OPM released its annual call letter for FEHB plan benefit and rate proposals which kicks off the 2012 OPM contract year. Carriers must file their benefit and rate proposals by the end of May 2011 and then OPM and the carrier settle on benefits and rates by the end of August. Then OPM and the carriers prepare for the Open Season which occurs from mid November through mid December.

At the OPM carrier conference yesterday, OPM’s Director highlighted the contents of the call letter as discussed in reports found in the Washington Post and Govexec.com

OPM released yesterday a benefits administration letter about the upcoming Open Season for the Federal Long Term Care Insurance Program. The Open Season will run from April 4 through June 24, 2011. Here’s a link to FAQs about this Open Season.

Also yesterday, the Department of Health and Human Services released to Congress and the public a national strategy to improve healthcare quality. National Underwriter notes that

Drafters mention the cost of care briefly in the new National Strategy for Quality Improvement in Health Care, a document that is supposed to shape U.S. quality improvement efforts. * * * To reduce costs, officials say, “the National Quality Strategy will foster care strategies that reduce redundant and harmful care, for example, by reducing health care-acquired conditions; establish common measures that will help assess the cost impact of new programs and payment systems.”

The New York Times reports on Washington State’s health technology assessment committee which determines which medical devices and procedures will be covered under the State’s Medicaid and state employee health programs. The Times describes the committee “as a living laboratory of the complexities of applying evidence-based medicine, something that is becoming more common as a way to rein in health care costs.” The Affordable Care Act created a Patient Centered Outcomes Research Institute to make similar decisions for the Medicare Program. This organization will be funded with per capita fees imposed on health plans beginning later this year (January 1, 2012, for the FEHB Program).

The AMA News reports that the Medicare Rights Center has convinced a federal judge in New York City to rule that the Medicare program must cover off label prescription drugs “when the treatment is medically necessary [according to peer reviewed literature even if] the use is not described in an official medical compendium [of approved off label uses].”  When the Food and Drug Administration (“FDA”) approves a prescription drug for the market because testing has proved the drug to be effective and safe, the agency also approves a “label” for the drug. Under the FDA’s rules, the manufacturer must market the drug strictly in accordance with the labelled uses, but with the exception of controlled substances, doctors can decide to prescribe the drug for so-called off label uses as the American Cancer Society explains.

The American Medical News also includes a helpful report on how to avoid data breaches.

Kaufman, Rossin & Co., an accounting firm in South Florida, issued a report in February that found practices and hospitals are more likely to experience a breach because of an employee losing a thumb drive, mobile device or stack of paper files than because they were targeted for a malicious hacking.

The firm analyzed 166 breaches affecting 500 or more patients that were reported to HHS’ Office for Civil Rights from September 2009 to September 2010 and found that theft and loss were the leading causes.

“Humans truly are the biggest vulnerability within an organization with regard to security and privacy,” said Rebecca Herold, a privacy and data security consultant based in Iowa.

Common sense truly is a wonderful trait.

Because Congress has recessed for the upcoming week, this week’s exciting event surely will be the FEHB Plan Carrier Conference sponsored by OPM and America’s Health Insurance Plans. Right around the time of the conference, OPM issues its annual “call letter” to carriers. The call letter initiates the benefit and rate renewal process for the next year. Benefit and rate proposals according to OPM’s regulations must be submitted by the end of May.

In 2008, several FEHBP annuitant enrollees who were over 65 sued the Department of Health and Human Services in the federal district court here in D.C. to decouple Medicare Part A from Social Security benefits. The plaintiffs wanted primary coverage under their FEHB  plans but HHS ruled that they could not refuse Medicare Part A without forfeiting their Social Security benefits. Last week, U.S. District Judge Rosemary Collyer entered summary judgment for the government. The Court in its opinion concluded that Medicare Part A coverage is statutorily mandated for Social Security recipients.

The Washington Post reported on a trend that the FEHBlog has noticed — health insurers are expanding outside of their core businesses in the wake of the Affordable Care Act. No doubt this sensible trend will continue.

The President signed into law today a new continuing resolution funding the federal government until April 8, 2011.

The Labor Department today issued a technical release (2011-01) extending the grace periods from enforcement of several new Affordable Care Act requirements on group health plans, including FEHB plans — most significantly the requirements for a 24 hour time frame (instead of the long standing 72 hour time frame) for making urgent care claims decisions, providing notices in a culturally and linguistically appropriate manner, and disclosing diagnosis codes and treatment codes and their corresponding meanings on explanations of benefits (thereby unnecessarily creating privacy issues).

These requirements created by a July 23, 2010, regulation, apply only to grandfathered plans in the private sector but OPM has decided to apply the claims and internal appeal requirements of that regulation to all FEHB plans. The Affordable Care Act regulators explained that the extended grace period is intended to give them time to publish new regulations necessary or appropriate to implement the internal claims and appeals provisions of PHS Act section 2719(a).

The FEHBlog has discussed the Golinski v. OPM case pending in federal district court in San Francisco. Ms. Golinski is suing for FEHB coverage of her same sex spouse. On Wednesday, the court dismissed Ms.Golinski’s complaint against OPM but allowed the plaintiff an opportunity to amend her complaint to raise the claim that that Section 3 of the Defense of Marriage Act is unconstitutional. A copy of the opinion is available here.

The House passed on a 271-158 vote a new continuing resolution (H. Joint Res. 48) to fund federal government operations until April 8. The Senate is expected also to approve the CR, and then we shall see whether a bi-partisan deal on the FY 2011 budget can be struck during the next three weeks. The Washington Post points out that this new “CR may also be the last, given the fraying support for short-term fixes among House Republicans, as well as from President Obama.”  Politico reports that no budget deal is imminent.

The Congressional Budget Office published yesterday its periodic report identifying policy options available to Congress to reduce the deficit. As the Federal Times points out, one option that CBO presents is to give federal employees vouchers to pay for FEHBP coverage. Currently, the federal government contributes 72% of the enrollment weighted average premium capped at 25% of the selected plan’s premium. Under the CBO option report, p. 37), federal employees and annuitants would receive  “a voucher that would cover roughly the first $5,000 of an individual premium or the first $11,000 of a family premium beginning on January 1, 2013.” The idea would be to provide an incentive for FEHBP members to enroll for low cost plans that would be covered in full by the voucher or leave the FEHBP for the state health insurance exchanges created under the Affordable Care Act. The vouchers would increase by the overall inflation rate (the CPI-U). CBO projects $32 billion in savings from this approach over the period 2012 through 2021.

Other ideas include accelerating the implementation and expanding the reach of the high cost health plan or Cadillac plan tax imposed by the Affordable Care Act (increasing government revenues by $300 billion from 2012 through 2021, p. 195) and repealing the Affordable Care Act’s individual mandate (saving the government $282 billion over the period 2012-2021, p. 199). The FEHBlog believes that any such acceleration and expansion of the Cadillac plan tax would drive employers to put their employees and retirees in the state health insurance exchanges. As a side note, Business Insurance reports that the federal goverment subsidy toward COBRA and TCC extension coverage cost the government over $34 billion.

Govexec.com reports that Congress will take action this week to avoid a government shutdown for three weeks beyond this coming Friday March 18. The new continuing resolution funding the federal government would cut an additional $6 billion ($2 billion per week) from FY 2011 appropriations.

The Associated Press reports that the U.S. Court of Appeals for the 11th Circuit has granted the federal government’s motion to accelerate its consideration of the government’s appeal of U.S. District Judge Vinson’s order holding the Affordable Care Act unconstitutional. “The decision means the federal government must file its first set of court papers on the issues in the case by April 4, and the state of Florida has until May 4 to file its papers. The federal government would file additional papers by May 18. The appeals court said it had not made a decision on a request that the initial review be held before all 10 federal judges.”

Modern Healthcare reports that HHS Secretary Sebelius announced that the much anticipated accountable care organization regulation will be issued later this month. ACOs are scheduled to begin participating in the Medicare program next year.

There are two major Affordable Care Act regulations affecting group health plans, including FEHB plans, this month — the regulation governing the uniform explanation of benefits (new Public Health Service Act section 2715) and the regulation governing transparency reporting (new Public Health Service Act section 2715A).

Govexec.com reports that Rep. Stephen Lynch has reintroduced, as H.R. 979, his bill to more strictly regulate prescription benefit managers operating in the FEHB Program.  From the FEHBlog’s perspective, OPM defused the bill in the last Congress by requiring FEHB fee for service plan carriers to contract with the prescription benefit managers (“PBMs”) using transparent pricing.  As Rep. Lynch was unable to move this bill beyond the Federal Workforce subcommittee which he chaired in the last Congress, it’s unlikely that he will have better luck in this Congress.

Speaking of PBM’s, the Chicago Tribune reports that Walgreen’s Pharmacy has agreed to sell its PBM retail unit to Catalyst Health Solutions. Walgreen’s will be retaining the mail order division of its PBM.  Dow Jones adds

While Walgreen will retain its specialty and mail-order pharmacy facilities, Catalyst will manage those benefits for clients, Blair said. The deal also includes an agreement for Catalyst to provide pharmacy-benefit services for Walgreen’s 244,000 active employees plus retirees and dependents, and an agreement to administer the chain’s Prescription Savings Club.

Catalyst is growing quickly through acquisitions, having substantially boosted membership in September when it purchased Independence Blue Cross’s FutureScripts pharmacy benefits-management businesses for $225 million.

The Walgreen deal will swell Catalyst’s membership to 18 million members from 7 million; and annual prescription volume will grow to more than 165 million from 80 million. Those prescriptions account for some 4% of the overall market, according to J.P. Morgan analyst Michael Minchak.

In the sometimes obscure world of drug pricing, Catalyst emphasizes a straightforward business model based on fixed fees, transparent, pass-through drug pricing and localized service.
While Catalyst has won some business from its larger rivals, and retained one of its largest customers in a contract renewal last year, not all of its growth has gone smoothly. For example, it remains unclear whether one of Catalyst’s largest clients, the state of Maryland, will renew a multiyear contract set to expire this year; analysts had expected the contract to be decided months ago, and Catalyst CEO [David] Blair last month said the timing was uncertain.

Business Insurance reports about the release of the 16th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. The survey discussed the impact of Consumer Driven Health Plans or CDHPs which are high deductible plans coupled with health savings accounts or health reimbursement accounts.

Although 53% of employers already had CDHPs in place in 2011, roughly the same percentage as last year, 27% plan to begin offering CDHPs in 2012 according to the survey. In 2002 [before Congress and the IRS gave the green light to CDHPs], just 2% of all employers offered CDHPs.

Employers also are trying to improve CDHP takeup rates by offering employees significant reductions in premium contributions. In 2011, 56% of employers set their employees’ CDHP premium contributions at least 20% lower than contributions for their traditional plan, and 26% of employers more than halved employee contributions compared with other plan types.

Employers that added 10% or more employees to their CDHP enrollment in 2010 vs. 2009 held their health care costs nearly flat, while companies that drove greater CDHP adoption rates reduced their costs by nearly $1,000 per employee, the Towers Watson/NBGH research found.

CDHPs exist in the FEHB Program but the FEHB Act’s contribution formula does not create any incentive for employees to join those plans.  In Congressional testimony yesterday, OPM Director John Berry explained

For most employees, the Government contribution [toward FEHB coverage] equals the lesser of: a) 72 percent of the overall weighted average; or b) 75 percent of the total premium for the plan an employee selects. The amount the employee pays is the balance. In applying this formula to all plan premiums, the result is a 70% average employer contribution, 30% employee contribution.

The Wall Street Journal featured a story yesterday on the problems that an Affordable Care Act provision is creating for pharmacies, doctors, and consumers. That’s the provision which took effect this year limiting health plan and flexible spending account reimbursement of over the counter drugs prescribed by a doctor. In 2003, the Internal Revenue Service interpreted the law to permit health plans and flexible spending accounts to reimburse over the counter drugs. Rather than simply reversing that administrative decision, Congress created this confounding half measure.

Finally, Politico reports that the Justice Department has asked the U.S. Court of Appeals for the 11th Circuit to accelerate its review of Judge Vinson’s decision holding the Affordable Care Act unconstitutional. If the Court grants the motion, then according to the article, the Court could hear oral argument on the appeal in the early summer of this year. All signs point to a Supreme Court decision before next year’s Presidential election.

Reuters reports that the federal government today appealed Judge Vinson’s decision holding the Affordable Care Act unconstitutional to the U.S. Court of Appeals for the Eleventh Circuit.  This step was a condition that Judge Vinson placed last week on staying his decision pending an appeal. 

The Washington Post reports that House Speaker John Boehner (R Ohio) is convening a meeting of the Bipartisan Legal Advisory Group.  This is the first step in a process that is expected to lead to the House of Representatives intervening in the various lawsuits challenging the constitutionality of Section 3 of the Defense of Marriage Act. The Justice Department has decided that it can no longer defend this law which prevents same sex spouses from receiving FEHB coverage, among other federal benefits.

In other legal action, U.S. District Judge Roger Vinson (Northern District of Florida) issued an order last week, at the federal government’s request, staying his decision holding the Affordable Care Act unconstitutional provided that the Justice Department promptly appeals his decision to the U.S. Court of Appeals for the 11th Cir. and seeks expedited review either from that Court or the U.S. Supreme Court.

Last week, the Department of Health and Human Services issued a report on the implementation and operation of the Early Retiree Reinsurance Program in 2010. The Affordable Care Act created the EERP to subsidize group insurance coverage of early retirees (those who retire at age 55 or older but before age 65 when Medicare kicks in). Notwithstanding the fact that (or perhaps because) the FEHB Program has a very large cadre of early retirees, HHS barred FEHBP carriers from participating in the EERP.  Congress appropriated $5 billion of funding for the EERP and insiders joked that the General Motors retiree health plan VEBA would suck up all of the money. The FEHBlog was therefore surprised that the public sector (state and local government health plans) was by far the largest beneficiary of the EERP, receiving 47% of the $535 million disbursed.

While speaking of HHS, it’s worth noting that the Center for Consumer Information and Insurance Oversight, the CMS agency responsible for implementing the Affordable Care Act, has fresh new website which does not share the look of other CMS agency websites.

Finally, the FEHBlog notes two note-worthy New York Times articles over the weekend — one which appears to recognize that health insurance premium increases are tied to health care cost increases and the other on the demise of talk therapy by psychiatrists.

Following up on last Friday’s story about the Golinski case, on Monday, the Government filed a response to the Court’s show cause order. Here’s the upshot — “Pursuant to the instructions of the President, OPM will continue to enforce Section 3 of DOMA [the Defense of Marriage Act — in other words OPM will not extend FEHB Program coverage to same sex spouses] until it is repealed or there is a final judicial finding striking it down.” Although the last Congress might have repealed DOMA, this Congress will not. So it’s up to the judicial system, and Politico reports that the House of Representatives will take action this week to take up the defense of DOMA in court.

Also last month, the FEHBlog discussed a putative class action in San Francisco federal court challenging the validity of the Medicare Part B doctor reimbursement methodology which also has limited FEHBP application. The FEHBlog looked at the Court docket (thank you PACER) and learned that the Court will hear the Government’s motion to dismiss the complaint before considering the class action application. The Court has scheduled oral argument on the motion to dismiss for October 14, 2011.

Earlier today, the Senate joined the House in voting for a two week extension of the continuing resolution funding the federal government. The new CR, will expire on March 18, calls for $4 billion in federal spending cuts identified by the President. The President signed the measure into law, according to the Washington Post. Govexec.com reports that the White House plans to take a more significant role in the next stage of the funding negotiations.

OPM posted on its FY 2012 budget justification on the web today. Its discussion of the FEHBP begins on page 58. Here is OPM’s list of FEHBP related accomplishments for the past and current fiscal years:

FY 2010 Accomplishments:
Some of the major activities completed in FY 2010 include:
• Revamped Federal Long Term Care Insurance Program (FLTCIP) materials for greater transparency and to promote a better understanding of the insurance products for prospective applicants
• Expanded communication regarding benefits for internal and external customers through the use of focus group and social media
• Used “go green” strategies in to eliminate mail costs for Audit Resolutions, communications to FEHB plans, make the disputed claims process paper–free, increase telework and workplace flexibilities, and review document retention practices to reducing paper dependency and storage
• Maximized our enrollment clearinghouse to identify problematic practices, and piloting an enrollment verification and premium income data base using EHRI data, to reduce Federal agency and FEHB plan discrepancy rates
• Conducted negotiations with carriers to ensure compliance with OPM’s benefits and rate guidance for contract year 2011
• Administered FEHB contracts to ensure that enrollees have access to well-managed and accredited carriers, with competitive healthcare choices and good healthcare benefits
• Conducted the full range of Insurance Operations functions and governmentwide systems support for Open Season activities, audit functions, contract administration, disputed claims, and oversight
• Enhanced web-based information and tools to support employee and annuitant benefits decision making, and fully utilize self service enrollment services
• Provided consultative services to the Department of Health and Human Services’ (DHHS) in standing up the PCIP program and implemented the Federal plan in 23 states and the District of Columbia which did not set up their own plan
• Began developing the FEHBP data collection and analysis capacity. Selected and brought on board dedicated Project Manager and a contractor to provide Project Management Office support

Anticipated FY 2011 Accomplishments:
OPM will continue to improve the FEHBP services during FY 2011 by evaluating quality service and continuing to offer value choices. OPM will be evaluating quality and guiding principles among participating health plans. FEHBP will continue to provide the new tools so enrollees can compare and make informed decisions about health, dental and vision plans and will further enhance the web-based information and tools to support employee and annuitants benefit decisions.
In FY 2011 the HCDW [Health Care Data Warehouse] project will continue implementation activities for the Program Management Office: establishment of the Earned Value Management System and baseline; procurement of a systems integrator; on-board the systems integrator vendor and initiate requirements documentation; and validation activities with the contractor. The System Integrator will stand-up a proto-type version of the anticipated system to streamline requirements documentation and validation activities utilizing a copy of the health claims records maintained by the Office of the Inspector General.

The  Oversight Subcommittee of the House Ways and Means Committee held a hearing today on health care fraud. Interestingly, AHIP President Karen Ignani and Louis Saccoccio, the Executive Director of the National Healthcare Anti-Fraud Association, testified on private sector initiatives to combat health care fraud. Meanwhile, the Wall Street Journal reports on the efforts of Sen. Ron Wyden (D Oregon) and Sen. Chuck Grassley (R Iowa) to open to public view the Medicare claims database information on payments to doctors. That information has been shielded from public view by a 1979 court order obtained by the American Medical Association.