Changes in the way Medicare pays physicians are set out in a final rule released Oct. 14 by the Centers for Medicare and Medicaid Services (CMS). The rules will increasingly base doctors’ pay on their efficiency and quality of care. Effective Jan. 1, 2017, the rules begin phasing in Medicare’s Quality Payment Program (QPP) which generally offers two approaches to physician compensation: the Alternative Payment Models (APMs) and the Merit-based Incentive Payment System (MIPS). Providers participating in APMs will get higher payments.
The American Medical Association and other physicians' groups said CMS appears to have taken the needs of their members into account in these QPP rules implementing the law, officially known as the Medicare Access and CHIP Reauthorization Act (MACRA). Congress cleared the measure last year with strong bipartisan support. Other changes in the law will require more beneficiaries to pay income-based Part B and Part D premiums and limit future Medicare supplement products.
Final Department of Labor rules explain the nonretaliation protections for employees seeking subsidized health coverage from a public exchange, reporting certain ACA violations by an employer's group health plan, cooperating in ACA investigations or enforcement proceedings, or refusing to engage in activities that could violate the ACA. The rules leave intact interim regulations from 2013, with a few clarifications about complaint procedures and the scope of the law's protections.
IRS has released final instructions and forms for 2016 minimum essential coverage (MEC) reporting (Forms 1094-B and 1095-B) which health insurers and some self-insured employers will use to report MEC provided to individuals in 2016. IRS uses MEC reported on the forms to determine whether individuals owe assessments under the ACA's shared-responsibility provisions. IRS has apparently made only minor changes to the 2016 instructions from the version used for 2015 reporting. Drafts of the 2016 employer shared-responsibility forms and instructions that applicable large employers will use to report on coverage offered to employees and their dependents came out earlier this summer.
The reports of steep premium hikes in the public exchanges keep rolling in, raising concerns about their long-term viability. But should we really be worried? Two recent news items make the case for and against a pessimistic view.
Let’s start with the good news, which came in the form of an analysis conducted by the Urban Institute of the actual cost of coverage in public exchanges across the country. The headline? After adjusting for actuarial value and enrollee age, individual unsubsidized premiums on the public exchanges are about 10% lower than the average premium in an employer-sponsored plan. In head-to-head comparisons, the exchange plans cost less in 80% of the markets examined. While the study adjusted for actuarial value, it did not address such differences as network size or provider participation and we know that narrow networks are one of the ways exchange plans are keeping prices low. It does explode the myth that exchange premiums are sky high, because, of course it's all relative -- compared to employer plans, they're not. But compared to the deal that most people get in an employer plan – a 75% to 80% premium subsidy – unsubsidized coverage will seem extremely expensive to anyone who has been covered through an employer plan, or anyone buying coverage for the first time. (And the lack of any tax break for obtaining coverage – only the threat of a tax penalty for not doing so – is not going to help that perception.)
So maybe many exchange plans were priced too low to begin with and increases will stabilize once premiums reach a certain level, closer to that of group plans. The argument against this view was presented in a New York Times article that addressed the pent-up demand for services of many exchange enrollees, comparing it to a high-school football team at a buffet table. Whatever you might think about that metaphor – I can’t quite equate seeking diabetes treatment with seeking a third plate of baked ziti! – the exchange risk pools do present serious challenges. My colleague Tracy Watts had this to say about that: “Everyone knew that the people who really needed access to care would be the first to sign up and use healthcare services. The assumption was that over time, as the individual mandate penalty increased, more healthy people would join. Unfortunately, they have not. While employers experience turnover and changes in the workforce, the risk pools are much more stable than the public exchange.”
Proposed IRS regulations address several Affordable Care Act (ACA) reporting issues for group health plan sponsors and other providers of minimum essential coverage (MEC). The proposals give more detail on MEC providers' obligations to request covered individuals' taxpayer identification numbers (TINs), explain when supplemental MEC doesn't need to be reported, and address the use of truncated TINs, among other things. Employers that sponsor self-funded health coverage and have MEC reporting responsibilities will want to review the proposed rules, particularly the provisions on TIN solicitations.
New Health and Human Services (HHS) FAQs offer guidance on the non-English taglines required under final rules implementing Section 1557 of the ACA. Employers and employer-sponsored group health plans covered by the rules -- which appear to include most hospitals and health systems, as well as entities receiving retiree drug subsidy payments from HHS -- must comply with notice and tagline requirements by Oct. 16, 2016.
A federal court in Wisconsin has ruled that an employer may not rely on the Americans with Disabilities Act (ADA) safe harbor for bona fide benefit plans to justify incentives under its wellness program. But the court still decided the wellness program met the ADA exception for voluntary medical exams, even though employees who declined to participate in a health risk assessment had to pay the full cost of their health coverage. This is the first ruling to find the ADA safe harbor for bona fide benefit plans does not apply to wellness programs under the final Equal Employment Opportunity Commission rules. The court did not apply the 30% limit on incentives in the EEOC rules as it concluded that component of the rule does not apply retroactively (the case involved incentives offered in 2009).
First, let’s put public exchange enrollment in perspective. It’s a relatively small piece of the pie, although you wouldn’t know it from the amount of attention it gets. In a Wall Street Journal article, Drew Altman reminds us “about 11 million people are enrolled in the marketplaces. More than 13 times that many, around 150 million, have coverage through employers, and there are 66 million people in Medicaid and 55 million in Medicare. The marketplaces are an important part of Obamacare. However, more uninsured people have been covered by Medicaid expansions than in the marketplaces, even though 19 states have not expanded Medicaid. Millions of young adults have been covered on their parents’ employer plans.” Another important point: 24 million Americans still do not have coverage, a number that would be smaller if all states had expanded Medicaid.
Here’s my take on what’s going on in the public exchanges -- and how it may affect employers.
- The Risk Pool is still risky. It was expected that the first people to enroll in the public plans would be those previously uninsured and in need of care -- and hence, more costly. Analysis done by CMS documents very little change in the per member per month medical cost from 2014 to 2015. While it may appear the risk pool is stable, the bad news is that it is not getting better. The expectation was that the risk pool would improve over the years as healthier people sign up. So far, that hasn’t been the case. The “young invincibles” are still not signing up, likely because the individual mandate penalty is still considerably lower than the cost of coverage
- Big-name carriers are losing money and leaving the market. To be sure, some regional players are entering the market, but overall it appears that fewer insurers will participate in the marketplaces in 2017. That means less competition among those that remain and thus less downward pressure on costs. As the WSJ article points out, affordability is very important in the individual market. Those not relying on a government subsidy may find more choices on the “off exchange” individual market. There are also implications for employers: cost shifting to group plans. When carriers lose money in one market segment, they try to make it up where they can.
- Estimates for premium cost increases for 2017 now range from 11% to 23%. A person enrolled in the exchange this year who is looking to minimize their cost increase in 2017 would need to switch to a lower cost plan -- and then would still likely see an 11% premium increase, according to a McKinsey analysis of 18 state exchanges and the District of Columbia. The situation could be even worse in the other states that have not yet filed their premiums for next year. Blue Cross Blue Shield has requested a 62 percent increase for next year in Tennessee and an average 65 percent increase in Arizona. See #1 above for why insurers are raising rates so sharply.
- Plans with limited provider networks have been popular. The reward for agreeing to a limited network of providers is a lower price tag for the plan. The downside is that members may have to change doctors, which is also the case when employers implement a narrow network plan. But if most plans on the exchange are narrow network plans, it becomes a less attractive option for early retirees, because the longer you have had a physician relationship -- and/or the greater your health care needs -- the more important those relationships are.
- Satisfaction is high among those previously uninsured; not so for those coming to the exchange from employer plans. Over time, exchange plans have begun to look very much like Medicaid plans, but with higher cost sharing. The impact of higher cost-sharing is mitigated by federal subsidies for much of the population with exchange coverage, which may be why they are generally satisfied with their coverage despite limited plan options and limited provider choices. But in most states, a relatively small number of individuals are willing to pay the full cost of the coverage that’s available on the exchange.
This last item -- on satisfaction -- is important. The exchanges are new and have real problems that need to be addressed through some policy changes and greater enrollment. (Policymakers might want to study how employers, through a lot of hard work, have stabilized cost increases at about 4% over the past five years.) As the satisfaction data shows, the exchanges are clearly filling a critical unmet need for Americans who previously lacked access to decent coverage. But so far, they are not delivering an acceptable alternative to employer-sponsored coverage. Unless that changes, they will always play a limited role in the U.S. healthcare system.
Annual cost-sharing limits for nongrandfathered group health plans would increase to $7,350 for individuals and $14,700 for families in 2018, under a recent CMS proposal. This marks a 2.8% increase from the 2017 limits, which cap out-of-pocket costs for in-network covered essential health benefits under nongrandfathered group health plans at $7,150 for self-only coverage and $14,300 for broader coverage.
Applying the same premium adjustment percentage to employer shared-responsibility assessments, the play-or-pay assessment for not offering coverage would increase to $2,320, while the assessment for offering coverage that is unaffordable or lacks minimum value would increase to $3,480 for 2018.
The Department of Health and Human Services' Office for Civil Rights (OCR) has launched an initiative to more widely investigate HIPAA breaches affecting fewer than 500 individuals. Historically, investigations have focused on breaches involving protected health information (PHI) of 500 or more individuals, but OCR now intends to shift more attention to the root causes of smaller breaches. OCR believes breach investigations allow it to better understand industry-wide compliance problems as well as compel corrections for entity-specific deficiencies.
The IRS has released draft instructions for 2016 Forms 1094-B and 1095-B, confirming that health insurers and self-insured employers can expect few changes when reporting minimum essential coverage (MEC) provided to individuals in 2016. The Service posted preliminary 2016 versions of these forms in June, but instructions noting what's new became available only last week. The IRS uses data from this reporting to administer assessments under the Affordable Care Act’s individual mandate provisions. Separately, the IRS earlier released draft 2016 employer shared-responsibility forms and instructions that applicable large employers will use to report coverage offered to employees and their dependents.
The IRS has released draft instructions for 2016 Forms 1094-C and 1095-C, highlighting changes that employers can expect when reporting health coverage offered to full-time employees and dependents in 2016. The instructions give more detail about the minor revisions shown on the 2016 draft forms issued last month. The IRS uses data from this reporting to administer Affordable Care Act (ACA) assessments on employers and individuals, as well as eligibility for premium subsidies on the public insurance exchanges.
Employee Benefits News posted a slideshow illustrating the differences between Clinton and Trump on the current state of healthcare in the US. Spoiler alert: there are not that many differences! The areas where they are aligned include:
- Cadillac tax – both want it repealed
- Cost – both think it needs to go down
- Prescription drug costs – both want Medicare to set drug prices
- Insurer consolidation – both oppose
- Transparency – both support
The two major differences are the ACA – Clinton supports with tweaks; Trump wants it repealed, mostly. The other is Medicare-for-all/single payer – Clinton favors the ACA; Trump wants to repeal the ACA and is “open” to some kind of free healthcare option or single payer system.
Trump has been vocal on two additional health benefit issues – purchasing insurance across state lines (check out my prior blog post) and support/expansion of consumer directed health plans and health savings accounts. Clinton has not publicly addressed these two topics so we are not sure if she is aligned on these, or not.
Likely not the last we will be hearing on this topic as the campaigns move full steam ahead.
Mental health parity is nowhere close to the top of most lists of benefit concerns. After all, the Mental Health Parity and Addiction Equity Act (MHPAEA) is eight years old and has never received the attention paid to other laws. Its rules are complex, requiring comparison of mental health/substance use disorder benefits with medical/surgical benefits in six separate classifications.
It is a mistake to ignore the MHPAEA, though, for at least three reasons.
First, mental health issues are abuzz in Washington. Witness increased public awareness of gun violence and opioid abuse. Several bills are pending, including HR 2646, a bi-partisan effort that would strengthen the MHPAEA. Also, earlier this year the President created a Mental Health and Substance Use Disorder Taskforce that will issue a report later this year that will identify gaps in parity implementation and discuss best practices.
Second, the regulatory agencies view mental health parity as a high priority. In May, DOL, Treasury, and HHS clarified in FAQ Part 31 that insurance companies or TPAs performing mental health parity testing cannot base the testing on their book of business. Instead, they must use plan-specific data when available. Also, in early June DOL and HHS provided a list of 15 red flags that indicate an issue with MHPAEA, including differing preauthorization requirements, likelihood of improvement provisions and written treatment plan constraints. DOL reviews mental health parity in its plan audits.
Finally, May’s final §1557 regulations have brought one mental health condition to the forefront: gender dysphoria. Health programs and activities receiving HHS funds cannot discriminate based on gender, among other protected categories. Blanket exclusions based on gender are prohibited -- this includes a broad exclusion of all items and services related to gender transition/re-assignment. Employers covered by final 1557 regulations will potentially have to cover gender reassignment benefits when deemed medically necessary. Mental health parity rules could limit design options as it prohibits stricter cost-sharing (e.g., a lifetime or annual limits) for mental health benefits than applies to medical/surgical benefits in the same classification.
Additional issues arise in varied situations, like carved-out behavioral health and autism spectrum disorder coverage. The challenge is that MHPAEA includes financial requirements, quantitative treatment limitations, and non-quantitative treatment limitations.
What should employers do? At least three things come to mind:
- Review current and future medical plan designs with legal counsel to determine if there are any mental health parity “red flags.”
- Address testing concerns with their insurance company or TPA to assess compliance with the recently issued FAQ.
- Work with a trusted advisor to determine if any other mental health parity issues are lurking “under the hood.”
Democrats convene this week at their national convention in Philadelphia on the heels of last week’s Republican gathering in Cleveland, and while no issue divides the parties as starkly as healthcare, they agree that states should take a leading role in healthcare reform.
The Democrats' platform pledges to “empower the states” to use the Affordable Care Act’s Section 1332 “innovation waivers.” Starting in 2017, these waivers can – if approved by federal regulators – exempt states from one or more key ACA reforms such as the employer mandate, individual mandate, or public health insurance exchanges. The waiver lets a state tailor its own health reform initiative, provided it doesn't reduce the number of insured individuals and adheres to certain other restrictions. States that secure waivers receive federal funds that otherwise would have been spent on public exchange subsidies. Colorado and New York, for example, are considering proposals to pursue waivers to launch single-payer healthcare initiatives.
Other items in the Democratic platform call for allowing people to buy into Medicare starting at age 55, reducing prescription drug costs, capping consumers’ out-of-pocket costs, creating a public insurance plan option, and giving states new incentives for Medicaid expansion.
While the Republican platform calls for repeal of the ACA, it urges restoration of states’ “historic role” as regulators of health insurance and limited federal involvement. The platform also contains several familiar themes including broader distribution of tax breaks for the purchase of healthcare, greater price transparency, and purchasing pools for small businesses and individuals.
The party platforms are more wish lists than to-do lists for a new administration, but they provide key messaging points ahead of the elections and will help frame the policy debate next year.
Before leaving for the conventions, Congress left behind a number of bills with implications for employer health care plans. Lawmakers return after Labor Day for a brief work period before leaving again to campaign ahead of the November election. Certain proposals with bipartisan backing could cross the finish line this year as part of larger tax or spending bills, but most bills, such as one liberalizing HSA rules, face dim prospects.
Mercer’s Washington Resource Group recently released our top 10 compliance priorities for 2017 health benefit planning. There aren’t any surprises on this list. In fact, we’ve recently blogged about many of them. Employee Benefit News created a slide show on our Top 10 and here is a list of related posts and podcasts if you want to take a deeper dive into a topic.
- Wellness Plans (podcast): More innovative designs make it critical to know the new rules that begin on January 1, 2017.
- Essential Health Benefits (podcast): Check those dollar limits and maximum out-of-pocket maximums against updated benchmark plans for 2017.
- Mental Health Parity (podcast): Make sure your benefits are aligned with current law and best practices.
- Employer Shared Responsibility: Affordability (podcast): Know the impact of opt-out cash and flex credits; 30-hour (podcast): Understand what payments must be converted to hours of service; ACA Reporting (podcast): Make sure it’s right – no more good faith standard and the old deadlines return for the 2016 reporting year.
- Preventive care: Modify benefit terms to reflect latest recommendations and guidance on preventive care.
- Summary of Benefits and Coverage (podcast): New model SBC must be used for open enrollments on and after April 1, 2017.
- FLSA overtime rules: It’s not just a compensation issue – don’t forget to consider the benefits implications.
- Expatriate group health plans: Position group health plans covering globally mobile employees to take advantage of ACA relief.
- HIPAA privacy, security, and electronic transactions: Revisit health plans’ privacy and security obligations.
- DOL fiduciary rule: Assess the impact on welfare plans with an investment component.