C&M Health Law

C&M Health Law

Analysis, commentary, and the latest developments in health care law and policy

HHS Proposes New Regulations Aimed At Stabilizing the Individual Market

Posted in Exchanges, Health Care Reform & ACA
Christine M. ClementsA. Xavier BakerHarsh P. Parikh

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule  to stabilize the individual and small group markets to entice issuers to continue participation in the exchanges in 2018 despite continued uncertainty surrounding repeal and replacement proposals for the Affordable Care Act (ACA). The proposed rule, published today, would make the following changes to the individual and small group markets:

  • Open Enrollment: The proposed rule would shorten the Open Enrollment period from November 1, 2017 – January 31, 2018 to November 1, 2017 – December 15, 2017. This would align open enrollment for exchanges with both the employer market (including the Federal Employees Health Benefits Program) and Medicare Advantage open enrollment periods. CMS hopes that the modifications in enrollment period will mitigate adverse selection by requiring individuals to enroll in plans before the benefit year begins and pay premiums day 1 of the benefit year rather than allowing individuals who learn they will need services in late December and January to enroll at that time.
  • Special Enrollment Period: In response to perceived abuses of special enrollment periods (SEPs)—which allow individuals to enroll outside of the open enrollment period when there is a special circumstance (e.g., new family member)—the proposed rule would require verification of an individual’s SEP eligibility 100% of the time beginning in June 2017. Currently, eligibility for an SEP is verified only 50% of the time. Under pre-enrollment verification for new customers, consumers would submit their information and select a plan but their enrollment would be “pended” until completion of the verification. Consumers would have 30 days to submit information to verify their eligibility. The start date of the coverage would be (as it is today) the date of plan selection, but it wouldn’t be effective until the “pend” had been lifted following verification. The rule is limited to pre-enrollment verification of eligibility to individuals newly enroll through SEPs in marketplaces using the HealthCare.gov platform. The proposed rule would also limit certain individuals’ ability to switch to different levels of coverage during an SEP. The SEP provisions of the proposed rule may offer the most significant relief of all the proposed changes. Continue Reading

ACA Repeal and Replace Update: President Trump’s Executive Order Directs Executive Branch to Minimize the Economic Burden of the ACA

Posted in Exchanges, Health Care Reform & ACA, Medicaid, Tax
Harsh P. Parikh

On January 20, 2017, hours after being sworn in as the 45th president of the United States, President Donald Trump issued Executive Order 13765 that aims to “minimize the unwarranted economic and regulatory burdens” of the Affordable Care Act (ACA) while its repeal is “pending.” 

The one-page Executive Order declares that it is the policy of the Trump Administration to seek a “prompt repeal” of the ACA and directs that the executive branch “take all actions consistent with law to minimize the unwarranted economic and regulatory burdens” of the ACA.  The Executive Order also mandates that all federal agencies, including the Department of Health and Human Services (HHS), “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of” any provision of the ACA that imposes a financial or regulatory burden on any stakeholder including patients, physicians, hospitals and other providers, as well as insurers, medical device manufacturers, and pharmaceutical companies.  Federal agencies are also required to “exercise all authority and discretion available to them to provide greater flexibility to States.”  The Executive Order further instructs agencies “to create a more free and open healthcare market” consistent with ACA replacement proposals to permit the sale of health insurance products across state lines. 

By signing the Executive Order, President Trump signals that his Administration will prioritize changes to federal health care policy in order to lessen the economic impact of the ACA.  The Executive Order could be a signal for HHS to expand hardship waivers to permit individuals to avoid the ACA’s tax penalties for individuals who fail to maintain coverage.  HHS also may provide greater flexibility to states for the administration of Medicaid programs, including by more readily granting waivers under section 1115 of the Social Security Act, 42 U.S.C. § 1315.

The practical impact of the Executive Order remains unclear and is limited to agency discretion for now.  The Executive Order does not diminish the authority of federal agencies established by the ACA and requires agencies to implement the Order’s mandates in a manner consistent with current law.  Thus, HHS and other agencies must continue to comply with the requirements of prior legislation while exercising their discretion to minimize the financial burdens of the ACA.  In addition, the Executive Order does not provide a mechanism for private parties to enforce the Trump Administration’s new policy and states that it “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against” the federal government.  The Executive Order appears to give lawmakers the ability to proceed more deliberately and the spotlight will now be on Congress to agree on a plan to repeal and replace the ACA. 

District Court Issues Nationwide Injunction on ACA 1557 Regulations on Gender Identity and Abortion

Posted in Administrative Law
David Didier Johnson

On December 31, 2016, in Franciscan Alliance v. Burwell, Case No. 7:16-cv-00108-O, the District Court for the Northern District of Texas  issued a nationwide injunction finding that portions of the U.S. Department of Health & Human Services, Office for Civil Right’s (OCR) Final Rule for ACA Section 1557 violated the Administrative Procedures Act and cannot be enforced. The case was brought by eight States, three private healthcare providers and the Christian Medical & Dental Society.

U.S. District Court Judge Reed O’Connor found that OCR’s interpretation of Section 1557 to prohibit discrimination against transgender persons wrongly construed both Title IX and Section 1557. He found that these statutes only prohibit discrimination on the basis of biological sex. He also found that OCR’s Final Rule failed to properly incorporate the exceptions for religious institutions and for abortion services found in Title IX – which he said that Section 1557’s language was intended to incorporate. See 20 USC § 1681(a)(3); § 1688.

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CMS Publishes Interim Final Rule to Address Third-Party Payment of Insurance Premiums by Medicare-certified Dialysis Providers

Posted in Exchanges, Fraud, Waste & Abuse, Health Care Reform & ACA, Medicaid, Medicare
A. Xavier BakerTroy A. Barsky

On December 14, 2016, CMS issued an interim final rule with comment period to amend Medicare’s dialysis facility conditions for coverage to require certain disclosures to patients and health insurance issuers to address widespread concerns over inappropriate steerage of dialysis patients to individual market plans. After issuing an RFI about “inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans” by third parties in August 2016, CMS decided to focus on dialysis providers given the “overwhelming majority of comments [received in response to the RFI] focused on patients with [end-stage renal disease (ESRD)]” and “the high costs and absolute necessity of transplantation or dialysis” for people with ESRD.

CMS explained that reimbursement rates for dialysis and other ESRD treatment are “tens or even hundreds of thousands of dollars more per patient when patients enroll in individual market coverage rather than public coverage.” As such, providers have strong incentives to steer patients to private coverage and pay a few thousand dollars in premiums on their behalf. But doing so places patients at substantial health and financial risk. As CMS noted, third-party payment of premiums to enroll a patient in individual market coverage may interfere with transplant readiness, expose the patient to substantial financial harm for services beyond dialysis, and may result in mid-year coverage disruption.

To address these concerns, the interim final rule requires Medicare-certified dialysis facilities to disclose the array of costs and coverage options available to a patient, including the availability of Medicaid, Medicare ESRD coverage, and individual market plans, and to ensure that health insurance issuers are aware of and willing to accept a third-party’s payment of premiums on behalf of the patient. As summarized by the CMS Fact Sheet, providers must:

  • Make up-front disclosures to patients regarding their health insurance coverage options, including information about available individual market plans, Medicaid or Children’s Health Insurance Program (CHIP) coverage, and available options and costs of Medicare ESRD coverage.
  • Provide a summary of short- and long-term cost estimates of various health coverage options for patients and information on enrollment periods for those health coverage options.
  • Inform issuers of the individual market plans for which they make payments of premiums for individual market plans.
  • Receive assurance from the issuer that it will accept these payment of premiums for individual market plans for the duration of the plan year, or else not make such payments.

The interim final rule does not preclude providers from making charitable donations that support access to health care. CMS also noted that it remains concerned about third-party payment of premiums for persons who are eligible for public coverage, such as Medicaid or Medicare, and is considering whether to issue a blanket prohibition on third-party payment of premiums for such persons. CMS has solicited comments on this and alternative approaches, such as whether to allow third-party payments upon a showing that it was in the individual patient’s best interest. The comment period for the interim final rule closes on January 11, 2017 and the rule is effective on January 13, 2017.

Court Delays Action on Appeal of ACA Subsidies Case

Posted in Exchanges, Health Care Reform & ACA
Christopher FlynnJoseph MillerA. Xavier BakerJoseph Records

On December 5, 2016, the U.S. Court of Appeals for the D.C. Circuit issued an order to stay  the administration’s appeal of the district court decision in U.S. House of Representatives v. Burwell, a case challenging Cost-Sharing Reduction (“CSR”) payments to health insurance issuers under the Affordable Care Act (“ACA”) Section 1402. The district court decision found that the House of Representatives had standing to sue the executive branch, that reimbursements to health insurance issuers for CSR requires an appropriation by Congress, and that the Obama Administration’s reimbursements to issuers of CSR without an annual appropriation was illegal. The D.C. Circuit’s stay order directed the parties to “file motions to govern further proceedings by February 21, 2017”—one month after President-elect Donald Trump’s inauguration.

Impact of the Stay Order

In effect, the D.C. Circuit’s order provides additional time for the president-elect to consider whether to withdraw the administration’s appeal and what will happen if it does so. If the Trump Administration withdraws the appeal, the district court’s holding will stand, cutting off CSR payments to health insurance issuers absent an appropriation by Congress. The stay order also provides time for the new administration and Congress to enact policy changes that would moot the case, either by repealing the applicable provisions or by appropriating funds for CSR payments.

It is not yet clear whether the Trump Administration will drop the appeal. On its face, the House Republicans’ challenge to CSR payments was an attack against the ACA. It eliminates certain payments to issuers of health insurance plans on ACA Exchanges unless Congress specifically appropriates funds for those payments (which it has not), making it impracticable to offer such plans and thereby hindering the viability of the exchanges. President-elect Trump has promised to repeal the ACA, which suggests that the district court’s decision prohibiting CSR payment absent an appropriation is consistent with his overall policy objectives. But, the decision found that a chamber of Congress has standing to raise a legal challenge in federal court against the exercise of executive power—a potentially unwelcome precedent for the Trump administration to leave unchallenged.

If the Trump administration does not withdraw the appeal, it may nevertheless become moot as the result of legislative changes. Specifically, Congress could appropriate amounts for CSR payments to maintain the status quo until the ACA is repealed or Congress could repeal those provisions of the ACA authorizing payment of CSRs. The absence of CSR payments would likely force issuers to leave exchange markets, causing losses of coverage and fewer options for individuals. Despite promises to immediately repeal the ACA, the political consequences of many individuals’ losses of coverage before replacement is enacted may be untenable.

The district court stayed its decision pending appeal, and issuers have continued to receive CSR payments to compensate for the reduction or elimination of enrollee cost-sharing amounts as required by the ACA. For the immediate future, the stay of the district court’s opinion permits continued reimbursements to issuers for CSR. The Trump Administration, however, could opt to discontinue making those payments even while the stay is in place by declining to make payments in the absence of an appropriation. If the administration drops the appeal without repealing ACA Section 1402, issuers would remain obligated to provide CSRs to enrollees, but they would not be reimbursed for the costs of those CSRs as required by the statute.

Options for Issuers

In the event that the Trump administration drops the appeal or otherwise leaves issuers with an uncompensated-for obligation to continue CSRs for enrollees, issuers may have several options.

First, issuers may file suit in the Court of Federal Claims under the Tucker Act to be made whole for any CSR payments to enrollees for which the government failed to make timely payment. The CSR statute obligates the federal government to make payments to issuers, and the absence of an appropriation to make such payments does not preclude a claim for payment under the Tucker Act. The Obama Administration acknowledged as much in its briefing before the district court.

Second, issuers may seek to terminate their qualified health plan (QHP) issuer agreements. To offer QHPs on federally facilitated and federal-state partnership exchange, issuers signed QHP issuer agreements that contain a provision allowing the issuer “to terminate this Agreement subject to applicable state and federal law.” Note, however, that termination of the issuer agreement would not affect state law obligations, such as requirements to continue coverage for enrollees for a full policy period. Even if the QHP issuer agreement is terminated, careful analysis would be necessary to determine whether and how a plan may be terminated or discontinued.

Finally, issuers may seek legislative or regulatory relief from the CSR provisions. The president-elect has repeatedly promised to repeal the ACA, but it is possible that an intermediate solution may be reached that achieves the dismantling of the Act without leaving health insurance issuers that participated in Exchanges with significant financial obligations for which they cannot be reimbursed.

The AMA Takes a Position on Mobile Health Applications

Posted in Health IT
Jodi G. DanielAdeoye Johnson

The AMA recently adopted a set of principles on mHealth applications (mHealth apps) and other similar digital health tools, to guide coverage and payment policies and the AMA’s advocacy efforts. While many have touted the potential health benefits of mHealth apps and digital devices, the AMA also raises concerns about the potential health and safety risks that these apps can pose to patients along with privacy and security risks.

In developing a set of principles to support the use of mHealth apps and devices, the AMA has demonstrated a willingness to adapt to such innovation while restating some of its long held positions on the roles of physicians, licensure laws, and the need for evidence. Digital health tools, including mHealth apps, can challenge some of these positions. The principles are:

  • Support the establishment or continuation of a valid patient-physician relationship;
  • Have a clinical evidence base to support their use in order to ensure mHealth app safety and effectiveness;
  • Follow evidence-based practice guidelines, to the degree they are available, to ensure patient safety, quality of care and positive health outcomes;
  • Support care delivery that is patient-centered, promotes care coordination and facilitates team-based communication;
  • Support data portability and interoperability in order to promote care coordination through medical home and accountable care models;
  • Abide by state licensure laws and state medical practice laws and requirements in the state in which the patient receives services facilitated by the app;
  • Require that physicians and other health practitioners delivering services through the app be licensed in the state where the patient receives services, or be providing these services as otherwise authorized by that state’s medical board; and
  • Ensure that the delivery of any services via the app be consistent with state scope of practice laws.

It is clear that as physicians are increasingly incorporating digital health tools such as mHealth apps into their practice and advice to patients, the AMA needed to state its position on these digital health tools.  The AMA’s focus on the impact and the role of the physician is not surprising; however, it may limit the usefulness of some new tools and services.

There are two important issues that the AMA addresses: data protection and safety.  First, the AMA publication serves as an opportunity to advise physicians about new privacy and security concerns that may arise from mHealth apps.  The principles encourage physicians to alert patients of the potential privacy and security risks for any mHealth apps that they recommend and document the patient’s understanding of these risks.  The AMA also advises physicians to consult with legal counsel to ensure that mHealth apps and devices meet privacy and security laws.

Second, the AMA focuses on safety, which is a key issue that will grow in importance, safety and effectiveness.  For example, with the passage of the 21st Century Cures Act, Congress limited FDA’s authority to regulate mHealth apps and related devices.  This could leave physicians with less clarity about the safety and effectiveness of these digital health tools.  An industry-based approach to review mHealth apps may be the only way to give some clarity in this uncertain market.

We will have to wait and see what impact this position has on future policy and industry action, but the publication serves as a reminder about the importance of these issues.

$33 Million Settlement Approved For Systematic and Improper “Bundling” of Chiropractic CPT Codes

Posted in ERISA, Managed Care Lawsuit Watch
Harsh P. ParikhDavid McFarlane

In what appears to be one of the largest class action settlement in the history of ERISA litigation in New Jersey, a federal judge approved $33 million settlement, including $11 million in attorneys’ fees, between Horizon Healthcare Services, Inc. (“Horizon”) and plaintiff chiropractors.

The underlying lawsuit stemmed from allegations that Horizon made “across-the-board” denials of certain types of claims that were submitted by chiropractic physicians.  Plaintiff’s complaint followed an October 7, 2009 cease and desist order by the New Jersey Department of Banking and Insurance.  In a subsequent class action complaint filed in New Jersey federal court against Horizon, plaintiff asserted that the Horizon Blue Cross Blue Shield of New Jersey improperly and systematically bundled various Current Procedural Terminology (“CPT”) codes that contracted and non-contracted chiropractic physicians billed to Horizon.  Plaintiff claimed that Horizon summarily denied reimbursement for non-CMT (chiropratic maniupulative therapy) services and unilaterally determined that the non-CMT services were bundled with Horizon’s payment for CMT services.  Thus, Plaintiff asserted that Horizon failed to determine whether the non-CMT billed services were separate and distinct from the CMT services.  On behalf of the all chiropractic physicians that submitted claims under ERISA plans that Horizon administers, Plaintiff’s complaint sought benefits due to the chiropractor physicians from plan member’s assignment under 29 U.S.C. § 1132(a)(1)(B), and also alleged that Horizon’s conduct constituted a failure to provide full and fair review pursuant to ERISA, 29 U.S.C. § 1133.  The remaining counts for non-ERISA plans alleged violation of New Jersey law, breach of contract and breach of covenant of good faith and fair dealings.  On or about June 1, 2015, the federal court certified two classes, including an ERISA class.

On October 13, 2016, Judge William Martini approved the settlement agreement and granted the Plaintiff’s Motion for Award of Attorneys’ Fees.   The court agreed to require Horizon to deposit $33 million for the settlement fund and awarded $11 million of the settlement fund as attorneys’ fees to class counsel.  Among other things, the Court noted that Plaintiff’s counsel conducted significant research and discovery, including review of 200,000 pages of documents, number of depositions and analyzed claims data for more than 19 million records.

This case highlights the significant exposure under ERISA that may result from improper billings and reimbursements for health plan administrators, insurers and providers.

CMS Issues Final Rules on MACRA Quality Payment Program Implementation

Posted in Medicare
Harsh P. ParikhStephanie Willis

On November 2, 2016, the final rule with comment period (the “Final Rule”) implementing provisions of the Medicare Access and CHIP Reauthorization Act (MACRA) relating to the new Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) will be published in the Federal Register.  The Center for Medicare and Medicaid Services (CMS) also launched a new website with tools and updates to help MIPS-eligible clinicians learn and prepare for participation in MIPS and APMs.

As we describe in our client alert titled “CMS Releases Final Rules on MACRA Quality Payment Program Implementation for 2017-Onward,” the Final Rule makes several significant changes to the MIPS and APM tracks of the “Quality Payment Program” as they were proposed in the notice of proposed rulemaking.  We previously summarized the proposed rule in two previous alerts MACRA and MIPS: The Basics and Beyond and Medicare Quality Payment Program: Alternative Payment Models (APMs).  When compared to the proposed rule, the Final Rule increases flexibility for eligible clinicians or groups to participate in MIPS by creating several “choose-your-own-pace” options that would allow them to avoid negative payment adjustments.  The Final Rule also includes more value-based payment models that qualify as Advanced APMs.

Given the significant changes, the agency has published the Final Rule with a 60-day comment period for certain provisions that will end on December 19, 2016.

New California Law To Target Surprise Bills Impacts Payor Relationships With Non-Contracted Professionals

Posted in Exchanges, Litigation, Managed Care Lawsuit Watch
Harsh P. ParikhPeter Roan

California recently enacted Assembly Bill 72 (“AB 72”) to target surprise medical bills from out-of-network professionals.  The new law applies to commercial plans licensed by the Department of Managed Health Care and the Department of Insurance.  AB 72 sets reimbursement rates for out-of-network professionals at in-network facilities at either the average contracted rate, or 125 percent of the Medicare Fee-for-Service reimbursement for the same or similar services.  The constitutionality of these provisions has been challenged in federal court by the Association of American Physicians and Surgeons.  AB 72 also implements a new dispute resolution process to resolve reimbursement disputes between commercial health plans/insurers and non-contracting health professionals that provide services at a contracted facility.  Read the full client alert titled “New California Law to Curb Surprise Medical Bills Will Impact Relationships Between Health Plans and Non-Contracted Professionals,” here.

GAO Finds HHS Exceeded Authority in Implementation of Transitional Reinsurance Program

Posted in Exchanges, Health Care Reform & ACA, Uncategorized
Joseph RecordsChristine M. Clements

The Government Accountability Office (GAO), in a letter to members of Congress, found that the implementation of the Transitional Reinsurance Program by the U.S. Department of Health and Human Services (HHS) violates the Affordable Care Act.

The Transitional Reinsurance Program is one of three premium stabilization programs authorized by the Affordable Care Act (ACA), commonly known as the “Three Rs.” These programs were designed to soften the impact of ACA reforms, such as guaranteed availability and the prohibition against preexisting condition limitations, that brought new health risks into the insurance markets.

Section 1341 of the ACA (42 U.S.C. § 18061) directs HHS to establish the Transitional Reinsurance Program and sets forth specific amounts for HHS to collect under the program. The statute states that the Program “shall be designed so that” HHS collects $10 billion for plan years beginning in 2014, $6 billion for 2015, and $4 billion for 2016. For each year, HHS would distribute the reinsurance amounts collected under the Program to health insurance issuers based on the number of “high-risk individuals” covered under the issuer’s commercial lines of business. In addition, the statute calls for $2 billion to be collected by HHS and paid to the Treasury for 2014, another $2 billion for 2015, and $1 billion for 2016, in addition to the costs of administering the Transitional Reinsurance Program.

HHS promulgated regulations and guidance to establish the Transitional Reinsurance Program, initially stating that, in the likely event of a shortfall, it would allocate funds on a pro rata basis to reinsurance claims, the Treasury, and administrative costs. HHS later adjusted its allocation scheme to pay reinsurance claims first and to reserve collected reinsurance amounts in excess of claims to pay reinsurance claims in future years. For example, for 2014, HHS aimed to collect $12.02 billion, but collected only $9.7 billion. It paid reinsurance claims in full, amounting to $7.9 billion, which left approximately $1.7 billion in collections under the Program. HHS remitted no funds to the Treasury, and reserved the $1.7 billion in collections that exceeded claims to be used to pay reinsurance claims in future years.

In April 2016, several members of Congress sent a letter to GAO requesting its opinion on whether HHS had exceeded its authority by declining to make a payment to the Treasury. HHS’ articulated position to GAO was that the statute failed to expressly address how HHS should allocate collected funds in the event of a shortfall, and that the amounts to be paid to the Treasury were described in the statute as “in addition” to reinsurance amounts, so the Secretary had discretion to prioritize future years’ reinsurance payments over contributions to the Treasury. GAO disagreed, concluding that HHS “lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program in the Treasury and instead make deposits to the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341.”