Out-of-Pocket Limits Delayed to 2015

by Michael Gomes, executive vice president, BenefitMall

The Obama Administration delayed the out-of-pocket cost limits that protect individuals and families to 2015. This delay gives health plans one more year to offer plans with more lenient out-of-pocket cost restrictions. These limits represent one of the most publicized insurance market reforms contained in the Affordable Care Act (ACA). The delay follows a string of recent announcements by the administration postponing portions of its signature health insurance reform law.

Delay Announced in February

The delay of out-of pocket limits for many health plans was explained in a February 2013 FAQ issued by the Department of Labor (DOL), but did not receive attention until recently, when DOL officials confirmed the delay. Since the passage of PPACA, DOL, as well as IRS and the Department of Health and Human Services (HHS) have often issued far-reaching decisions in FAQs. DOL, alone, has published 15 separate FAQ sections since PPACA’s passage answering a total of 137 questions.

Details of the Delay

PPACA restricts out-of-pocket cost limits, including deductibles and copays, at $6,350 for individuals and $12,700 for families. The one-year delay to 2015 allows some health plans to set higher limits, or no limit at all on some costs.  Health plans can require enrollees to pay $6,350 for services like doctor and hospital services and another $6,350 for prescription drugs. A New York Times article notes that the delay on these limits is justified because employers and health plans use different companies to administer coverage. These companies often have separate computer systems for medical coverage and drug coverage that cannot communicate with each other. The delay gives these companies more time to upgrade their computer systems to accommodate the new federal requirements.

The following is the DOL FAQ that led to the delay:

Where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under section 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:

a. The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and

b. To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).

This statement essentially means that a consumer may have to pay the maximum out-of-pocket costs for major medical care and then pay the same maximum costs for prescription drug coverage.

Effect of the Delay

One immediate impact of the delay is the extra costs it will impose on Americans with chronic illnesses, disabilities, or unexpected health conditions. Prescription drugs and medical treatments for conditions like cancer, diabetes, and multiple sclerosis can cost tens of thousands of dollars a year or more. The limit on out-of-pocket costs was supposed to prevent individuals from having to bear large portions of these costs. This delay will, at least through 2014, compel many Americans to continue paying for these treatments.

Despite the close attention being paid to implementation of ACA, it is impossible to grasp every aspect of the law’s enforcement. As a result, this provision has gone almost unnoticed for the past six months. With the hundreds of FAQs, dozens of regulations, and all other relevant information regarding the ACA’s implementation, questions remain about what other provisions of this law have escaped the notice of the health care industry and the public at large. For more information, visit www.benefitmall.com orwww.HealthcareExchange.com.

Republicans Call for Review of HHS Fundraising

Senate Republicans are calling on the HHS Inspector General to investigate fundraising activities by HHS Secretary Kathleen Sebelius. The following is a summary of a letter to the HHS Inspector General from Senate Ranking Members Lamar Alexander (R-Tenn.) of the Senate Health, Education, Labor and Pensions Committee, Orrin Hatch (R-Utah) of the Senate Finance Committee, and Tom Coburn (R-Okla.) of the Senate Homeland Security and Governmental Affairs:

Major news outlets have reported that Sebelius is raising money from the private sector, including from health care executives, for use by a private entity, Enroll America, which is helping implement the Patient Protection and Affordable Care Act (PPACA). These activities call into question whether appropriations and ethics laws are being followed.

Administration officials told The New York Times that private fundraising was necessary because Congress refused to provide enough money to carry out the health care law. An HHS spokesman said the Secretary’s efforts included meetings, calls, and events with 18 categories of people and organizations since January, including retail pharmacies, insurers, pharmaceutical companies, and hospitals

Administration officials told The New York Times that the Secretary secured $10 million from the Robert Wood Johnson Foundation and a pledge of about $500,000 from H&R Block, which plans to help people apply for tax credits under the new law.

The Hill reported that a nonprofit promoting President Obama’s healthcare law has created an air of expectation that insurers will contribute to the group, according to an insurance industry official. Enroll America has come to feel like just an arm of the administration, said one official who works closely with insurers.

The Hill also reported that current and former administration officials have taken on leadership and fundraising roles for Enroll America. President Obama himself made a vague, but personal appeal for a close partnership with insurers, which some in the industry saw as a precursor to direct fundraising pitches. If true, these statements from the administration and the news reports would suggest the following:

· The Secretary has asked for financial support from at least two private entities.
· The Secretary has asked entities she regulates to support private efforts.
· The solicitation has been broad and has been taking place for months.
· These solicitations were in response to Congress’s refusal to appropriate more funds for PPACA implementation.
· The Secretary and other government officials may be attempting to raise funds for Enroll America from health insurers.
· There are close ties and substantial coordination between the Administration and Enroll America.

HHS May Delay SHOP Exchange, But Not California

The Department of Health and Human Services (HHS) issued a proposed rule delaying implementation of the Small Business Health Options Program (SHOP) for small businesses under the Protection and Affordability Act (PPACA). HHS said that  “Implementation challenges” led to the proposed one-year delay to January 1, 2015. Despite the delay in the federally operated exchanges, several states, including California, intend to move forward with the choice option for their state-operated exchanges.The choice option allows small employers to select a level of coverage (known as the bronze, silver, gold, and platinum coverage tier) from which their employees can choose any qualified health plan within the exchange, according to Intercare, a HUB International company.

Covered California exchange spokesperson, Dana Howard, told Intercare that exchanges are “not new territory for California. We are confident that Covered California will be ready for enrollment and implementation for a January 1, 2014 effective date.”

Small employers will still be able to purchase coverage though the federal exchange, but in 2014 that coverage is limited to the single health plan selected by the employer. A single health plan is another exchange option, which allows employers to select a single qualified health plan to offer employees. Beginning in 2014, those small employers that are eligible for the employer tax credit must purchase their plan through a state or federal exchange to qualify.

This delay does not affect individual coverage under the exchange. With 2014 right around the corner, the activity level for exchanges will increase rapidly.

Bill Would Limit Financial Incentives in Wellness Plans

WellnessCalifornia Health Underwriters is alerting members toSenate Bill 189 (Monning).It would ban all wellness programs until 2020 unless they meet a number of restrictive conditions. A health plan could not offer an incentive or reward under a group health care service plan contract or group health insurance policy unless it met these requirements:

Incentives can only include rewards for participation that are not linked to premiums, deductibles, copayments, or coinsurance.

A program must have a reasonable chance of improving the health of, or preventing disease. It cannot be overly burdensome, cannot be a subterfuge for discriminating based on a health status factor, cannot lead to cost shifting, and cannot use a highly suspect method to promote health or prevent disease.
Participation must be voluntary.
An individual cannot be offered an incentive or reward for participating the program based on satisfying a standard that is related to a health status factor. The following would be acceptable:
  • A program that reimburses all or part of the cost for memberships in a fitness center.
  • A diagnostic testing program that provides a reward for participation, but does not base any part of the reward on outcomes.
  • A program rewards people for attending a health education seminar as long as participation is not related to a particular health condition or any other health status factor.
Participation in the program must be offered to all similarly situated individuals.
People with disabilities must be offered reasonable accommodations to participate.
There must be a reasonably available and equivalent alternative for those who are unable to participate due to occupational requirements, a medical condition, or other hardship.
All materials related to the program must disclose the availability of these accommodations.
The program must assesses the cultural competency needs of the health plan’s population.
The program must provide language assistance for those who speak limited English.
The program cannot not result in any decrease in benefits coverage.
The program cannot not result in an increase in premium for the product as demonstrated through rate review consistent with Article 6.2 (commencing with Section 1385.01).
The incentive or reward cannot not exceed the amounts determined to be unreasonable by regulation by the director in consultation with the Insurance Commissioner
The incentive or reward can not exceed the percentage of the cost of coverage under the plan contract identified in Section 2705(j)(3)(A) of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-4) or regulations adopted thereunder.

The state notes that PPACA prohibits a carrier from requiring a person to pay a greater premium or contribution based on a health status-related factor. Senator Bill Monning said, “There is growing concern among consumer advocates that wellness programs could become a subterfuge for discrimination against those with pre-existing conditions…Wellness incentives should be about making people healthier, not pricing insurance premiums based on pre-existing conditions…” The intent of SB 189 is supported by AARP, American Cancer Society Action Network, American Heart Association, California Black Health Network, California Pan-Ethnic Health Network, Consumers Union, Health Access, Greenlining Institute, and Prevention Institute.

According to a CAHU statement, “As health care coverage specialists, you know the value of wellness programs and positive impact they have on the lives and affordability. CAHU is asking you to join with other licensed insurance agents and their clients in letting your state Senator know you oppose SB 189.” Click here to oppose SB 189.

Does The Medicare Drug Discount Program Drive up Prices?

The Patient Protection and Affordable Care Act established the Discount Program to help Medicare Part D beneficiaries with their prescription drug costs while in the coverage gap. Until the Discount Program began in 2011, beneficiaries in the coverage gap paid 100% of drug costs. The Discount Program required manufacturers to provide a 50% discount on the price of brand-name drugs for beneficiaries in the gap.

The General Accountability Office (GAO) interviewed pharmacy benefit managers (PBMs) to get their take on the effects of the program. Most sponsors and PBMs told GAO that the Discount Program may be contributing to rising prices of some brand-name drugs by some manufacturers. However, most manufacturers say they don’t think that the Discount Program affected the drug prices that they had negotiated with sponsors and PBMs.

The PBMs said that some manufacturers decreased rebates for their brand-name drugs because of the Discount Program. In comparison, most of the plan sponsors did not observe manufacturers decreasing rebate amounts and most manufacturers said the Discount Program had no effects on their rebate negotiations. Most sponsors and PBMs told GAO that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices.

Prices for high-expenditure brand-name drugs increased at a similar rate before and after the Discount Program was implemented in January 2011. Specifically, from January 2007 to December 2010, before the Discount Program began, the median price for the basket of 77 brand-name drugs (weighted by the utilization of each drug) used by beneficiaries in the coverage gap increased 36.2%. During the same period, the median price for the basket of 78 brand-name drugs used by beneficiaries who did not reach the coverage gap increased 35.2%. From December 2010 through December 2011, the first year with the Discount Program, the median price for the two baskets increased equally by about 13%, the greatest increase in median price for both baskets compared to earlier individual years.

For more information, contact http://www.gao.gov/products/GAO-12-914

Could an ACA Advisory Board Limit Care?

A controversial feature of the Patient Protection and Affordable Care Act (ACA) is the new Independent Payment Advisory Board (IPAB). This appointed panel will be tasked with cutting Medicare spending, but some of its features appear to be problematic, according to a report by Douglas Holtz of the American Action Forum. IPAB appears to be barred from recommending rationing health care, raising revenue or premiums, increasing cost sharing, or restricting benefits and eligibility. But it may bring Medicare dangerously close to a rationed system. It will become more difficult to make appointments with providers of all sorts, thereby restricting care. On top of which, a provider will not offer a poorly reimbursed, but effective, treatment unless there does not appear to be a therapeutic alternative. Rationing will occur in complex and often subtle ways, and patients may never know that they could have received a more effective treatment, according to Holtz.

The board is prohibited from recommending changes that would reduce payments to certain providers before 2020, especially hospitals. Because of directives and restrictions written into the law, reductions achieved by IPAB between 2013 and 2020 are likely to be limited primarily to Medicare Advantage (23% of total Medicare expenditures), to the Part D prescription drug program (11%), and to skilled nursing facility services (5%). That means that reductions will have to come from segments that together represent less than half of overall Medicare spending.

The law makes it almost impossible for Congress to reject or modify IPAB’s decisions, even if those decisions override existing laws and protections that Congress passed. As a result, it is not in fact an advisory body, despite its name. The system is set up so that IPAB makes policy choices about Medicare.

Finally, IPAB’s time horizon is too short. IPAB’s cuts have to be achieved in one-year periods, which rules out long term quality improvements or preventive programs. Instead, IPAB will be forced to focus on reducing reimbursements to providers due to their short-term nature.

He warns that IPAB will be an agent for reimbursement cuts in Medicare. This has two potentially damaging effects on Medicare and health care in the United States. First, IPAB’s actions may stifle U.S. led medical innovation in the medical device, pharmaceutical, biotechnology, and mobile health industries. As noted above, by statute, IPAB cannot directly alter Medicare benefits. Instead, the more likely threat to patients is that IPAB will be forced to limit or deny payments for medical services. In the process, it will effectively determine that patients should have coverage for one particular treatment option but not another, or must pay much more out of pocket for one of the treatment options. This is especially troubling because it may choose to disproportionately make cuts to expensive new treatments, he said. New medicines for conditions like Alzheimer’s or Parkinson’s will likely have rapid cost growth,

Because about one-half of spending is off limits until after 2020, there will be a disproportionate and uneven application of IPAB’s scrutiny and payment initiatives. IPAB creates a level of uncertainty that will have a detrimental impact on venture capital investment in start-up firms and research and development investments from established firms.

If Medicare’s provider reimbursements are reduced drastically, providers will have three options: close up shop, refuse to treat Medicare patients, or shift the costs onto the other patients. None of these options help our healthcare system operate more effectively or more efficiently, he said. To get the full report, visithttp://americanactionforum.org.

Insurers Fail to Provide the Required SBC Documents

Last month, the Summary of Benefits and Coverage (SBC) provision of the PPACA law took effect and most issuers are still struggling to provide the documents. The Dept. of Labor has stated that, during the first year of applicability, it will not impose penalties on plans and insurers that are working diligently and in good faith to comply, according to a report by Tyurla.

The law states that insurance companies need to provide a paper SBC document within seven days of application, renewal, or first day of coverage. Generating SBCs for all of the plan designs a health insurance company offers is proving to be a challenging process. Tyrula visited the websites of more than 35 major health plans the week after the law took effect. Tyrula targeted individual plans and applied as a single male born in 1980 who doesn’t smoke. Tyrula found that 61.5% insurance companies did not have SBCs online. Manu Uppal, CEO and co-founder of Tyrula LLC, said, “It’s not surprising that a high percentage of health plans have not made their SBCs available online. Creating SBCs is not an easy task. An AHIP study from last year predicted $194 million in annual ongoing operating costs for all insurance plans to comply with the SBC regulation. Many companies may have taken a wait-and-see approach and are planning to be compliant by October 2013.” For more information, visit www.tyrula.com.

Last Updated 09/22/2021

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