Health Care Reform Blog : Health Care Law Reform : McDermott Will & Emery Law Firm

by Amy M. Gordon, Anne W. Hance and Susan M. Nash

The U.S. Department of Health and Human Services (HHS), the U.S. Department of Labor’s Employee Benefits Security Administration and the U.S. Department of the Treasury’s Internal Revenue Service issued a proposed rule on February 1, 2013 presenting a revised approach for the coverage of women’s contraception by certain religious employers under the Affordable Care Act. The proposed rule, which is open for public comment through April 8, 2013, has significant implications for employers, health insurers and third-party administrators (TPAs). 

The Landscape

The Affordable Care Act requires non-grandfathered group health plans and health insurance issuers offering individual and group health insurance coverage to provide first-dollar coverage for select preventive services. For women with reproductive capacity, this includes FDA-approved contraceptive, sterilization procedures and patient education, as prescribed by a health care provider. The agencies adopted an exemption from this requirement for group health plans sponsored by religious employers. The agencies also established a temporary enforcement safe harbor for non-grandfathered group health plans sponsored by certain nonprofit organizations with religious objections to providing contraception coverage for plan years beginning before August 1, 2013. The proposed rule is the agencies’ latest attempt to balance access to these health care services and accommodation of organizations’ religious beliefs.

The Proposed Rule

Exemption for Religious Employers

The proposed rule simplifies the definition of a “religious employer” that is exempt from the contraceptive coverage requirement to mean any nonprofit entity referenced in Sections 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code.

Accommodation for Eligible Organizations

A separate accommodation will be established for group health plans sponsored by an “eligible organization,” defined as an organization that: (1) opposes providing coverage for some or all of any contraceptive services required to be covered on account of religious objections; (2) is organized and operates as a nonprofit entity; (3) holds itself out as a religious organization; and (4) self-certifies that it meets these criteria and specifies the contraceptive services for which it objects to providing coverage.

Contraceptive coverage will still be made available to women participating in group health plans sponsored by an “eligible organizations” on a no-cost basis.  The proposed rule will require health insurance issuers providing fully-insured coverage to group health plans sponsored by eligible organizations to enroll participants into separate individual health insurance policies that provide contraception coverage without cost sharing or additional premiums. For self-insured group health plans, the applicable TPA would arrange for the enrollment of participants into individual health insurance policies that provide contraception coverage without cost sharing or additional premiums, whether through voluntary enrollment, automatic enrollment or by the TPA becoming the plan administrator for this purpose.

HHS proposes to recognize contraception-only policies as a new category of “excepted benefit” coverage, although certain consumer protections, such as guaranteed renewability and annual/lifetime limit prohibitions, still would apply. 

The proposed rule anticipates that health insurance issuers would offset the cost of providing contraceptive coverage under individual policies issued to participants of self-funded group health plans by claiming a reduction to user fees imposed on issuers participating in Federally Facilitated Exchanges (FFEs).

Next Steps

• Entities that may qualify for the “eligible organization” accommodation, including religious institutions of higher learning, will need to consider whether they can self-certify to this new status. They also will have to work with their insurer or TPA to address how coverage will be provided to participants.
• The proposed rule raises numerous legal, financial and operational issues for health insurance issuers, including development of a new type of excepted benefit coverage, coordination of enrollment and benefits with self-funded group health plans, the cost of providing this coverage, and the potential risks associated with requesting a reduced FFE user fee based on costs relating to these new policies. 
• TPAs will need to consider how they will arrange for contraception coverage to participants of self-funded plan customers that certify to being an eligible organization, a challenging process if different customers seek different approaches. TPAs also will have consider how to recover administrative costs from issuers issuing coverage policies (and receiving FFE reductions). An additional consideration is how to fund contraception coverage from the coverage effective date, September 1, 2013, until dollars become available in connection with the FFE user fees. 

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by Erica Stocker

On January 31, a group of six current and former members of the Senate Finance Committee—led by current Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT)—released a comprehensive report detailing recommendations on combating waste, fraud and abuse in the Medicare and Medicaid programs. The report is a compilation of recommendations received from more than 160 health care industry stakeholders following a solicitation of such information in May 2012, and also includes proposals from the group of Senate Finance leaders themselves.

Senators Baucus and Hatch were joined by Senators Tom Coburn (R-OK), Ron Wyden (D-OR), Chuck Grassley (R-IA) and Tom Carper (D-DE) in soliciting the recommendations and releasing the report. In the coming months, this group of six intend to work not only within the Finance Committee—which has jurisdiction over Medicare and Medicaid—but also with other relevant Senate Committees, the Centers for Medicare and Medicaid Services (CMS), other appropriate federal agencies and interested stakeholders.

Specifically, the bipartisan report focuses on five key themes: improper payments; beneficiary protection; audit burden; data management; and enforcement. Several changes of note—some of which are within CMS’ authority to make and will not require legislation—include:

• Increasing state Medicaid anti-fraud program funding;
• Making changes to payment policies that tend to lead to waste, fraud and abuse due to inconsistent pricing;
• Requiring the Centers for Medicare and Medicaid Services (CMS) to use currently un-utilized statutory authorities, such as mandatory compliance programs;
• Making operational changes with regard to CMS audit contractors, in order to promote efficiency and effectiveness;
• Clarifying appropriate settings for care (inpatient vs. outpatient, for example); and
• Creating a balance between Medicare contractor incentives for identifying overpayments versus penalties when findings are overturned through appeals to CMS.

Upon the report’s release, Chairman Baucus noted that the Committee had received nearly 2,000 pages of input from stakeholders. “Now we must take these ideas and put them to work and strengthen Medicare and Medicaid, ensuring the programs continue to care for those they serve,” Baucus stated.

The Finance Committee press release with a link to the full PDF report can be found here.

As these recommendations advance, we can assist clients in expressing any ideas or concerns to relevant legislators and policymakers.

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by Anne W. Hance and Amy M. Gordon

The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) released on January 30, 2013, two proposed rules and a final rule relating to the Affordable Care Act’s (ACA) requirement that individuals maintain “minimum essential coverage” (MEC) or be subject to a “shared responsibility” payment.

• IRS Final Rule: The IRS issued final regulations in May 2012 addressing eligibility for the health insurance premium tax credit, which is available to certain low-income individuals purchasing a qualified health plan on a health insurance exchange.  The January 30, 2013 final rule supplements these regulations by finalizing the requirement that “affordability” of coverage available for the employee under an employer-sponsored group health plan is determined based on self-only coverage (and not family coverage).
• IRS Proposed Rule: The proposed rule addresses (1) the obligation each taxpayer has to make a “shared responsibility payment” for himself, herself and any dependents who, for a calendar month, do not have MEC, and (2) exemptions to this payment obligation.  The limited exceptions for this payment obligation include individuals who lack access to affordable MEC.  The proposed rule addresses the difference in determining affordable MEC for an employee eligible for coverage under a group health plan (as described above) versus affordability for a “related individual.”  A “related individual” is one for whom an Internal Revenue Code Section 151 deduction can be claimed.
• HHS Proposed Rule: The HHS proposed rule sets forth standards and processes by which a health insurance exchange will make eligibility determinations and grant exemptions from the shared responsibility payment.  This proposed rule also (1) identifies certain types of coverage deemed to be MEC , and (2) sets forth standards by which HHS may designate certain health benefits coverage as MEC. 
  
  

  For example, self-funded student health insurance coverage and Medicare Advantage Plans are proposed to be designated as MEC.  Additionally, sponsors of other types of coverage that meet designated criteria, such as providing consumer protections required by the Affordable Care Act, may apply to HHS for recognition as MEC.

Next Steps

Health insurance issuers will want to consider whether the various products they offer or administer will meet the MEC requirements set forth in HHS’s proposed rule, in order to respond to inquiries from customers, to meet notice requirements (including inserting model statements into existing plan documents, as applicable), and potentially to respond to exchanges making eligibility determinations.  If a product does not constitute MEC, issuers may want to consider whether to continue to offer the product in its current form or revise the coverage to meet the MEC requirements.

Sponsors of group health plans will need to consider the separate affordability standards for employees and for related individuals and the implications for group health plan participants, and either modify coverage to meet the MEC standards, or consider the consequences of the shared responsibility payment.

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by Stephen Wu

During an American Bar Association (ABA) program on antitrust and health care issues on October 1, 2012, U.S. Federal Trade Commission (FTC) Deputy Director for Health Care and Antitrust, Leemore Dafny, said that the FTC will focus on how patients purportedly react to price increases, as measured by "diversion ratios," when deciding which hospital mergers to investigate further for potential anticompetitive effects. 

Dafny stated that the FTC will focus on diversion ratios rather than geographic markets because relying on geographic market overlaps in hospital mergers may do a poor job of identifying the true source of potential competition problems.  Instead, the FTC has and will continue to evaluate hospital mergers to look at whether patients would be willing and able to substitute one hospital for the other if one hospital decided to raise prices for services, using the diversion ratio or the proportion of patients who would switch between them in response to a change in prices.  Importantly, the diversion ratio does not rely on any one particular geographic market definition to give the FTC what it believes to be an accurate idea of how a hospital merger might affect competition. 

To the extent the FTC considers geography, its staff begins by examining the primary service area of the hospitals – the area from which the hospitals draw about 75 percent of their patients – when conducting a preliminary evaluation of a merger to determine whether overlaps exist.  According to Dafny, the more significant the overlaps, the higher the likelihood of a potential competition problem.

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by Amy Hooper Kearbey and Eric Zimmerman

The Facts

On August 1, 2012, the Centers for Medicare & Medicaid Services (CMS) posted the Inpatient Prospective Payment System (IPPS) final rule for fiscal year 2013.  In the rule, CMS finalized a revision to its regulations to address situations where a hospital was incorrectly classified as a Sole Community Hospital (SCH).  Under the revised regulation, an SCH is required to report “any factor or information that could have affected its initial classification [as an SCH].”  If a hospital makes such a report, and CMS subsequently determines that the hospital should not have been classified as an SCH initially, CMS will revoke SCH status effective 30 days after CMS’s determination.  If the hospital fails to report, CMS may recoup overpayments consistent with existing reopening rules  (i.e. for cost reporting periods that are within the 3-year reopening period).

CMS’s proposed rulemaking drew a number of comments from stakeholders.  Although CMS addressed several concerns raised in the comments, CMS did not respond to questions regarding the level of due diligence that a hospital is expected to exercise to discover errors in its initial classification as an SCH status or the extent to which a hospital should be able to rely on CMS’s final determination regarding SCH status.  In particular, stakeholders requested that CMS incorporate an express “awareness” requirement into the regulatory language, such that a hospital has a duty to report only if it becomes aware of a factor or information that could have affected its initial classification as an SCH, but CMS declined to do so.  CMS instead instructed that a hospital must report if it “suspects that it should not have qualified as an SCH,” without addressing what standard would be used to determine whether a hospital should have had a suspicion about its SCH classification.  Stakeholders also requested that CMS expressly clarify that only the regulations and interpretations that were effective at the time of the initial classification are relevant.  CMS confirmed this in the preamble, but it did not incorporate this concept into the regulatory language.

What’s at Stake

The new regulation calls into question whether a hospital can rely on CMS’s determination that the hospital qualifies for SCH status.  The regulation also creates a meaningful incentive to report any suspicion regarding SCH status because the financial implications of not reporting are significant – the potential for retrospective revocation for all cost reports subject to reopening. 

While this issue is of particular concern to SCHs, all hospitals should take note of CMS’s view that a hospital may not always rely on a final determination rendered by the Agency.

Steps to Consider

SCHs that have reason to suspect that they may not have initially satisfied all of the qualification criteria required for SCH status should consider investigating that suspicion, and making a report to CMS to avoid severe recoupments for failing to report.  Because of the significant legal and reimbursement implications associated with these investigations and reports, it is advisable to conduct these activities under the oversight of legal counsel.

In addition to the new regulatory requirement regarding initial classifications, SCHs should continue to be mindful of existing regulations at 42 C.F.R. § 412.92 that require the hospital to monitor certain changes to the circumstances under which it qualified for SCH status, such as the opening of a new hospital in the area or a change to the hospital’s geographic classification, and to report such changes to CMS.

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by Jon B. Dubrow and Carla A. R. Hine

Today the Federal Trade Commission (FTC) announced proposed changes to the Hart-Scott-Rodino (HSR) premerger notification rules that will impact the types of transactions for which pharmaceutical companies will be required to file HSR notifications with the Department of Justice and FTC.  The proposed rulemaking is meant to clarify when a transfer of exclusive rights to a patent in the pharmaceutical industry results in a potentially reportable acquisition of assets under the HSR Act.

Previously -- although never actually codified -- the FTC would determine whether the transfer of rights to a patent (usually in the form of a license) was a reportable event under the HSR Act by focusing on whether the licensor transferred the exclusive rights to "make, use and sell" under a patent.  The emphasis on the transfer of the exclusive right to manufacture would result in scenarios where parties would not be required to report the transfer of patent rights because although the licensor transferred the rights to commercialize the product, it retained the right to manufacture the product.

In an effort to place substance over form, the proposed rulemaking instead suggests an "all commercially significant rights" test, where a transfer of "the exclusive rights to a patent that allow only the recipient of the exclusive patent rights to use the patent in a particular therapeutic area (or specific indication within a therapeutic area)" would constitute a potentially reportable acquisition of assets if the size-of-transaction and size-of-person (if applicable) thresholds are met, and no exemption is applicable.  The proposed rules further explain that all commercially significant rights are transferred even if the patent holder retains limited manufacturing rights to provide the licensee with product(s) covered by the patent, or co-rights to assist the licensee in developing and commercializing the product(s) covered by the patent.  Please note that this rule would only apply to patents within the pharmaceutical industry (as this is the industry in which these scenarios most often occur).

The text of the proposed rulemaking can be found here.  The FTC is accepting comments until October 25, 2012.

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by Andrea M. Bergman, Teddy Eynon, Karen S. Sealander and Eric Zimmerman

On February 17, 2012, Congress approved the Middle Class Tax Relief and Job Creation Act of 2012, ending debate over the extension of payroll tax reductions, unemployment insurance benefits, and numerous Medicare and Medicaid payment provisions, most of which were set to expire at the end of February. This White Paper provides an overview of the most significant Medicare- and Medicaid-related provisions in the act.

To read the full article, click here. 

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by Teddy Eynon, Karen S. Sealander and Eric Zimmerman

The Temporary Payroll Tax Cut Continuation Act of 2011 extends numerous expiring Medicare and Medicaid programs, thus sparing physicians, hospitals and other health care providers significant Medicare and Medicaid payment cuts.  This On the Subject provides an overview of the most significant Medicare- and Medicaid-related provisions in the Temporary Continuation Act.

To read the full article, please click here. 

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by Bernadette M. Broccolo, Emily J. Cook, Lesley N. DeRenzo, Susan S. Lee and Joan Polacheck

The U.S. Centers for Medicare & Medicaid Services (CMS) released a proposed rule implementing the "Sunshine" provisions of the Affordable Care Act (ACA) that requires annual public reporting by certain drug and device manufacturers of payments made by them to physicians and teaching hospitals and of physician ownership interests in such manufacturers.  The "Sunshine" provisions of the ACA also require group purchasing organizations to make annual public reports of physician ownership interests in such organizations.  CMS is accepting comments on its proposed rule through February 17, 2012.

To read the full article, please click here. 

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McDermott Will & Emery is pleased to provide this supplemental matrix to its original White Paper summarizing and evaluating the Centers for Medicare & Medicaid Services (CMS) proposed Medicare Shared Savings Program (MSSP) regulations.  As did the original White Paper, the matrix provides both a summary of, and commentary on, CMS’s recently published final regulations.  The matrix, which is intended to be read together with the original White Paper, “The Controversial Draft Medicare ACO Regulations: Analysis, Comments and Recommended Action,” includes page-by-page cross-references identifying changes between the Proposed Rule and the Final Rule, as well as McDermott commentary and recommended action items.  Readers should consult both the White Paper and the updated matrix when navigating through the Final Rule’s requirements.  We hope that you find this update and the original White Paper to be a useful and valuable resource and strategic planning tool as you evaluate your organization’s participation in the MSSP.  The authors and editors of these documents, as well as other McDermott lawyers with substantial experience and knowledge in the many issues raised by the MSSP, are available to respond to your questions and to facilitate your consideration and pursuit of shared savings programs.

For more information, please contact your regular McDermott Will & Emery lawyer or an editor: 

Editor:
Gary Davis:  +1 305 347 6520 gsdavis@mwe.com

Contributing Editor:
Eric Zimmerman:  +1 202 756 8148 ezimmerman@mwe.com

Click here to view the Supplemental Matrix in Adobe PDF format.

Please click here to view the original White Paper in Adobe PDF format.

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