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

On Friday, December 17, 2010, the National Association of Insurance Commissioners (NAIC) approved a model law for state insurance exchanges. Each state is required under Patient Protection and Affordable Care Act (PPACA) to establish an “American Health Benefit Exchange” by January 1, 2014. 

The NAIC’s American Health Benefit Exchange Model Act provides a basic statutory framework designed to comply with PPACA’s mandates. PPACA has two basic categories of requirements for these state exchanges: (1) minimum functions that the exchanges must undertake, and (2) oversight responsibilities that exchanges must exercise in certifying and monitoring the performance of “quality health plans” (QHPs).

The exchanges are supposed to help individuals obtain QHPs and help small group employers to obtain coverage for employees. According to the Model Act, the “intent of the Exchange is to reduce the number of uninsured, provide a transparent marketplace and consumer education and assist individuals with access to programs, premium assistance tax credits and cost-sharing reductions.”

It is widely understood that states will need plenty of lead time to properly plan and implement exchanges.  Further, PPACA provides that the Secretary can set up and operate an exchange in any state if “the Secretary determines on or before January 1, 2013” that a state will not be able to meet the 2014 deadline.  The U.S. Department of Health and Human Services (HHS) published its first guidance on state insurance exchanges on November 18, 2010.  The first Notice of Proposed Rulemaking for federal regulation governing the state exchanges will be published in early 2011. 

Even states that have joined in court challenges to PPACA have indicated they are moving forward to plan for the insurance exchanges.  In September 2010, forty-eight states and the District of Columbia were awarded their first grants from the federal government under PPACA to be used for planning the implementation of exchanges.  Additional grants to states are available in 2011, but states will have to meet certain milestones in order to be awarded more grants. 

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On December 13, 2010, Judge Henry E. Hudson of the U.S. District Court for the Eastern District of Virginia declared portions of the Patient Protection and Affordable Care Act (PPACA) unconstitutional.  The lawsuit challenging PPACA’s “individual mandate,” which, starting in 2014, requires citizens to pay a penalty if they do not purchase health insurance, was brought by Virginia’s Attorney General, Ken Cuccinelli.

Cuccinelli argued the federal government does not have the constitutional authority to impose the individual mandate.  This marks the first decision by a judge striking down any portion of PPACA.  Final resolution on the “individual mandate” will not be immediate.  Two other federal courts recently rendered decisions upholding PPACA and observers unanimously agree the Supreme Court eventually will determine PPACA’s constitutionality.  Many commentators have suggested for months that, regardless of how the legal issues play out, the relatively modest penalties imposed by the individual mandate would prove insufficient to cause uninsured people to buy health insurance (particularly younger and healthier people) and that Congress might well delay the implementation of the mandate for political reasons.

The December 13 decision needs to be studied carefully, and in relationship to all of the components of the recently enacted U.S. health care reform law.  How and to what extent this ruling affects other aspects of the health reform bill, either directly through legal susceptibility or indirectly due to the practical interdependence of the parts, is yet to be seen.  What is critical, however, and should not be lost in the headlines, is that the result of the PPACA legislation is a transformation of how employers, consumers, insurance companies and providers work together to meet the demand for health care services that can be delivered at lower cost, with higher quality and with outcomes that can be measured that will then serve as a basis for payment.

Regardless of the constitutionality of the insurance mandate, hospitals, physicians and public and private insurers are being pushed and pulled by the market, as well as new government programs, to develop alternatives to fee-for-service payment models.  Patients, employers and public and private insurers will continue to demand that providers focus on outcomes, cost reduction and quality of care.  The underlying market reality will continue to demand that the quality curve bend up and the cost curve down.

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Next week CMS is continuing to hold sessions in its series of regional listening sessions on the subject of “Health Care Delivery System Reform.”

The stated purpose of the listening sessions is to highlight CMS’s reform efforts and also to gain input from stakeholders. CMS organized the regional sessions stating that the Affordable Care Act (ACA) has given it new opportunities to improve the care delivery and payment system, including Accountable Care Organizations (ACOs) under the ACA’s Shared Savings Program. (For information on a prior CMS listening session regarding ACO waivers under the Shared Savings program read McDermott’s On the Subject here.)

Each listening session throughout the country, will spotlight these three areas:

• Shared Savings Program for ACOs
• Center for Medicare and Medicaid Innovation (CMMI)
• Federal Coordinated Health Care Office (FCHCO)

Some of the upcoming listening sessions may be attended via call in numbers.  Other listening sessions are only open for in-person attendance and subject to advanced registration.  The following is the schedule of listening sessions to be held next week according to the CMMI calendar and circulars provided by the Division of Partner Relations at CMS:

Monday, December 13, 2010
Event: Region 10 Listening Session
Time: 12:00 - 2:00 pm PST
Hosts/Panel: Co-hosted by HHS Regional Director Susan Johnson and CMS Regional Administrator John Hammarlund. Dr. Don Berwick, CMS Administrator, will provide opening remarks and Dr. Richard Gilfillan, Acting Director of the CMMI will solicit ideas and feedback from attendees.
Call in Information (if any): None. In person attendance only. Subject to availability, register here.
Location:  Hilton Seattle Airport and Conference Center, 17620 International Blvd, Emerald Ball Room, Seattle, WA 98188

Tuesday, December 14, 2010
Event: CMS Region 2 Listening Session
Time: 2:30 - 4:00 pm EST
Hosts/Panel: Co-hosted by CMS Consortium Administrator James T. Kerr and DHHS Regional Director Dr. Jaime Torres, featuring Dr. Rick Gilfillan, Acting Director, CMMI and Cheryl Powell, Deputy Director for the FCHCO.
Call in Information (if any): +1 800 837 1935; ID Code: 28948644

Thursday, December 16, 2010
Event: Region 4 CMS Listening Session
Time: 1:00 - 2:30 pm EST
Hosts/Panel: Hosted by CMS Regional Administrator, Dr. Renard Murray, featuring Dr. Richard Gilfillan Acting Director, CMMI, and Sharon Donovan, FCHCO; and including Anton Gunn, HHS Regional Director.
Call in Information (if any): +1 800 837 1935; ID Code: 28950540

Friday, December 17, 2010
Event:  Listening Session (last currently scheduled in the series)
Time: 9:30 - 11:30 am CST
Hosts/Panel: Hosted by Dr. Renard Murray, Ph.D., CMS Regional Administrator and featuring Dr. Richard Gilfillan, M.D, Acting Director, CMMI.
Call in Information (if any): None.  In person attendance only. Those interested in attending must register here no later than close of business Wednesday, December 15, 2010.
Location:  Richardson Civic Center, 411 W. Arapaho Road, Ste. 102, Richardson, TX 75080
Questions: CMMI’s website states that questions regarding this session may be directed to the voicemail box at +1 303 844 7130.

Some details of each event are available on the website for CMMI.

A calendar showing the various regional sessions also is on CMMI website.

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The President’s Fiscal Commission Report contains significant recommendations for health care policy that could yet influence policymakers. On December 3, 2010 the Report failed to get the affirmative vote of 14 of the 18 members of the Commission. That may have marked a fork in the road, but is unlikely the end of it. The Report says health care spending “represents our single largest fiscal challenge in the long run” and it offers six recommendations for health policy that policymakers may find appealing.

One recommendation involves actions that CMS can take under the Affordable Care Act (ACA) “without any further congressional action.”  CMS should implement new pilot and demonstration projects “aggressively” and “as rapidly as possible.” The Commission believes that “there could be substantial savings in Medicare, Medicaid, CHIP, and other health programs” if successful pilots are aggressively implemented. 

We note that one idea in the Report, the introduction of “downside risk” to Accountable Care Organizations (ACOs) under the ACA, is already gaining momentum as MedPAC recently recommended that CMS introduce this concept to ACOs.  (For more information, see the On the Subject about MedPAC's comments to CMS.)

The Report also urges the following measures:

• Eliminate the carve out for hospitals and other providers that are currently exempt from changes in Medicare payment policies established by the ACA’s Independent Payment Advisory Board.
• Reform the Sustainable Growth Rate (SGR), known as the “doc fix,” by implementing a three-year freeze at current reimbursement rates followed by a 1 percent cut in 2014, then reinstatement of the SGR in 2015.
• Modify Medicare cost-sharing rules. First, introduce an annual deductible of $550 per beneficiary with coinsurance thereafter until the beneficiary reaches a maximum annual out-of-pocket of $7,500. Second, restrict “first dollar” Medicare supplement insurance, which cause over-utilization of health services.
• Establish a long-term global budget for federal health care spending.
• Eliminate the CLASS Act, which is “viewed by experts as financially unsound.”         

The Report can be found on the Commission’s website at http://www.fiscalcommission.gov. 

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