluate each potential QHP against all applicable certification standards, either by confirming the outcome of a state’s review (as in the case of licensure) or by performing the review itself. HHS intends to certify as a QHP any health plan that meets all certification standards (sort of an “Any Willing QHP” standard) –***In future years, HHS will analyze the QHP certification process and may identify improvements or changes to the process.
© 2013 Polsinelli Shughart PC 30 QHP Certification Process – Issuer-Level Review HHS will look to the QHP Issuer Application to assess at least the following certification standards: –Licensure and good standing: confirm state licensure and compliance with state solvency and other related requirements –Network adequacy: in states meeting minimum federal standards, verify state review. Otherwise, review network adequacy data submitted in QHP Issuer Application –Essential Community Providers (ECPs): collect information on inclusion of ECPs in provider networks and review for sufficiency –Accreditation: confirm accreditation status, depending on certification year –Program attestations: ensure submission of required attestations (e.g., attestation of compliance with marketing standards)
© 2013 Polsinelli Shughart PC 31 QHP Certification Process – Plan-Level Review HHS will look to the rate and benefit data submissions to assess at least the following certification standards : –Essential health benefits: confirm coverage of essential health benefits –Actuarial value standards: confirm actuarial value levels of potential QHPs, including compliance with standards related to cost-sharing reductions, cost-sharing limits, and variations to cost-sharing structures –Discriminatory benefit design: conduct plan-level analysis to determine where discrimination would most likely occur –Meaningful difference: conduct review for meaningful difference across QHPs offered by the same issuer to ensure that a manageable number of distinct plan options are offered –Service area: confirm that service area is at least one county or that smaller service area is necessary, non-discriminatory, and in the interest of consumers –Rates (new and increases): review new rates and rate increase justifications for reasonableness, including confirmation of compliance with market rating reforms
© 2013 Polsinelli Shughart PC 32 FFE: Potential Texas Complications Establishment and operation of FFEs may come with a number of complicated issues ahead of the October 2013 open enrollment deadline, including: –Consequences of Texas choosing not to expand Medicaid –Overlap of state and federal regulations regarding health plans –Adverse Selection –Availability of subsidies –Consumer assistance –Funding (marketplaces are to be self-sufficient by 2015)
© 2013 Polsinelli Shughart PC 33 Small Business Health Options Program The Affordable Care Act also calls for states to establish a Small Business Health Options Program (“SHOP”) Intended to provide an array of affordable, high- quality health insurance plans for small businesses and their employees States can also choose to combine the individual and small business or SHOP exchanges SHOP exchanges will be competing with insurance offered in the outside market, so they’ll need to offer health plans that are high quality and cost-effective
© 2013 Polsinelli Shughart PC 34 Small Business Health Options Programs A SHOP has responsibilities similar to an individual exchange: –Collect and verify information from employers and employees (both considered applicants) A qualified employee is an employee who receives an offer of coverage from a qualified employer A qualified employer is a small group employer that elects to make all full-time employees eligible for one or more QHPs or offers coverage to each eligible employee through the SHOP serving the employee’s worksite –Process applications –Determine eligibility –Facilitate enrollment
© 2013 Polsinelli Shughart PC 35 Federally-Facilitated SHOP Similar to state SHOP exchanges; will provide a number of tools and resources to assist employers and employees to evaluate coverage options and select a health plan allow employers to model various plan scenarios (i.e., changing the employer contribution percentage) before making a final selection collect an aggregated payment from each employer and distribute that payment to QHPs based on participating employees’ plan selections Other functions: –Health plan data collection –Offer coverage to multi-state employers –Administrative support –Consumer services –Facilitate agent and broker interface with the exchange
© 2013 Polsinelli Shughart PC 36 Practical concerns for payers Are we going to play? Resounding “yes” from BCBSTX –“Be Covered Texas” – BCBS will “spend what it takes” to get 6 million lives onto the marketplace –Acting almost as the exchange operator in Texas Increased dealings with the federal government – federal fraud and abuse laws Network Adequacy –Amending current contracts to specify addition of exchange products –Contracting with more providers in the market –Careful network structuring and payment Benefit plan structure – EHBs! If only thinking about this now, very late to the game. Transparency – are payers ready to share pricing?
© 2013 Polsinelli Shughart PC 37 Practical concerns for providers Network Participation Amending current contracts to specify addition of exchange products Contracting with new QHPs in the market Be proactive in approaching payers – avoid network de-selection Stay on good terms with BCBSTX Relationships with new payers – be open to new QHPs Benefit plan education – knowing new product characteristics Transparency – are providers ready to share pricing?
© 2013 Polsinelli Shughart PC 38 QUESTIONS? Thank you!
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