• Medicaid EHR incentive program begins implementation phase
• Expanded options for Medicaid HCBS begin in October
• CMS Actuary questions Medicare Trustee’s projections
• HHS grants help states fight “unreasonable” hikes In health insurance premiums

• ERIC urges adoption of more flexible standard to maintain grandfathered status under Affordable Care Act
• Most large employers will change health plan designs in spite of, or because of, health reform

Medicaid EHR incentive program begins implementation phase

CMS has issued guidance to states on the requirements for receipt of 90 percent federal financial participation (FFP) in their expenditures for implementation of the electronic health records (EHR) incentive program. This program is to be coordinated with the Medicare program and other grants to states to encourage the adoption and meaningful use of EHR by participating Medicaid providers and professionals.

To qualify for the enhanced FFP, states must meet requirements in three areas:(1) administration of the EHR incentive payment program; (2) oversight of providers’ eligibility for and use of the incentive payments, including reporting mechanisms and routine tracking of providers’; attestations; and (3) pursuit of initiatives that encourage adoption of EHR and the exchange health information through the EHR technology.

State Medicaid programs are encouraged to partner with other payers and/or federally funded programs to share the cost of systems and equipment needed for implementation. All costs must be allocated equitably according to the principles outlined in 42 C.F.R. 495.358. The State Medicaid Health Information Technology Plan should be consistent with the state’s overall strategy developed pursuant to section 3013 of the Public Health Service Act, and the states’ expenditures and activities should be consistent with the projections made in the implementation planning documents. Both documents must be approved by CMS before the Medicaid agency begins the implementation activities.

States’ oversight activities must include audits to verify the eligibility of professionals seeking incentive payments, specifically, that the professionals are not hospital-based, have not been sanctioned, and are properly credentialed in the required professions. Professionals’ attestations concerning the population served must be checked against other available data such as claims. They also must develop a system to verify that the professional adopts, implements or upgrades a certified EHR technology, checking professionals’ attestations against the list of certified technologies and combinations of technologies. The states must develop an appeals process for providers who dispute the Medicaid agency’s determinations.

CMS and states also will share the use of a National Level Repository (NLR) of data to avoid duplicate payments. Audits to verify meaningful use will begin after 2011. States are expected to make a payment within 45 days of verification of the necessary information and to notify the NLR of each payment within five business days.

CMS will determine the expenses that will be matched at 90 percent by applying certain guiding principles. The expenditures must: (1) directly accelerate the adoption, implementation or meaningful use of EHR technology; (2) not be reimbursable as Medicaid Management Information Systems expenditures; (3) be consistent with the plan and priorities outlined by the office of the National Coordinator for Health Information Technology; (4) not duplicate efforts directed to similar populations; (5) be allocated appropriately among all parties who will benefit from them; (6) meet the requirements of the regulations; and (7) be short-term projects that will be integrated into the Medicaid program and have sustainable outcomes within a reasonable period of time.

CMS Letter to State Medicaid Directors, No. SMDL-10-016, August 17, 2010.

Expanded options for Medicaid HCBS begin in October

CMS has issued guidance to assist state Medicaid agencies in expanding the optional home- and community-based services (HCBS) benefits using the flexibility offered under the Patient Protection and Affordable Care Act (PPACA). States that choose to amend their Medicaid plans to add or expand the HCBS benefit as of October 1, 2010, must submit their proposed state plan amendments (SPA) by December 31, 2010.

The Deficit Reduction Act of 2005 (DRA) allowed states to offer HCBS as an optional benefit under the state plan. The benefits were limited to individuals with income up to 150 percent of the federal poverty level (FPL). States were permitted to cap enrollment and to maintain waiting lists, and they were not required to offer benefits statewide. PPACA amended Soc. Sec. Act Sec. 1915(i) to allow state Medicaid programs to target HCBS to specific populations and tailor the benefit to their needs. However, states exercising the new options may not limit the number of eligible individuals who may receive the benefit, nor may they create waiting lists. All benefits must be offered statewide, and members of a targeted population must have access to the services regardless of their location. The Deficit Reduction Act of 2005 (DRA) allowed states to offer HCBS as an optional benefit under the state plan. The benefits were limited to individuals with income up to 150 percent of the federal poverty level (FPL). States were permitted to cap enrollment and to maintain waiting lists, and they were not required to offer benefits statewide. PPACA amended Soc. Sec. Act Sec. 1915(i) to allow state Medicaid programs to target HCBS to specific populations and tailor the benefit to their needs. However, states exercising the new options may not limit the number of eligible individuals who may receive the benefit, nor may they create waiting lists. All benefits must be offered statewide, and members of a targeted population must have access to the services regardless of their location.

States may seek approval of plans to add the optional benefits for five years at a time. During the first five-year period, they may phase in the new benefit, if they do, the phase-in must be complete, and the benefit available statewide, by the end of the period. States must report on the projected enrollment each year, and if the actual enrollment exceeds projections, the agency may tighten its needs-based criteria for new enrollees. However, any Medicaid beneficiary who qualified under an earlier, less restrictive standard, must remain eligible and continue to receive benefits for as long as he or she continues to meet those criteria and the state is authorized to offer the benefit.

CMS Letter to State Medicaid Directors, No. SMDL-10-015, August 6, 2010.

CMS Actuary questions Medicare Trustee’s projections

The projected Medicare expenditures in the 2010 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds do not represent the best estimate of actual future Medicare expenditures, according to the CMS Actuary.

The estimates shown in the 2010 Trustees Report are complicated by mandated reductions in payment updates for Medicare services. For example, Medicare payment rates for physician services as determined by the Sustainable Growth Rate (SGR) system are scheduled to be reduced by approximately 30 percent over the next three years. In addition, the recently enacted Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care Education and Reconciliation Act (HCERA) calls for a reduction in payment rate updates equal to the increase in economy-wide multifactor productivity for most of the other categories of Medicare providers. In the view of the Office of the Actuary, and that of the independent outside experts they have consulted, neither of these update reductions is sustainable in the long range, and Congress is very likely to override or otherwise modify these reductions in the future. The Office of the Actuary concludes that it is critically important that Medicare costs, and health care costs in general, be brought in line with the country’/s ability to pay for them.

The Chief Actuary’s projections are available at http://www.cms.gov/ActuarialStudies/Downloads/2010TRAlternativeScenario.pdf

HHS grants help states fight “unreasonable” hikes In health insurance premiums

The Department of Health and Human Services (HHS) has announced grant awards of $1 million each to 45 states and the District of Columbia under the Patient Protection and Affordable Care Act to help improve the oversight of proposed health insurance premium increases, take action against insurers seeking “unreasonable rate hikes, and ensure consumers receive value for their premium dollars.”

The only states not receiving this first round of grants were Alaska, Georgia, Iowa, Minnesota, and Wyoming.

“For too long, insurance companies in many states have increased health insurance premiums with little oversight, transparency, or public accountability,” said Kathleen Sebelius, HHS secretary. “Health insurance premiums have doubled on average during the last ten years, much faster than wages and inflation, putting health coverage out of reach for millions of Americans and business owners. Today, just 26 states and the District of Columbia have the authority to reject a proposed increase that is excessive, lacks justification or otherwise exceeds state standards. Many states that have the authority lack resources to exercise it meaningfully. This lack of authority and resources for states has unfortunately contributed to unjustified premium increases in some states.”

Recent examples of insurance premium hikes reviewed by states, based on public reports, include these:

• In New Mexico, Blue Cross and Blue Shield proposed to raise health insurance premiums by an average of 21 percent on some of its members in the individual market for 2010.
• In Michigan, in 2009, Blue Cross and Blue Shield of Michigan requested approval for premium increases of 56 percent for plans sold on the individual market.
• In Oregon, Regency Blue Cross Blue Shield requested a 20 percent premium increase for 2009.
• In Rhode Island, UnitedHealth, Tufts, and Blue Cross requested 13 percent to 16 percent rate increases for 2009.
• In Washington, in 2007, health insurance premiums for some individual health plans increased by up to 40 percent until the state imposed stiffer premium regulation in 2008.

The Affordable Care Act provides states with $250 million in health insurance premium review grants over a five year period to help create a more level playing field by improving how states review proposed health insurance premium increases and holding insurance companies accountable for unjustified premium increases (Public Health Service Act Sec. 2794). Applications for the first round of Health Insurance Premium Review Grants were available on June 7. Additional resources from this $250 million program will be available in subsequent years to further strengthen state health insurance premium review procedures.

Among the initiatives states have proposed to use this funding are the following:

• Additional legislative authority to strengthen review or require advance approval of proposed health insurance premium increases for reasonableness—15 states and the District of Columbia;
• Expand scope of premium review and preapproval of rate increases for additional health insurance products in the state—21 states and the District of Columbia;
• Require insurance companies to report more extensive information through a new, standardized process to better evaluate proposed premium increases and increase transparency across the marketplace—all 46 state grantees;
• Increase the public transparency of the health insurance premium review process and provide easy-to-understand, consumer friendly information to the public about changes to their premiums—42 states and the District of Columbia; and
• Develop and upgrade technology to streamline data sharing and make information available to consumers more quickly—All grantees.

“States will use these grant dollars in the way that makes the most sense for their insurance consumers,” said Jay Angoff, director of the Office of Consumer Information and Insurance Oversight. “As we continue to implement the new health insurance reform law, we will continue to work with states to ensure they have the tools they need to ensure the stability of the marketplace, keep costs low and provide consumers with increased transparency, choice and quality they need to make the best health care decisions for their businesses and families.”

For more information, visit http://www.healthcare.gov/news/factsheets/rates.html

ERIC urges adoption of more flexible standard to maintain grandfathered status under Affordable Care Act

The ERISA Industry Committee (ERIC) has submitted comments on the interim final regulation arguing that the loss of grandfathered health plan status under the Patient Protection and Affordable Care Act should be limited to significant and fundamental plan changes. The Departments of Health and Human Services (HHS), Labor, and Treasury published the interim final regulation in the June 17 Federal Register.

ERIC’s letter expresses concern over the impact of the grandfather regulation on ERIC members’ ability to provide high-quality affordable health care. In addition, ERIC urges that the final rule should provide more flexibility to plan sponsors to accommodate their need both to control costs and to tailor plan changes to the needs of plan participants.

“Employers must have sufficient flexibility to reflect increasing medical costs in a manner that is most suitable for their employees and their own ability to continue to maintain their plans. What may be appropriate for the demographics of one population could be completely inappropriate for another. The unintended result of imposing an inflexible and unnecessarily narrow interpretation of grandfathering will likely be to generate more plan curtailments and cutbacks and increased costs for participants, all inconsistent with the objectives of the Affordable Care Act,” said Gretchen Young, senior vice president for health policy at ERIC.

ERIC urges that a more general standard be used to maintain grandfather status, rather than relying on a series of rules restricting nearly all changes in benefit structures or contributions. For instance, plans should be able to maintain their grandfathered status if they do not significantly decrease the benefits provided to the average plan participant from one year to the next based on the expected average out-of-pocket costs for participants. This would allow for a more flexible allocation of costs among all plan participants, as appropriate, while still maintaining the sponsors overall support of the plan, the letter explained.

Alternatively, the standard could be based on actuarial equivalence; in this case, the plan would be considered to have retained grandfathered status if it were still the actuarial equivalent of the plan in existence on March 23, 2010.

ERIC specified that elimination of a “non-essential” health benefit should not result in the loss of a plan’s grandfather status. Ms. Young noted, “This requirement goes well beyond the basic thrust of the Affordable Care Act, which, when fully implemented, will not require any health plans to provide benefits that are not ‘essential’ health benefits.”

ERIC also strongly urged that the portion of the regulation tying the elimination of a “necessary element” to diagnose or treat a condition to a loss of grandfather status be removed. “There simply is no uniformly accepted method or procedure available for plans to use to determine what constitutes a ‘necessary element’ to diagnose or treat a condition,” stated Ms. Young.

For more information, visit http://www.eric.org.

Most large employers will change health plan designs in spite of, or because of, health reform

More than half (53 percent) of large employers plan to proceed with health plan design changes for 2011, in spite of the threat of losing grandfathered plan status under health reform, according to a survey from the National Business Group on Health (NBGH). Another 19 percent of large employers have decided to scale back plan design changes for 2011, 19 percent have decided to make no changes, and 9 percent are waiting for federal regulations before they make any decisions. The NBGH survey was conducted prior to the June 17 release of interim final regulations detailing the changes that will cause health plans to lose grandfathered status under the Patient Protection and Affordable Care Act. Grandfathered plans are any group health plans that were in effect on March 23, 2010, the date the Affordable Care Act was enacted. Grandfathered plans are exempt from some, but not all, of the provisions of health reform.

To comply with the Affordable Care Act, most large employers (70 percent) will need to remove lifetime limits on overall benefits; 40 percent will need to remove annual limits on specific benefits such as behavioral health and dental; 26 percent will need to remove annual limits on overall benefits; and 13 percent will need to remove preexisting condition exclusions for dependent children younger than 19 years. In 2011, nearly two-thirds (63 percent, compared with 57 percent in 2010) of respondents plan to raise employees’ share of the premium; 46 percent will raise out-of-pocket costs; and 44 percent will raise in-network deductibles.

Plan Costs

Employers anticipate medical benefits cost increases to average 7 percent for 2010, and 8.9 percent for 2011. About one-fifth (21 percent) of respondents consider a consumer-driven health plan (CDHP) as the most effective cost-control strategy, followed closely by wellness initiatives (20 percent). Wellness initiatives were listed among the top three cost-management strategies.

Three-fifths (61 percent) of large employers say they will offer a CDHP in 2011—64 percent a high deductible health plan (HDHP) with a health savings account (HSA); 21 percent an HDHP with a health reimbursement account (HRA); and 19 percent an HDHP with an HRA and a Sec. 125 medical flexible spending account (FSA). Of those who currently offer a CDHP, 20 percent either already offer or plan to offer the CDHP as the only plan, instead of one of the options. Employers most commonly fund the accounts with a flat preset amount (80 percent do so to an HRA and 68 percent do so to an HSA). Nearly all (95 percent) CDHPs cover preventive services in full with no copayment or deductible, compared with 85 percent of the non-CDHP plans.

In 2011, plan sponsors also plan to raise copayments and/or coinsurance for prescriptions dispensed at retail pharmacies (25 percent of respondents) and at mail-order pharmacy (21 percent). The most effective pharmacy benefit management tools employers cited are preauthorization (73 percent for the entire program overall and 57 percent for expensive specialty drugs); step-therapy (63 percent for the program overall and 51 percent for specialty drugs); and three-tier copayment plan design (63 percent for the program overall). For specialty drugs, utilization management was an important tool for 59 percent of employers.

Retiree Medical

At the time of the survey, most employers (60 percent) that offered retiree medical benefits were still evaluating their strategies with respect to those benefits, partially due to the fact that retiree medical benefit sponsors no longer would be able to deduct from their income taxes the amount of the Medicare retiree drug subsidy (RDS). Two-thirds of retiree medical plan sponsors received the RDS in 2010. Also having an effect on employers’ considerations are the coverage expansion of the Medicare Part D drug benefit and payment reductions to Medicare Advantage plans. More than three-fifths (62 percent) of these plan sponsors planned to apply for the early retiree medical reinsurance reimbursement.

Most employers offered retiree medical benefits to already retired individuals who are younger than age 65 (89 percent) and to Medicare-age retirees (68 percent). Retiree medical offerings are less prevalent for current active individuals (46 percent for all employees, and 33 percent for some employees), and much less for new hires (18 percent for early retirees and 11 percent for Medicare-age retirees). The most popular cost-control strategies for these benefits were capped company contribution (46 percent of sponsors), higher retiree contribution (37 percent), and elimination of coverage for future retirees (33 percent).

For more information on the study, Large Employers’ 2011 Health Plan Design Changes, visit http://www.businessgrouphealth.org.