Tag: ACA

The latest on Affordable Care Act litigation at the Fifth Circuit

By Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

In late March, the Department of Justice (“DOJ”) issued a letter to the U.S. Court of Appeals for the Fifth Circuit supporting the holding by District Court Judge Reed O’Connor that the Affordable Care Act’s (“ACA’s”) individual mandate is unconstitutional and therefore the entire ACA should be repealed.

The DOJ’s letter states that it “is not urging that any portion of the district court’s judgment be reversed.”  We have addressed Judge O’Connor’s decision in a previous blog post. The DOJ’s letter is a departure from its original argument that, although the individual mandate was unconstitutional, it was severable from the rest of the unrelated provisions in the ACA.

At issue before the Court is whether the removal of the individual mandate’s penalty by the Tax Cuts and Jobs Act has invalidated the mandate. If so, does that mean the entire ACA is unconstitutional or is the mandate and its dependent provisions (such as the protections for pre-existing conditions) severable from the rest of the ACA?

Although the DOJ will no longer be supporting the severability argument, Ohio Attorney General Dave Yost, a Republican, filed a friend-of-the-court brief arguing that the unconstitutionality of the individual mandate does not invalidate the rest of the ACA. In support of his argument is the fact that Congress essentially removed the individual mandate in 2017 by reducing the penalty to zero for not having health insurance, while keeping the rest of the ACA’s provisions, such as protections for pre-existing conditions.

A friend-of-the-court brief in support of the Democrat-led states defending the ACA was filed on April 1 by the American Hospital Association, the Federation of American Hospitals, the Catholic Health Association of the United States, America’s Essential Hospitals and the Association of American Colleges. In their brief, they claim that the wholesale judicial repeal of the ACA will remove millions from the insurance rolls, which will hurt not only patients but also hospitals that will be burdened with providing a greater amount of uncompensated care. Additionally, the brief argues that the ACA established numerous programs to address pressing health care needs, such as the opioid crisis and providing more support for the country’s aging population, which would indicate that Congress could not have intended for the entire ACA to be repealed with the elimination of the individual mandate.

On April 10, the Fifth Circuit agreed to expedite the case, setting oral arguments for July. However the Court rules, there is a good probability that the decision will be appealed to the Supreme Court, and the ACA will likely remain in effect as it winds its way through the judicial process.

Fifth Circuit resumes consideration of district court decision invalidating the Affordable Care Act

By Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

In late 2018, federal District Court Judge Reed O’Connor held that the Patient Protection and Affordable Care Act (the “ACA”) was invalid. The lawsuit was filed by a coalition of Republican attorneys general and governors, and was based upon the Tax Cuts and Jobs Act of 2017, which reduced the tax penalty for failing to obtain an ACA-compliant plan (i.e. the “individual mandate”) to $0.

The individual mandate had previously been held constitutional by the Supreme Court based upon Congress’ taxing power. The plaintiffs’ argument in this case was that the individual mandate was no longer constitutional since the tax no longer existed. Furthermore, they argued that the mandate was an essential, inseverable piece of the ACA, and therefore, the entirety of the ACA was invalid.

Judge O’Connor agreed with the plaintiffs’ arguments, holding that the individual mandate was unconstitutional, and, since the mandate was an inseverable part of the ACA, also held the entire act to be invalid. In other words, not only was the individual mandate unconstitutional, but the hundreds of other provisions in the ACA, such as the 10 essential health benefits, Medicaid expansion and the prohibition on discrimination for pre-existing conditions, were also no longer enforceable.

The healthcare industry had a mixed response to this ruling. The American Medical Association warned that the decision could destabilize health insurance coverage. However, Seema Verma, the CMS Administrator, stated that 2019 ACA plans would not be affected by the ruling. She also stated that CMS has a plan to protect patients with pre-existing conditions if the ACA is struck down, but was not forthcoming with the details of the plan.

In early January 2019, Judge O’Connor’s ruling was appealed to the U.S. Court of Appeals for the Fifth Circuit by a coalition of Democratic state attorneys general. It should be noted that Judge O’Connor allowed the ACA to stand while his decision is under appeal “because many everyday Americans would otherwise face great uncertainty.” Therefore, for now, the ACA remains in full force and effect.

The federal appeals process can take anywhere from a few months to more than a year in order to obtain a decision. If the case is appealed all the way to the Supreme Court, the process could take even longer.

To make matters worse, the Fifth Circuit stayed its review of this case during the federal government shutdown, and only resumed consideration of this appeal on January 29. Many legal experts are confident that Judge O’Connor’s ruling will be reversed by the Fifth Circuit. However, the Fifth Circuit could uphold the decision, could overturn only part of the decision, or could rule to sever the individual mandate from the ACA, leaving all other portions of the ACA intact. We will continue to monitor this case as we await the decision of the Fifth Circuit and, regardless of the Fifth Circuit’s decision, we expect that the case will ultimately be appealed to the Supreme Court.

Trump Administration Opens Door for Broader Contraceptive Mandate Exemptions

By Matthew Byron, Class of 2019

The Affordable Care Act (ACA) does not currently mandate that insurers cover contraceptives under their respective plans. However, in 2011, the Departments of Health and Human Services, Treasury, and Labor (the Departments) issued regulations requiring non-grandfathered group health plans and health insurers to cover all FDA-approved contraceptives. Under those regulations, a few entities–mainly churches and other religious organizations–were exempt from being required to cover contraceptives, so the exemptions under these regulations were very narrow.

Since the 2011 regulations were enacted, several religious organizations sued the Department of Health and Human Services to challenge paying for or providing contraceptives due to certain religious and moral objections over contraceptives. In an effort to protect the individuals and entities with sincere religious and moral objections to providing or covering contraceptives, while still keeping the contraceptive mandate intact, on November 7, 2018, the Departments announced two final rules, available at the Federal Register, that provide certain protections for American individuals and entities that have a legitimate religious or moral objection to health insurance that covers certain contraceptive methods. While these rules do not go into effect until January 14, 2019, the rules provide for two major exemptions from the contraceptive mandate requirement.

Exemptions for Religious Beliefs

The first of the two final rules establish an exemption from the contraceptive mandate for entities and organizations that have “sincerely held religious beliefs” opposed to coverage of some or all contraceptive or sterilization methods…” An otherwise exempt entity can still choose in its plan to provide for the coverage of contraceptives, but of course, this would be a voluntary choice for that entity instead of a requirement. In addition, if an otherwise exempt entity chooses to object to one particular type of contraceptive, but chooses to allow for coverage of another type of contraceptive, the entity may do so. This exemption applies not only to religious organizations, but it can be applicable to non-profit organizations, institutions of higher learning, and certain individuals, so long as those entities have a sincerely held religious objection.

Exemptions for Moral Convictions

The second of the two final rule provides an exemption from the contraceptive mandate requirement for individuals and entities that have non-religious moral convictions opposing services covered by the mandate. These exemptions can apply to nonprofit organizations and to closely held businesses, as well as to institutions of education, health insurance issuers serving exempt entities, and individuals. Like the religious beliefs exemption, otherwise exempt individuals and entities with a moral conviction may choose to voluntarily cover contraceptives to beneficiaries in their plan. One notable exception to this exemption is that this final rule does not exempt publicly-traded businesses or governmental entities. While it can be hard to establish what a valid moral conviction looks like, the Departments clarified that, under case law, a moral conviction is one (1) that a person “deeply and sincerely holds”; (2) “that are purely ethical or moral in source and content; (3) “but that nevertheless impose…a duty”; (4) and that “certainly occupy…a place parallel to that filled by…God’ in traditionally religious persons,” such that one could say the “beliefs function as a religion.”

In sum, since these two final rules are not currently in effect, it is unclear as to how many individuals and entities will try to claim the exemption, and how many beneficiaries the exemption would otherwise affect. The Departments estimate that, at most, 200 employers with religious or moral objections would be affected by these final rules, and between 6,400 and 127,000 women’s coverage would potentially be affected. Although these rules do not replace or supersede any existing contraceptive mandate requirements, they do add protection, and possibly an additional avenue for providers of health insurance with legitimate religious or moral objections to be exempt from covering contraceptive services. While at first glance it appears, based on the Departments’ numbers, that the final rules will only have a relatively small impact on contraceptive coverage, only time will tell when these rules take effect mid-January.

CMS unveils new bundled payment model

By Chase Doscher, Class of 2018; Elizabeth N. Pitman, Counsel at Waller; Zachary D. Trotter, Associate at Waller

Earlier this month, CMS announced the launch of the Bundled Payment for Care Improvement Advanced (BPCI Advanced) payment model.

This is the first Advanced Alternative Payment Model (Advanced APM) introduced under the Trump Administration and the start of the next generation of BPCI models offered through the Center for Medicare and Medicaid Innovation and authorized under the Affordable Care Act.  Under the MACRA Quality Payment Program, providers will be subject to Medicare payment adjustments through one of two tracks: Merit-based Incentive Payment System (MIPS) or Advanced APM.

Under MIPS, a provider may receive a negative, neutral or positive adjustment with the expectation that the majority of participants will experience either negative or neutral adjustments. The BPCI Advanced model, however, entices providers to participate in an Advanced APM by offering the potential for bonus payments under MACRA for those who meet or achieve certain benchmarks during a 90-day episode of care, including the all-cause hospital readmission measure and advance care plan measure.  As with other Advanced APMs, BPCI Advanced requires that participants assume some of the risk and ties payment to quality performance metrics and the required use of certified healthcare technology.

After cancelling an Obama-era proposal for converting certain of the BPCI episode models to mandatory bundled-payment models, the Trump Administration effort to maintain voluntary participation is an attempt to decrease the administrative burdens such models placed on providers. Voluntary participation in BPCI models, such as Comprehensive Care for Joint Replacement and the Cardiac Rehabilitation Incentive model, has been offered since 2016.

This new model will give providers, “an incentive to deliver efficient care,” Seema Verma, CMS Administrator, said. “BPCI Advanced builds on the earlier success of bundled payment models and is an important step in the move away from fee-for-service and toward paying for value.”

Thirty-two clinical care episodes will initially be included in BPCI Advanced, 29 inpatient-setting episodes of care and three outpatient-setting episodes of care and the potential for episode revision for new and existing participants beginning January 1, 2020.   The clinical care episodes include services such as major joint replacement of a lower extremity, percutaneous coronary intervention and spinal fusion.

BPCI Advanced performance period is from October 1, 2018 through December 31, 2023.  Participants joining in the initial stage may not exit prior to January 1, 2020.

Providers interested in at least one of the 32 clinical episodes to apply to the model have until 11:59 pm EST on March 12, 2018 to apply via the application portal.

The Trump Administration Shores Up Health Insurance Marketplace Pending Possible ACA Repeal

By Will Blackford, Class of 2017

Recently, the Trump administration put forth two key initiatives to ease the burden of the Affordable Care Act (“ACA”) and to stabilize the Obamacare marketplace.

First, the Internal Revenue Service (“IRS”) quietly updated its website with a statement indicating that the agency will not reject 2016 tax filings that fail to indicate whether a taxpayer complied with the ACA’s individual mandate. Second, the Centers for Medicare & Medicaid Services (“CMS”), now overseen by Tom Price, the new Secretary of the Department of Health and Human Services, submitted a new proposed rule aimed at making health insurer plans under the Obamacare exchange more profitable.

Both changes come on the cusp of significant insurer uncertainty, with Humana announcing its departure from the exchange market in 2018, and other insurers—such as Aetna and Anthem—threatening to cease future participation in the absence of meaningful modifications to the system.

 

New IRS Individual Mandate Policy

Following the signing of an executive order by President Trump on Jan. 20, 2017, which directed federal agencies to reduce the burden of the ACA, the IRS retreated from its previous policy that would have required an indication of health insurance coverage on tax returns. The system the IRS initially developed would have automatically rejected tax returns that failed to indicate whether the individual maintained health insurance, allowing the agency to efficiently enforce the ACA’s assessment of a penalty on those lacking coverage.

Under the newly announced policy, this mechanism for handling so-called “silent returns” will not be implemented. Instead, the IRS will continue to accept and process electronic and paper returns, even in the absence of an indication of coverage status. However, the IRS will still be enforcing the individual mandate if people volunteer on their 1040s that they lacked health coverage in 2016. While the agency reserves the right request additional information from individuals that file “silent returns,” the policy shift will undeniably lead to a lesser degree of enforcement under the mandate.

 

CMS Market Stabilization Proposed Rule

As Congress continues its debate over repealing, repairing, or replacing the ACA, a recent CMS notice of proposed rulemaking (“NPRM”) is intended to calm insurer anxieties over the long-term viability of the health insurance exchange. The NPRM offers numerous policy and operational tweaks geared toward stabilizing the marketplace, including:

  • Shortened 2018 Open Enrollment Period. The NPRM would reduce the open enrollment period for 2018 to 45 days (November 1 to December 15, 2017). This would allow insurers to collect a full year’s premium for 2018 from regular enrollees and limit adverse selection by those individuals who discover health issues during the months of December and January.
  • Special Enrollment Periods. The NPRM would target special enrollment periods (“SEP”) by tightening up eligibility, restricting the upgrade ability of existing marketplace enrollees, and limiting overall use of the “exceptional circumstances” SEP.
  • New Guaranteed Availability Requirement Interpretation. To address insurer concerns over potential abuses, the NPRM would add flexibility to the guaranteed availability requirement for allowing an issuer to collect premiums for prior unpaid coverage before enrolling a patient in the next year’s plan with the same issuer. This is meant to incentivize patients to avoid coverage lapses.
  • Reduced Essential Community Providers Requirement. The NPRM proposes that for 2018, plans be required to include only 20 percent of Essential Community Providers (e.g., community health centers, family planning clinics, safety-net hospitals) within their network, rather than the current requirement of at least 30 percent.
  • Network Adequacy Delegated to States. Starting with the 2018 plan year, CMS proposes deferring to the state regulators to ensure network adequacy, provided that the state has adequate authority and resources to ensure reasonable access to providers.

Unlike the traditional 30-day minimum for feedback, the NPRM has an unusually short comment period—only 20 days—for CMS to consider public comments prior to issuing a final rule. This expedited timeframe is intended to accommodate insurers who are frantically working to finalize their forms and rates for 2018.

Increased Price Transparency

By Zachary Gureasko, Class of 2017

On President Donald Trump’s website, one of his objectives is: “Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.” President Trump believes that by allowing the individual to “shop around” for the best prices, competition among providers will increase and they will be forced to lower costs.

There are some organizations that already attempt to use existing data to provide consumers with cost estimates that they can use to make cost-informed choices. One such organization is FAIR Health, which is an independent, non-profit corporation whose mission is to promote cost transparency in healthcare costs. Using the website highlights some discrepancies in costs that would be helpful to consumers. For example, a procedure done in Nashville proper priced at $5,000 could potentially cost as low as half of that amount if it was performed more than 45 miles away from Nashville.

The health care industry has long been viewed as “hiding the ball,” so to speak, when it comes to the full prices of their services. Generally, the only information they offer before the patient elects to undergo a procedure or treatment is the immediate cost, such as a co-payment or deductible. Arguments have been made, even prior to President Trump’s call for increased transparency, for the provision of total costs to the consumer. The justification for this is that consumers with more information will be able to comparison shop and obtain the desired care for a relatively affordable price.

There are issues with price transparency from both provider and consumer perspectives. There are impediments to price reporting, such as contractual provisions preventing health plans from negotiating their rates with providers, as well as the indication that encouraging patients to be more price-conscious could have negative impacts on low-income consumers due to cost-shifting. Additionally, there is currently no standard structure for reporting prices, and the interplay between health care providers, insurance companies, and government agencies almost require some sort of formatted structure to be in place to enable providers to adequately report in a way that would achieve the intended result of these price transparency efforts.

Several studies have also shown that price transparency initiatives, such as requiring hospitals to publish the prices of their procedures and treatments up-front, do not truly lead to changes in either consumer behavior or pricing. This result is potentially attributable to a perceived correlation between high cost and high value, one that is not necessarily accurate in the health care industry as it might be in other industries. Another wrinkle in the fold from a consumer perspective is the notion that consumers will use price transparency tools in their decision-making. However, many consumers are unaware that such tools exist; moreover, even if they are aware of the tools’ existence, research has shown that this has little to no bearing on the consumers’ ultimate decisions or determinations.

As a final consideration, although efforts to increase price transparency are still in their early stages (and thus there is not enough data to form a fully conclusive study on their impact), not all health care services are amenable to “shopping around.” For instance, a person in an emergent situation will not be on his or her smartphone comparing the prices of different ERs. The person will assuredly utilize the nearest hospital with an emergency room. Emergency room services comprise a fairly substantial portion of health care costs. Therefore, it remains to be seen whether increased price transparency will truly increase competition or lower health care costs for consumers.

 

Selling Health Insurance Across State Lines—A Summary

By Kim Macdonald, Class of 2018

Selling Health Insurance Across State Lines—A Summary

Currently, health insurers are restricted to each state for purposes of regulation. One primary health reform proposal is to allow insurers to sell health insurance to out-of-state markets. Proponents argue that removing the state line restrictions will encourage competition, increase consumer choice, and, therefore, offer national plans with much lower premiums as determined by the market. By providing people with more options, in theory, consumers can choose the plans that provide only the benefits they need without paying for superfluous benefits.  Critics argue that allowing interstate sales of insurance will instead provide a mechanism for insurers to choose their regulator, sparking a “race to the bottom” for the states with the least restrictive regulations. In turn, removing the barriers to selling health insurance across state lines may encourage states to have less restrictive regulations to attract health insurance companies.  Removing these restrictions would likely benefit the young, healthy policy holders, resulting in lower premiums because they do not rely on regulations to cover their needs. By contrast, fewer regulations could harm older and sicker policy holders who depend on the coverage restrictions to qualify for sufficiently robust policies.

Additionally, critics argue interstate sales of health insurance would decrease the availability of policies per state, since insurers have to compete on a national market rather than a regional or state-wide market. Some critics are concerned the proposal undercuts states’ role in regulating insurance, which, counterintuitively, may increase the necessity of the federal government to further regulate the market to ensure basic minimum standards.

Insurers would also have to grapple with the difficulty of setting up a network of providers and entities without being in-state.  Insurance costs reflect the general health of an area’s population. Therefore, while one policy may be affordable in one state due to its robust network of providers, lower cost of living, and overall health of the population, the exact same policy may not translate financially across state borders. Insurers face difficulties with selling “healthy state” plans to sicker populations in other states.

ACA- Benefits and Risks

By Zachary Gureasko, Class of 2017

The future of the health care industry is as uncertain as ever, pending the potential repeal (and hopefully subsequent replacement) of the Patient Protection and Affordable Care Act (“ACA”), colloquially known as “Obamacare.”

On January 20, 2017, President Donald J. Trump signed an executive order titled “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” This particular order directed federal agencies to reduce enforcements of the ACA’s requirements, subject to two limits: any reductions in the enforcement of the ACA’s provisions must be consistent with the law itself, and the change must comply with “notice and comment rule making” requirements (should the law so require). Although these are significant limitations on the order, they indicate a willingness to repeal the ACA as soon as possible and practicable. As of the date of this post, proponents of the repeal of the ACA have not tabled a viable alternative to replace the Act. They have also not designated which provisions of the Act they intend to keep, if any, although President Trump has indicated that he wishes to keep in place the prohibition on denying coverage to individuals with preexisting conditions. There are some notable risks and benefits to this prospective repeal.

One of the notable benefits is for branded pharmaceutical companies due to the bidding processes that may take place in the event of the ACA’s repeal. Although 90% of the prescription drugs in this country are generic, and therefore there is significant market control over the prescription drug industry, pharmaceutical companies have been able to needlessly increase the prices of brand-name prescription drugs. These participants, who have often increased prices for products that do not provide significant value to the consumer, will most likely suffer. Unlike generic drug companies, brand-name drug companies are subject to the industry fees imposed by the ACA. Any cost reduction realized by the elimination of these fees will be counterbalanced by substantial revenue erosion. This will pave the way for other players in the brand-name drug industry to emerge, establishing a more competitive market that will hopefully drive up value while lowering costs. President Trump has stated that it is one of his express goals to remove barriers to entry into free markets for drug providers.

Pharmaceutical and biotech companies could also realize greater revenues if the Branded Prescription Drug Fee that levies taxes on drug-makers in proportion with their market share is eliminated by repealing the ACA. Companies’ bottom lines could be benefitted even further if Trump’s tax plan succeeds, thereby decreasing business tax rates, allowing larger companies to keep more of the money they earn. Deregulation is also integral to President Trump’s long-term plan for the healthcare industry. Stocks have reportedly increased for pharmaceutical and biotech companies since President Trump’s election and inauguration.

In contrast, the risks for providers and payers are significant if the ACA is repealed completely. Without a replacement, repealing the ACA would, in the first year, cause 18 million individuals who are currently insured to lose coverage. An increase in the number of uninsured individuals will have an exceptionally negative impact on providers, as an increase in the number of uninsured correlates with a provider’s inability to collect payments from the uninsured, increasing the provider’s “bad debt.” A greater number of uninsured necessarily implies higher premiums, deductibles, and cost-sharing for those who are still insured, meaning that Medicare and other third-party payers will have to pass these costs on to consumers that are still enrolled. This will lead to a decline in Medicaid enrollment, as the historically poor and categorically needy will be unable to afford these increased costs. Private insurers could potentially benefit, since they have not experienced the increased enrollment that was anticipated under the ACA’s individual mandate. The simple fact is that repealing the ACA without a viable alternative will leave millions uninsured, and the ones losing coverage are not the ones who will feel the first, strongest financial effects. Providers and payers will experience increased costs and bad debts, and this is undesirable in an era where the focus of the industry is moving toward value-based measures.

As time goes on, it appears that the ultimate goal of ACA’s many detractors is truly to replace and reform (or “repair”) the Act rather than repeal it entirely, but the future is uncertain, for better or for worse, for all those involved in the health care industry.

 

The Prevalence of Health Savings Accounts Predicted to Increase During the Trump Administration

By Ann Hogan, Class of 2018

It is no secret that repealing the Affordable Care Act (ACA) is a top priority on the Trump Administration’s agenda. It is predicted that the use of Health Savings Accounts (HSAs) will increase and may be used as a replacement for the ACA. The Republicans favor competition among the insurance companies rather than a government-mandated program. Thus, HSAs will rise in popularity as it gives the individual more flexibility and control over their healthcare.

 

Enacted by Congress in 2003, Health Savings Accounts are usually paired with a high deductible insurance policy and allow both the policyholder and their employer to contribute money into the account for medical expenses without being taxed. Simply put, HSAs are a tax-free savings account to be used specifically for medical expenses. HSAs limit the amount of money that can be contributed to the account each year. In 2017, the policyholder and their employer may contribute up to $3,400 to an HSA for individuals and $6,750 for families. Policyholders age 55 and older can contribute an extra $1,000 each year. However, unlike the “use it or lose it” function of Flexible Spending Accounts (FSAs), HSAs allow the policyholder to keep their balance and continue saving from year to year. Another attractive feature of the HSA is that the policyholder can take their HSA with them if they were to switch jobs or insurance providers.

The Trump Administration believes that the increase of HSAs will give individuals more control over their health care decisions and costs resulting in better quality outcomes in care and cost. According to the 2015 Census of Health Savings Account – High Deductible Health Plans, AHIP Center for Policy and Research, Nov. 2015, “nearly 20 million Americans have an HSA.” The Report from the Health Care Reform Task Force states that House Republicans have proposed HR 5324: Health Savings Account Expansion Act of 2016 by Rep. Dave Brat. While the healthcare reform process will be slow to change, the utilization of HSAs are predicted to increase.