The Center for Consumer Information and Insurance Oversight within the Department of Health and Human Services (HHS) issued a bulletin on December 16 to provide information and solicit comments on HHS’s approach to defining Essential Health Benefits (EHB) under the Patient Protection and Affordable Care Act (ACA).  The ACA requires non-grandfathered plans in the individual and small group markets, Medicaid benchmark and benchmark-equivalent, and Basic Health Programs to cover EHB beginning in 2014.  The scope of EHB, as defined by HHS, must equal the scope of benefits provided under a “typical” employer plan.  In the bulletin, HHS stated that it intends to define EHB through a benchmark plan that each state selects.  Significantly, HHS intends to allow states to select a benchmark plan from among the following existing health plans: 

• One of the three largest small group plans in the state;
• One of the three largest state employee health plans;
• One of the three largest federal employee health plan options; or
• The largest health maintenance organization in the state’s commercial market. 

If a state fails to select a benchmark, the default would be the state’s largest small group market plan.  Comments on the intended approach are due by January 31, 2012.

On November 14, 2011, the Supreme Court announced that it will hear challenges related to the Affordable Care Act (ACA) during its spring term. The Court has chosen to address four specific issues with respect to legal challenges of the health reform law:

(1) the constitutionality of the law’s requirement that all individuals purchase insurance (i.e., the Minimum Essential Coverage provision, also referred to as the individual mandate);

(2) whether the Anti-Injunction Act, a law which requires individuals to refrain from suing the federal government for the imposition of a tax until after the tax has been paid, bars a pre-enforcement challenge to the individual mandate until 2014 when the provision goes into effect;

(3) the constitutionality of the law’s Medicaid expansion requiring states to provide coverage to all adults under 65 with household incomes below 133 percent of the poverty level; and

(4) the issue of severability, as the Court must determine whether the law must be struck down in its entirety if one of the provisions is found unconstitutional, or whether that provision may be removed while the remainder of the ACA remains intact.

An extraordinary five-and-a-half hours for oral arguments have been granted: two hours on the constitutionality of the individual mandate, 90 minutes on the issue of severability, one hour on whether the Anti-Injunction Act bars some or all of the challenges to the insurance mandate, and one hour on the constitutionality of the Medicaid expansion.  Observers speculate that the arguments will be held in March and a decision may be issued by the Court by late June, well in advance of the 2012 Presidential election.

On November 8, 2011, the D.C. Circuit Court of Appeals upheld the individual mandate provision of the Affordable Care Act (ACA) as constitutional. The opinion, authored by Judge Silberman, is the fourth  appellate court ruling on the ACA and the second to uphold the law.  Recall that the 6^th Circuit also found the mandate constitutional in June. The 11^th Circuit has declared the individual mandate unconstitutional, and the 4^th Circuit has stated that the Anti-Injunction Act is a bar on its ruling until 2014. The Justice Department has already petitioned for review of the 11^th Circuit decision by the Supreme Court. According to observers, the growing split among appellate decisions makes it increasingly likely that the Court will consider taking on this issue during the fall term.

The Centers for Medicare & Medicaid Services (CMS) published the Accountable Care Organization (ACO) final rule in the Federal Register on Wednesday, November 2.  CMS also published the notice regarding the ACO “Advance Payment Model” and the interim final rule with comment period regarding fraud and abuse waivers applicable to certain arrangements involving ACOs.  The deadline for submitting comments to CMS on the fraud and abuse waiver interim final rule is 5:00 pm on January 3, 2012.

Click here to see Akin Gump’s updated analysis of the ACO final rule, which includes new discussions of the Statement of Antitrust Enforcement Policy jointly issued by the Federal Trade Commission and Antitrust Division of the Department of Justice and the guidance for tax-exempt ACO participants issued by the Internal Revenue Service.

Click here to see Akin Gump’s preliminary analysis of the Medicare Shared Savings Program final rule. We anticipate that the final rule will be published in the Federal Register on November 2nd. In addition, the final rule indicates multiple areas where the Centers for Medicare & Medicaid Services (CMS) anticipates releasing subregulatory guidance. We will provide additional information as it becomes available.

On October 20, 2011, the Centers for Medicare & Medicaid Services (CMS) released a final rule on the creation of Accountable Care Organizations (ACOs).  The final rule implements provisions of the Affordable Care Act that require the Secretary of Health and Human Services (HHS) to establish a Medicare Shared Savings Program, and follows from a proposed rule issued by CMS on April 7, 2011.  CMS received approximately 1,320 public comments on the ACO proposed rule.  According to the agency, the final rule includes “significant modifications” from the proposed rule that are intended “to reduce the burden and cost for participating ACOs.”  These modifications include: 

• greater flexibility in eligibility to participate in the Shared Savings Program;
• multiple start dates in 2012;
• establishment of a longer agreement period for those starting in 2012;
• greater flexibility in the governance and legal structure of an ACO;
• simpler and more streamlined quality performance standards;
• adjustments to the financial model to increase financial incentives to participate;
• increased sharing caps;
• no down-side risk and first-dollar sharing in “Track 1”;
• removal of the 25 percent withhold of shared savings;
• greater flexibility in timing for the evaluation of sharing savings (claims run-out reduced to 3 months);
• greater flexibility in antitrust review;
• greater flexibility in timing for repayment of losses; and
• additional options for participation of Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs).

In connection with the ACO final rule, CMS and the HHS Office of Inspector General released an interim final rule with comment period establishing waivers of the Physician Self-Referral Law (“Stark law ”), the Anti-Kickback Statute, and certain civil monetary penalty law provisions to specified arrangements involving ACOs.  The Federal Trade Commission and Antitrust Division of the Department of Justice also issued a “Statement of Antitrust Enforcement Policy” regarding ACOs and the Internal Revenue Service issued a notice concerning tax-exempt organizations.    

Simultaneously, the Center for Medicare & Medicaid Innovation announced an ACO advanced payment model.  This model is intended for organizations, including rural and physician-led ACOs, in need of capital to make the necessary investments to coordinate care.  Additional information is available at http://www.innovations.cms.gov/documents/payment-care/APACO_Solicitation_10_20_11_Compliant1.pdf.

We will provide additional updates on the contents of the ACO final rule and related documents shortly.

On October 17^th, the Innovation Center announced a new initiative – the Innovation Advisors Program.  Innovation Advisors will support the Innovation Center in testing new models of care delivery, use their knowledge and skills in their organization in pursuing the three-part aim, work with local organizations and groups to drive delivery system reforms, and gather new ideas for possible testing or diffusion by the Innovation Center.  The Innovation Advisors Program consists of face-to-face national and regional meetings, training sessions, seminars, presentations by subject matter experts and individual coaching.  Innovation Advisors will partake in a dialogue between their home organization and the Innovation Center.  A fellowship stipend of up to $20,000 is available to support the activities of individuals selected for the program.  The Applications are due November 15th.  Additional information, including the application, is available at http://www.orise.orau.gov/IAP/index.html.  It is anticipated that CMS will select approximately 200 individuals to participate in this program.

On October 7, 2011, the Institute of Medicine (IOM) released a report setting forth the methodology it recommends that the Department of Health and Human Services (HHS) use to determine the essential health benefits package.  The Affordable Care Act requires plans participating in the insurance exchanges to, at minimum, provide coverage for a  defined set of benefits, known as essential health benefits.  While the statute provides a set of ten broad categories of services to be included in the benefits package, HHS asked the IOM to recommend a process by which the Secretary could define and update the essential health benefits.  In its report, the IOM concluded that the federal government should consider cost as a factor in deciding what benefits should be included.  Although HHS is not bound by the IOM recommendations, Secretary Sebelius said in a statement that HHS would consider IOM’s report and anticipates issuing its proposed rule on the benefits package “soon.”   Before publication of such rule, however, HHS plans to hold a series of listening sessions to gain input from relevant stakeholders.  The IOM report is available through the IOM web site: http://www.nap.edu/catalog.php?record_id=13234

Today, the Office of Management and Budget (OMB) received the long-awaited Medicare Shared Savings Program: Accountable Care Organization (ACO) final rule.  Observers speculate that this means that the rule could be made publicly available very soon.  The Affordable Care Act requires that the ACO program be established no later than January 1, 2012.

On September 28, 2011, the U.S. Department of Justice (DOJ) petitioned the Supreme Court to decide the constitutionality of the individual insurance mandate in the Affordable Care Act (ACA). The DOJ is petitioning for review of the 11th Circuit decision issued by a three-member panel on August 12, 2011, which struck down the individual insurance mandate as unconstitutional under the Commerce Clause while upholding the remainder of the ACA. DOJ petitioned the Supreme Court in lieu of requesting a hearing by the 11^th Circuit en banc, and well in advance of the 90-day deadline for appeal. The effect of the DOJ’s timing, should the Supreme Court accept the petition, will be to push the decision in advance of the 2012 Presidential election. Twenty-six states have filed a joint petition for certiorari requesting that the entire law be struck down.