FEHBlog

The U.S. Office of Personnel Management released guidance to plan carriers today on how the Affordable Care Act changes dependent child coverage rules in the FEHB Progam generally “effective January 1, 2010.” Currently, at a high level, the FEHB Act provides for coverage of unmarried dependent children up to age 22 if the employee or annuitant enrolls for self and family coverage. Here is a summary of the major Affordable Care Act changes outlined in the carrier letter:

• Children between the ages of 22 and 26 are eligible for coverage under their parent’s Self and Family enrollment up to age 26.
• Married children (but NOT their spouse or their own children) are eligible for coverage up to age 26. This is true even if the child is currently under age 22.
• Children who are eligible for or have their own employer-provided health insurance are eligible for coverage up to age 26.
• Stepchildren do not need to live with the enrollee in a parent–child relationship to be eligible for coverage up to age 26.
• Children who are incapable of self-support because of a mental or physical disability that began before age 26 are eligible to continue coverage.
• Beginning January 1, 2011, to add a foster child to a Self and Family enrollment, the foster child must be placed with the enrollee by an authorized placement agency or by judgment, decree or other order of any court of competent jurisdiction.  [OPM] will provide information on the coverage of current foster children in a future carrier letter.

Last Friday was the comment deadline for the June 28 Affordable Care Act implementing interim final rule governing annual and lifetime limits, pre-existing conditions, rescissions and patient protections. The federal government maintains a website where the public can access such comments. The website appears to be a little overloaded because there are only a few comments posted on the age 26 dependent coverage regulation but 400 posted on the grandfathered plan rule — the vast majority of which appear to be in support of the American Chiropractic Association’s comments. But of course we all know that democracy is messy.

Here are interesting comments on the age 26 dependent coverage rule submitted by the Blue Cross Blue Shield Association, Wellpoint, Aetna, the U.S. Chamber of Commerce, and the National Business Group on Health. Hewitt Associates, the benefit consulting firm, have posted on their own web site the comments which that firm submitted on the June 28 regulations.

Business Insurance reported on a United Benefit Advisors health plan survey finding that enrollment in health maintenance organizations has been growing faster than enrollment in consumer driven plans. “Preferred provider organization plans have nearly two-thirds of all enrolled employees, growing to 65.7% this year from 63.9% last year.” FEHB Program enrollment similarly is concentrated in PPO plans.

The regulatory agencies implementing the Affordable Care Act have released promised guidance on the federal external appeal process applicable to non-grandfathered group health plans, typically ERISA governed health plans, effective for plan years beginning on or after September 23, 2010.  For the past 25 years, the FEHB Program has had a successful external appeal process — prescribed by the FEHB Act, 5 USC Section 8902(j) — that culminates in OPM review. The Affordable Care Act gives the Secretary of Health and Human Services the authority to deem existing external review processes compliant with the Act, but this guidance does not even mention the FEHB Program or the status of its external appeal process. That is disappointing to the FEHBlog. Here’s a link to a Business Insurance article on the guidance.

Business Insurance reports today on an Aon Consulting survey of employers with 500 employees or more indicating that “Just over one-third of respondents said their group health care costs rose at least 5% but less than 10% this year, while 18% said costs climbed at least 10% but less than 15%. Twenty-four percent, though, said cost increases were less than 5%, while 5% said cost increases were at least 15% but less than 20%.”  AHIP offers a useful website that brings together various resources explaining why health care costs are increasing (hint — the population is aging and health care providers are raising prices).

A New York Times report earlier this week anticipates that the Health and Human Services Department pulled back the final rule governing notices of breach of unsecured protected health information because the Department plans to remove the common sense harm threshold. The current interim regulation required health care providers, health plans, and their business associates to provide affected individuals of a breach of unsecured protected health information if the breach creates a likelihood of financial or reputational harm to the individual. This threshold is found in the 2007 Office of Management and Budget guidance to federal government agencies on how to handle data breaches. OMB explained then that a harm threshold avoids unnecessarily alarming people. That makes sense to the FEHBlog, but not to the privacy zealots.

The Centers for Medicare and Medicaid Services (CMS) announced last Wednesday that “Based on the bids submitted by [Medicare] Part D [prescription drug] plans for the 2011 plan year, CMS estimates that the average monthly premium that beneficiaries will pay for standard Part D coverage will be $30 — a $1 increase from the current year (2010) average premium of $29.” OPM should announce 2011 FEHB plan premiums in the middle of next month.

Earlier this month, the Congressional Research Service issued a report on the history of the Sustainable Growth Rate (SGR) formula that Congress adopted in the 1990s to annual adjust the Medicare Part B reimbursement formula for physicians. Since 2002, the formula has produced a negative update which Congress has overridden except in the first year, 2002.  The AMA News notes that according to the Medicare trustee’s August 5, 2010, upbeat report on the Medicare program’s solvency

Projected annual spending growth for Part B is estimated to average only 5.3% during the next five years, about the same as the GDP growth rate, the report said. But this assumes deep physician pay cuts will take effect. Unless Congress steps in, physician rates are scheduled to decline 23% on Dec. 1, an additional 6.5% in January 2011 and 2.9% in 2012.

It’s unclear whether Congress will have the opportunity to reevaluate the SGR formula when it returns from recess next month for a short work session before the No fullyvember elections. Congress may kick the SGR can down the road again.

The National Association of Insurance Commissioners at its summer meeting held in Seattle approved the “blanks” that insurers will use to report financial information that state regulators will use to decide whether the insurer is complying with the Affordable Care Act’s new minimum loss ratio requirement.  This is just one of the pieces of this particular Affordable Care Act puzzle. AHIP expressed concerns about the substance of the blanks, but not the process. This provision’s impact on the FEHBP remains foggy.

The National Business Group on Health (“NBGH”) released a report on the results of a survey of 72 large employers which projected their 2011 health care plan costs. Business Insurance reports that the survey finds that employers expect that their costs will increase 8.9% next year compared to 7% this year. The large employers are opting to waive grandfathered plan status under the Affordable Care Act in order to have more flexibility in making benefit changes. According to the Business Insurance report

The NBGH survey of 72 member employers found that 70% will have to amend their plans to eliminate lifetime limits, 26% will have to remove annual dollar limits and 13% will have to remove pre-existing condition exclusions for children under age 19 to comply with the law.
NBGH President Helen Darling estimates that one percentage point of that 8.9% increase projected for 2011 is due to changes required by the law. Cost increases also are being fueled by unabated rate hikes by medical providers, Ms. Darling said.

The Government Accountability Office yesterday released a report on health reimbursement arrangements, a type of consumer driven plan that has been offered in the FEHB Program since 2003. The report indicates that

[B]ased on data from the Office of Personnel Management (OPM)—the agency that administers the Federal Employees Health Benefits Program (FEHBP)—about 57,000 of the nearly 8 million enrollees in the FEHBP were enrolled in CDHPs in 2009. About 42,000 of these FEHBP enrollees were in HRAs and about 15,000 were in HSA-eligible plans.

Those enrollees are concentrated in the APWU, Aetna, GEHA, and MHBP consumer driven options. HRA plans typically feature a higher annual deductible, a personal spending account (or health reimbursement account) and generous preventive care, the idea being to give enrollees some skin in the game. According to the report, “Spending and utilization for enrollees in HRAs generally increased by a smaller amount or decreased compared with those in traditional plans that GAO reviewed.” The GAO also suggested that these options attract better risks than traditional plans.

Congress is now out of session until mid-September. (The Senate returned briefly last week to pass a border security measure.)

The public comment deadline passed last week on the interim final rule implementing the Affordable Care Act’s mandate to cover children up to age 26. Very few of the comments currently are posted on the regulations.gov website. The next Affordable Care Act implementing rule comment deadlines are for the grandfather plan rule (August 16) and the patient protection rules (August 27).

The National Association of Insurance Commissioners is holding its summer meeting this coming week in Seattle. Business Insurance reports today that President Obama changed his schedule and will not be speaking about Affordable Care Act implementation at that meeting.

The NAIC will be discussing Affordable Care implementation at the meeting, in particular, its  recommendations to HHS on the minimum medical loss ratio (“MLR”) now under development. Congressional leaders sent HHS Secretary Sibelius their post-enactment views on the taxes which may be excluded from the calculation.  The Congress leaders want the ratio’s denominator to include federal and state taxes that health insurers currently pay. Modern Healthcare.com reports that the NAIC group looking at the issue reached the opposite conclusion (which in my view is consistent with the express language of the law, new Public Health Service Act Section 2718). 

The House of Representatives returned from vacation today for the purpose of passing a bill that will continue increased federal spending on State Medicaid programs. Modern Healthcare reports that the House took the anticipated action and the President signed the bill into law. The House is in adjournment until September 14.

The Office of Personnel Management released the results of its annual employee survey. This survey looks at job satisfaction, not employee benefits.

The Wall Street Journal is reporting that health insurers, including Aetna, Humana, and United Healthcare, are jumping into the “feeding frenzy” to provide healthcare providers with meaningful electronic healthcare record technology.  “It is an opportunity for insurers to diversify their operations as the federal health overhaul presents new challenges to their core business of collecting premiums and paying claims. In some cases, it is also an opportunity to link doctors more closely to systems to aid in reimbursement or disease management.”

Business Insurance reports on the results of a Hewitt Associates study that

Fifty-one percent of employers with self-funded plans expect their plans to lose grandfathered status in 2011, and 21% expect that to happen in 2012. Forty-six percent of employers with fully insured plans expect to lose grandfathered status in 2011, and 18% expect that in 2012. 

Interestingly the Hewitt press release notes that employers are opting to give up grandfathering in order to have more control over benefit design. That’s not what I expected when the law passed but it’s understandable given the strict regulatory interpretation of grandfathered plan status. The FEHB Program will likely reflect this pattern.

The Senate recessed this week after confirming Elena Kagan as a Supreme Court justice and passing a bill that will provide increased Medicaid funding, among other things. The American Hospital Association is very pleased by this Medicaid development.  House Speaker Nancy Pelosi is calling back the House in order to send this bill to the President for signature, according to the Washington Post.

The Wall Street Journal reports that momentum is building on both sides of the aisle in Congress to repeal or water down the Affordable Health Care Act provision that will vastly expand the IRS 1099-MISC reporting obligation on businesses. The current 1099 reporting requirement generally is limited to reporting purchases of services from individuals and partnerships over $600 in a tax year. Expanded reporting is required for health plan payments to health care providers and business payments to lawyers. The Politico reports on the dueling bills that will taken up shortly after the Senate returns on September 13.

Last year, First Databank implemented a class action settlement under which it agreed to stop publishing the Average Wholesale Prices (AWP) of prescription drugs in September 2011.  AWP is the pricing benchmark that prescription benefit managers often use in their contracts with retail pharmacies and health plans. Since then stakeholders have been evaluating other benchmarks to replace AWP.  AIS Drug Business News reports that

The search to find a replacement for controversial average wholesale price (AWP) data just became a little less urgent, as one of the major drug compendia has decided it will continue publishing the pricing benchmark because of a lack of consensus on possible alternatives.

Wolters Kluwer Health, Inc., publisher of the Medi-Span drug pricing database, has pledged to continue publishing AWP “until relevant industry or governmental organizations develop a viable, generally accepted alternative.” The company says that discontinuing AWP before an industrywide accepted alternative is found “could create significant customer problems and confusion or disruption” throughout the entire industry.

Affordable Care Act implementation grinds on. On August 5, the National Association of Insurance Commissioners (“NAIC”) offered an update on its efforts to make recommendation to the HHS Secretary on implementing the minimum medical loss ratio requirements of the new law. The MLR require the health insurers and HMOs make rebates if the percentage of premium dollars spent on benefits and quality efforts fall below 80% in the individual market and 85% in the group market, which includes the FEHB Program.

Here’s a link to the NAIC’s Affordable Care Act implementation page. (Even the IRS has an Affordable Care Act implementation page.)  Posted on that page is a lengthy, draft memorandum on the work of an NAIC actuarial workgroup that is trying to decipher the MLR provision. The NAIC plans to offers its recommendations to HHS later this month.