On Thursday, March 22, the U.S. Office of Personnel Management (OPM) and America’s Health Insurance Plans (AHIP) hosted the annual Federal Employees Health Benefits (FEHB) Program Carrier Conference. The conference featured OPM’s policy and contracting priorities for the FEHB Program for 2018. It followed and discussed OPM’s FEHB Program Call Letter (available here), which provides a high-level outline of its intentions for contract negotiations for plan year 2019.

This year’s Carrier Conference included three key highlights for FEHB carriers:

  1. OPM will re-open the Indemnity Benefit Plan to contract with either a nationwide carrier or a consortium of carriers to begin offering coverage in 2020.
  2. OPM is seeking legislative changes to apply the Anti-Kickback Statute to the FEHB Program.
  3. OPM is interested in Plans improving value by offering Accountable Care Organization or other innovative models

Continue Reading Federal Employees Health Benefits Program 2018 Carrier Conference Highlights

The U.S. Supreme Court unanimously decided, in Coventry Health Care of Missouri, Inc. v. Nevils, that the Federal Employees Health Benefits Act (FEHBA) preempts state laws that prohibit subrogation recovery by health insurance carriers.

FEHBA expressly preempts state law. Specifically, “[t]he terms of any contract under this chapter [5 U.S.C. § 8901, et seq.] which relate to nature, provision, or extent of coverage or benefits (including payments with respect to benefits)” preempt state health insurance laws and regulations. Contracts between the Office of Personnel Management (OPM) and a health insurance carrier under the Federal Employees Health Benefits Program (FEHBP) each include a provision requiring the carrier to subrogate and pursue reimbursement of FEHB claims and to condition benefits on the carrier’s rights to subrogation and reimbursement.

The plaintiff in this case, a former federal employee, was injured in an automobile accident and received medical treatment covered under his FEHBP plan. He then sued and recovered a settlement award based on the accident. His FEHBP carrier asserted a lien against his settlement award and recovered the costs of his medical treatment pursuant to its FEHBP contract. The plaintiff then sued the carrier, alleging that its recovery of the costs of his medical treatment was prohibited by Missouri state law.

The Court first discussed whether FEHBA’s preemption provision preempts state laws that would prohibit a carrier’s right to recover subrogation, and then discussed whether such preemption is prohibited by the Supremacy Clause.

According to the Court, the language of FEHBA’s preemption clause unambiguously covers the contractual subrogation provision. The decision briefly acknowledges the presumption against preemption of state law, which the Missouri Supreme Court decision on appeal had applied to find no preemption of state law. In addition, the Court points to regulations at 5 C.F.R. § 890.106 promulgated by OPM in 2015 that specifically call for the contract provisions requiring subrogation and reimbursement. But the Court declined to analyze the presumption or the regulations in depth, finding that the statutory language unambiguously requires preemption and is reinforced by FEHBA’s context and purpose. The decision distinguishes its decision from dicta in Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006), in which the Court saw two plausible readings of the FEHBA preemption clause. The Court noted that its decision in that case turned on jurisdiction, not on choice of law, and the case did not require the Court to evaluate different readings of the provision.

After finding that FEHBA’s preemption clause covered the contractual provision requiring subrogation and reimbursement, the Court turned to the constitutional question of whether the Supremacy Clause allows preemption based on the terms of federal contracts. The Court held that preemption is constitutional because it is FEHBA—not the contract—that preempts state law. The decision dismisses the counterargument that FEHBA’s preemption provision (uniquely among preemption clauses) calls for the “terms of any contract” to supersede and preempt state law whereas the Supremacy Clause provides that only federal laws can preempt state laws. The Court characterized this argument as elevating “semantics over substance” because the language manifests the same Congressional intent to preempt.

By holding that FEHBA preempts state law, and that such preemption is constitutionally permissible, this decision ends a series of disputes between private litigants and FEHBP carriers over whether state subrogation prohibitions applied to health benefits covered under the FEHBP. Soon after its decision in Nevils, the Court denied certiorari for two other cases dealing with FEHBA preemption of state subrogation prohibitions, Bell v. Blue Cross and Blue Shield of Oklahoma, and Kobold v. Aetna Life Insurance Co.

The April 3, 2017 release of the 2018 Rate Announcement and Call Letter brought some welcome news for Medicare Advantage organizations and Part D sponsors (collectively, sponsors) and could signal improved transparency by the Centers for Medicare & Medicaid Services (CMS) in its regulation of sponsors. House Ways and Means Committee Chairman Kevin Brady (R-TX) and Health Subcommittee Chairman Pat Tiberi (R-OH) issued a joint statement in response to the CMS Rate Announcement:

We are encouraged the Trump Administration took steps to roll back some of the Obama Administration’s flawed payment policies that would have negatively impacted nearly 18 million seniors. We are also pleased that HHS Secretary Price recognized the importance of protecting access to Medicare Advantage, including for patients suffering from kidney disease—a bipartisan priority on our Committee. We look forward to working with the new Administration on policies that promote innovation and competition, improve the quality and coordination of care, and deliver our seniors flexibility and choice in Medicare.

MA Employer Group Waiver Plans (EGWPs).  With CMS’s waiver last year of the bid submission requirement for MA EGWPs, payment rates for these plans have been administratively set based on a blend of EGWP bids and individual market plan bids.  CMS solicited comments in the 2018 Advance Notice on whether it should use only individual market plan bids from 2017 to calculate the bid-to-benchmark ratios for the 2018 MA EGWP payment rates, or whether it should continue to use the bid-to-benchmark ratios applied in calculating the 2017 MA EGWP payment rates. CMS decided to pause the transition to 100% individual market plan bids with the result that 2018 MA EGWP payment rates will continue to reflect a blend of individual market plan bids from 2016 and EGWP bids from 2016, with individual market plan bids weighted by 50% and EGWP bids weighted by 50%. Continue Reading Highlights from the 2018 Rate Announcement and Call Letter for Medicare Advantage and Medicare Part D

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 HHS Proposes New Regulations Aimed At Stabilizing the Individual Market

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.”

On June 27, 2016, the Department of Health and Human Services Office of Inspector General (“OIG”) issued a favorable Advisory Opinion, No. 16-07, relating to a savings card program under which individuals who have prescription drug coverage under Medicare Part D receive discounts on a drug that is statutorily excluded from Part D coverage.

According to the Advisory Opinion, the Requestor markets and distributes a prescription drug that has been approved by the U.S. Food and Drug Administration for the treatment of erectile dysfunction (the “Drug”). While the Drug is covered by many private insurance plans and some Federal health care programs, including state Medicaid programs and TRICARE, the Drug is statutorily excluded from coverage under Medicare Part D.

Under the arrangement, the Requestor offers and provides coupons, in the form of a savings card, which Medicare Part D beneficiaries (“Beneficiaries”) may use to receive discounts on the purchase of the Drug. Specifically, Beneficiaries may receive reductions on out-of-pocket costs greater than $15, up to a maximum benefit of $75 per prescription, on up to 12 prescriptions for the Drug, when they present their savings card and Drug prescriptions to their pharmacist.

Continue Reading OIG Issues a Favorable Opinion Regarding a Drug Savings Card Program

Last month, the Center for Medicare & Medicaid Services (CMS) issued a memorandum announcing a change pertaining to the effect of intermediate sanctions on the calculation of Star Ratings for Medicare Advantage organizations (MAOs) and Part D sponsors.  This is a significant change for plans.

The Star Rating program has continued to evolve since being introduced by CMS in 2006, and is a part of CMS’s efforts to define, measure, and reward quality health care and member services. The ratings incorporate data from Healthcare Effectiveness Data and Information Set quality measures, Consumer Assessment of Healthcare Providers and Systems surveys, the Medicare Health Outcomes Survey, and CMS administrative data.

Beginning in 2012, quality/Star Ratings directly affected the monthly payment amount MAOs receive from CMS. First, CMS is required to make quality bonus payments (QBPs) to MAOs that achieve at least 4 stars in a 5-star quality rating system. In addition, the percentage share of savings that MAOs must provide to enrollees as the beneficiary rebate is tied to the level of an MAO’s QBP rating.

Continue Reading CMS Suspends Automatic Reduction of Star Ratings for Plans and Sponsors Subject To Intermediate Sanction

On November 16, 2016, CMS posted the final rule to implement the Comprehensive Care for Joint Replacement (CJR) model, which is a new Medicare payment model intended to hold acute care hospitals financially accountable for the quality and cost of a CJR episode of care and incentivize increased coordination of care among hospitals, physicians, and post-acute care providers. The regulations are effective on January 15, 2016, and applicable on April 1, 2016 when the first model performance period begins.

Under the CJR model, acute care hospitals in certain selected geographic areas will receive retrospective bundled payments for episodes of care for lower extremity joint replacement (LEJR) or reattachment of a lower extremity. An episode of care begins with an admission to a participant hospital of a beneficiary who is ultimately discharged under Medicare Severity-Diagnosis Related Group (MS-DRG) 469 (Major joint replacement or reattachment of lower extremity with major complications or comorbidities) or 470 (Major joint replacement or reattachment of lower extremity without major complications or comorbidities) and ends 90 days post-discharge in order to cover the complete period of recovery for beneficiaries. All related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries are included in the episode, except for certain exclusions.

Continue Reading CMS Issues Comprehensive Care for Joint Replacement (CJR) Model Final Rule

CMS released the CY2016 Readiness Checklist, which highlights key compliance areas that Medicare Advantage organizations and Part D sponsors should be particularly mindful as they prepare for the 2016 contract year.

The CY2016 Checklist includes new and modified requirements for CY2016 as well as other areas of CMS concern. CMS reminds organizations that, if they need assistance or will not be in compliance with a requirement, the “organization must report those problems to your Account Manager directly by email in a timely manner.”

Included on the checklist are requirements relating to:

Continue Reading CMS Releases CY2016 Readiness Checklist

Citing concerns about transparency and timing, on August 13, 2015, CMS issued a memorandum to clarify guidance to Medicare Part D sponsors regarding the any willing pharmacy requirement.

Medicare Part D sponsors are required to contract with any pharmacy that meets the Part D sponsor’s standard terms and conditions.  CMS requires that the standard terms and conditions must be “reasonable and relevant.”  The sponsor’s standard terms and conditions establish the “floor” of minimum requirements that all similarly situated pharmacies must abide by (e.g., licensure requirements, minimum levels of liability insurance, etc.).

CMS expects Part D sponsors to make the standard contracting terms and conditions “readily available for requesting pharmacies no later than September 15 of each year for the immediately succeeding benefit year,” or 105 days prior to the start of the plan’s benefit year for non-calendar year plans.  The CMS guidance also requires that sponsors identify how pharmacies may obtain their standard terms and conditions, and provide the applicable terms and conditions to requesting pharmacies within two business days upon receipt of the request.  Part D sponsors must also provide the standard terms and conditions to CMS within two days of CMS’s request.

If the Part D drug plan sponsor requires a pharmacy to execute a confidentiality agreement, the sponsor is to provide the confidentiality agreement within two business days and then provide the standard terms to the pharmacy within two business days following the receipt of the executed confidentiality agreement.  CMS repeats that sponsors should not cause “any undue delay in executing” the any willing pharmacy agreement.

The guidance notes that sponsors may still modify some of their standard terms and conditions to encourage participation by particular pharmacies.  It does not alter or modify CMS regulations and guidance that permit Part D sponsors to establish networks of “preferred pharmacies.”