Health Care Reform & ACA

On Tuesday, February 20, Department of Health and Human Services (HHS) Secretary Alex Azar announced that the agency intends to expand access to short-term, low-cost insurance policies. On Wednesday, HHS published its proposed rule, which promises to reduce restrictions on such limited-duration policies. The short-term insurance plans have fewer benefits and more limited consumer protections as compared to those proscribed by the Patient Protection and Affordable Care Act (ACA). While such short-term plans currently can only be carried for 90 days, the new proposal would extend that maximum coverage period to one year.

The proposed rule is in response to President Trump’s Executive Order from October 12, 2017, which called for HHS to expand access to low-cost insurance plans. The Executive Order asked the agency to explore the possibility of extending the maximum duration of such short-term, limited-duration plans in order to increase options for consumers. The short-term insurance plans are contemplated for individuals who are unemployed, between jobs, or otherwise looking to reduce premium costs for up to one year. The plans do not have to meet ACA requirements. Notably, they do not have to cover individuals with pre-existing conditions and they do not have to cover prescription drug plans. The plans offer more limited coverage for consumers, but impose less immediate financial burden through reduced premium cost. Insurers who sell the short-term plans would need to include clear statements on applications and plan documents that the coverage does not meet ACA requirements.

The proposed rule continues the Trump administration’s efforts to roll back the ACA and minimize its economic burden and comes just over a year after the president issued an Executive Order laying out that goal. It comes on the heels of earlier rules from the administration geared at stabilizing the individual and small group insurance markets. It also follows the signing of the new tax reform bill, which repeals the individual mandate of Section 5000A of the Tax Code and eliminates the shared responsibility payment for failure to obtain health insurance starting in 2019.

Continue Reading Azar Rolls Out Expansion of Short-Term, Limited-Duration Insurance Plans

First 100 Days LogoOn Tuesday, April 18, 2017, our Health Care Group will hold a webinar on the health care policy and transition challenges still at play as the Trump Administration nears the end of its 100 days in power.  During the webinar, participants will hear important insights and predictions on what a Trump-led Executive Branch will mean for health care industry stakeholders from:

  • Partner Xavier Baker, whose practice focuses on the regulatory and compliance aspects of commercial insurers’ participation in Medicare Advantage, Medicaid managed care, and the health insurance exchanges;
  • Counsel Gary Baldwin, the former deputy director of Plan and Provider Relations at the California Department of Managed Health Care (DMHC), with expertise in state insurance regulatory issues for commercial plans;
  • Partner Laura Cordova, the former assistant chief in the Fraud Section of the Criminal Division at the U.S. Department of Justice, who focuses primarily on counseling health care companies and executives in criminal, civil and administrative enforcement actions, which may still increase under a Trump administration; and
  • Counsel Stephanie Willis, who counsels health care entities in licensure and regulatory matters related to participation in health care reform incentive programs such as the Medicare Shared Savings Program and Meaningful Use.

Register for the webinar here.

Two district courts[1] have recently stayed cases alleging that sex discrimination under ACA Section 1557 includes discrimination on the basis of gender identity and denial of coverage for gender transition, pending the Supreme Court’s decision in G.G. v. Gloucester County School Board.[2]  The Supreme Court accepted certiorari in Gloucester in October 2016 to determine the validity of recent Department of Education Title IX guidance regarding gender identity.  Briefing is currently under way.  The district courts stayed the Section 1557 cases, reasoning that the Supreme Court’s decision would likely determine the validity of the Department of Health & Human Services’ Section 1557 regulations on gender identity as well.

ACA Section 1557 and Title IX rules on sex discrimination

Section 1557 (42 U.S.C. § 18116) prohibits entities that receive federal funds for health activities or programs from discriminating on the grounds prohibited by Title IX.  Title IX generally prohibits discrimination on the basis of sex by recipients of federal education assistance.[3]  Title IX, however, permits federal fund recipients to set up “separate living facilities for the different sexes.”[4]  DOE and HHS regulations for Title IX, originally issued by the Department of Health, Education and Welfare, define sex in binary terms – “one sex” versus “the other sex”  —  and permit recipients to set up comparable but separate housing and “toilet, locker room, and shower facilities on the basis of sex.”[5]

The federal agency shift on sex discrimination:  from biological sex to gender identity

In the years prior to the enactment of the ACA, courts reached opposite conclusions as to whether Title IX and comparable sex discrimination laws, such as Title VII, prohibit discrimination based on gender identity.[6]  With the enactment of the ACA and Section 1557, suits began to be brought against health plans and providers which claimed that refusal to treat or cover services for transgender persons based on their gender identity constituted sex discrimination.  In one early Section 1557 decision from 2015, Rumble v. Fairview Health Services, a district court held that Section 1557 does provide a cause of action for discrimination based on gender identity.[7] Continue Reading Waiting for the Supremes: High Court’s Decision in Gloucester County to Determine Validity of ACA Section 1557 Gender Identity and Transgender Services Rules

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

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. 

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.

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 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 August 24, 2016, Judge Edgardo Ramos of the Southern District of New York approved a settlement in which Mount Sinai Health System (Mount Sinai) will pay $2.95 million to New York and the federal government to resolve allegations that it violated the False Claims Act (FCA) by withholding Medicare and Medicaid overpayments in contravention of the 60-day overpayments provision of the Affordable Care Act (ACA).  The provision creates FCA liability for healthcare providers that identify overpayments but fail to return them within 60 days, and the Mount Sinai settlement is the first one that specifically resolves allegations of violations of the provision.

The settlement stems from the qui tam action Kane v. Healthfirst, Inc., No. 1:11-cv-02325-ER, in which it was alleged that employee Robert Kane alerted Continuum Health Partners, Inc. (now a part of Mount Sinai) to hundreds of potential overpayments, and, instead of pursuing the refund of overpayments, Continuum fired Kane and delayed further inquiry.  Last year, as we discussed in a previous post, Judge Ramos denied Mount Sinai’s motion to dismiss and provided first-of-its-kind guidance on what it means to “identify” an overpayment and start the 60-day clock created by the ACA.  He opined that a provider has identified an overpayment if it has been “put on notice” that a certain claim may have been overpaid.  In February of this year, CMS released its final 60-day overpayment rule, largely adopting the same interpretation of “knowledge” and “identified” that Judge Ramos used.

Although the Kane court did not hold that the “mere existence” of an obligation under the ACA established an FCA violation, the 60-day period in the statute clearly carries a heightened risk of potential liability for providers that fail to carry out compliance activities or undertake an investigation once they have been given credible evidence of the existence of overpayments.  The settlement further signals to providers the importance of taking any allegation related to overpayments seriously, and to take swift action in order to be ready for the start of the 60-day clock deadline for returning any overpayments.

On August 18, 2016, CMS issued a request for information on “inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans” by third parties. CMS voiced concern over “anecdotal reports” that Medicaid or Medicare eligibles received premium and cost-sharing assistance from third parties so they could enroll in Marketplace plans, enabling providers to receive higher reimbursement rates. In November 2013, CMS had issued guidance discouraging third-party payment of premiums because it has the propensity to “skew the insurance risk pool and create an unlevel field in the Marketplaces.” Almost three years later, it appears that CMS has determined that more decisive action may be necessary.

In July, UnitedHealthcare filed suit against American Renal Associates LLC in the United States District Court for the Southern District of Florida (complaint), alleging ARA violated Florida’s deceptive and unfair trade practices act, fraud, unjust enrichment, conspiracy, and other causes of action. The suit alleges that ARA coordinated with the American Kidney Foundation to pay premiums of low-income enrollees to switch from government health care programs to private insurance coverage. The suit alleges that by steering enrollees from Medicaid and Medicare to private insurance, ARA was able to increase billing from about $300 to $4,000 for the same services. The complaint also alleges that ARA did not collect copayments or deductibles from the enrollees after covering their premiums for private insurance and so committed negligent misrepresentation and tortious interference with a contract by misrepresenting the charges of claims submitted to UnitedHealthcare.

Continue Reading CMS Renews Focus on Third-Party Payment of Insurance Premiums Steering Medicaid & Medicare Eligibles into Marketplace Plans