Category — Issue Areas

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.

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.

In a recent report, the Treasury Inspector General for Tax Administration (TIGTA) audited Internal Revenue Service (IRS) efforts to implement the Affordable Care Act (ACA) tax provisions. The report found that:

The IRS has revised Form 990 Schedule H to require hospitals to report on their financial assistance policies and community health benefits as required to maintain tax-exempt status under the ACA.  The ACA requires the IRS to review at least once every three years the community benefit activities of tax-exempt hospitals subject to these new exemption requirements and the IRS expects to complete reviews of the activities of 1,700 hospitals by the end of calendar year 2011 out of the approximately 5,100 hospitals subject to the new tax-exemption requirements.  

Also, in consultation with the Department of Health and Human Services (DHHS), the IRS is required to provide annual reports to Congress on (i) the levels of charity care, bad debt expenses, and unreimbursed costs for services provided under government programs by private tax-exempt, government-owned, and taxable hospitals and (ii) costs incurred by private tax-exempt hospitals for community benefit activities.  The TIGTA report indicates that the IRS is starting to collect some of this information for private tax-exempt hospitals from the revised Form 990 Schedule H, but the IRS is exploring the need to enter into a memorandum of understanding with DHHS to help clarify data responsibilities regarding the preparation of this report.  The TIGTA report does not mention that such a memorandum of understanding may be needed because the IRS currently does not have any mechanism to collect such data with regard to government-owned and taxable hospitals.

The Department of Health and Human Services (HHS) recently issued a proposed rule regarding the establishment of non-profit CO-OP insurance plans as required by the Affordable Care Act.  CO-OPs must operate with a strong consumer focus and use profits to lower premiums, improve benefits or improve the quality of care delivered to plan members.  The proposed rule sets forth the eligibility standards to become a CO-OP, stating that health insurance issuers and government entities are not eligible to directly participate in the program.   The proposed rule also provides standards for CO-OP governance and describes loan eligibility criteria  that will help achieve the agency’s goal of having at least one CO-OP in every state.

Organizations seeking to establish a CO-OP are also eligible to apply for a portion of the $3.8 billion in repayable loans available to cover start-up and capitalization costs.  Along with the proposed rule, CMS announced a funding opportunity that provides two types of loan opportunities: 1) joint start-up and solvency loans; or 2) solvency loans only.  Loan recipients will be allowed to draw down funds as they reach “milestones” proposed in their loan application.  HHS anticipates that the first round of loans will be awarded to 51 applicants by January 12, 2012.  All CO-OP loans must be repaid with interest and loan recipients will be subject to audits and reporting requirements.   Start-up loans must be repaid within five years and solvency loans must be repaid within 15 years.

Link to proposed rule.

Link to funding opportunity.

On August 12, 2011, the Department of Health and Human Services (HHS) awarded a total of over $185 million to 13 states and the District of Columbia in Exchange Establishment grants.  States can use the Exchange Establishment grants to develop their Insurance Exchanges and Small Business Health Options Program (“SHOP”) through activities such as conducting background research, consulting with stakeholders, making necessary legislative and regulatory changes, establishing information technology (“IT”) systems, performing oversight, and ensuring program integrity.  States may apply for single (Level One) or multi-year (Level Two) funding through the Exchange Establishment grant process depending on their progress in establishing Exchanges.  All awards in this cycle were single-year grants. 

HHS previously distributed Exchange Establishment grants to three states in May 2011.  Additionally, 49 states and the District of Columbia received Exchange Planning grants in March 2011 to conduct studies on the feasibility of Exchanges and to hold community forums on how Exchanges should be established.  Six states and one multi-state consortium (led by the University of Massachusetts Medical School) received Early Innovator grants to develop model Exchange IT systems.

Additional opportunities to apply for Exchange Establishment grants will be available through June 2012.  Future applications for grants will be accepted quarterly, with the last deadline on June 29, 2012.  Awards will be made approximately 45 days after the application due date.

The Department of Health and Human Services and the Department of the Treasury issued three Notices of Proposed Rulemaking (“NPRMs”) on August 12, 2011 on eligibility and enrollment in Insurance Exchanges and the Small Business Health Options Program (“SHOP”), health insurance premium tax credits, and eligibility changes to Medicaid and the Children’s Health Insurance Program (“CHIP”).  

• The Exchange Functions in the Individual Market: Eligibility Determinations and Exchange Standards for Employers (“Exchange Eligibility and Employers”) NPRM proposes processes for individual enrollment in qualified health plans (“QHPs”) and insurance affordability programs as well as standards for employer participation in SHOP. 
   
• The Health Insurance Premium Tax Credit (“Tax Credit”) NPRM outlines proposed eligibility standards for the premium tax credits for coverage purchased through the Exchanges (available to taxpayers with household incomes between 100 percent and 400 percent of the Federal Poverty Level (“FPL”) starting in 2014) and explains how such tax credits will be calculated.  
   
• The Medicaid Program: Eligibility Changes under the Affordable Care Act of 2010 (“Medicaid Eligibility”) NPRM proposes to expand Medicaid  to most adults under  the age of 65 with incomes up to 133 percent of the FPL and consolidate eligibility categories into four groups:  children, pregnant women, parents, and a new adult group.  The NPRM would also increase the Federal Matching Assistance Percentage (“FMAP”) for newly eligible individuals and to states that expanded Medicaid coverage for adults before enactment of the Affordable Care Act. 

Together, the three NPRMs establish coordination across Medicaid, CHIP and the Exchanges and create a system in which Exchanges would conduct eligibility determinations for Medicaid and premium tax credits as well as facilitate enrollment in insurance affordability program.  Comments on all three NPRMs are due by October 31, 2011.

The U.S. Department of Health and Human Services (HHS) issued two Notices of Proposed Rulemaking (NPRMs) on July 11, 2011 relating to state health insurance exchanges.  Both NPRMs will be published in the Federal Register on July 15, 2011.  Comments on both NPRMs are due by September 26, 2011.

The Patient Protection and Affordable Care Act (PPACA) requires each state to establish by January 2014 an American Health Benefit Exchange and a Small Business Health Options Program (“SHOP”) to facilitate health insurance purchasing by individuals and small employers.  Under PPACA, if a state fails to establish an Exchange and/or a SHOP by January 1, 2014, the Secretary of HHS must establish and operate the Exchange and/or SHIP  in that state.  PPACA provides that each Exchange will:  certify health plans that can offer coverage through the Exchange; assign ratings to each plan based on price and quality; provide consumer information on each plan (including an electronic calculator that consumers can use to assess the cost of coverage); determine eligibility for the Exchange, tax credits and cost-sharing programs, public health coverage programs (including Medicare, Medicaid, and CHIP), and exemptions from the individual mandate; and establish a “Navigator” program to assist consumers in making choices about their health care.

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On May 19, the Department of Health and Human Services (HHS) issued a final regulation implementing section 1003 of the Patient Protection and Affordable Care Act that requires review of certain health insurance premium increases.  Starting September 1, 2011,  premium increases of ten percent or more for non-grandfathered individual and small group health plans must be disclosed and reviewed by relevant officials.  States will primarily have the responsibility for reviewing rate increases and have already been awarded approximately $44 million in grants to obtain the necessary resources to conduct the reviews.  In September 2012, the ten-percent threshold will be replaced by state-specific percentages based on state cost trends.  The final rule also requires insurance companies to provide consumers with information and justifications for the rate increases in order to ensure transparency about consumer costs.  The rule does not provide HHS and states with authority to approve or reject the rate increases, but instead allows officials to enhance transparency in the insurance marketplace.

Section 4205 of the Patient Protection and Affordable Care Act of 2010 (PPACA) requires chain restaurants and vending machine operators with 20 or more locations or machines to provide calorie and other nutrition information to consumers.  Although FDA’s statutory deadline to publish the proposed rules was March 23, 2011 (within one year of PPACA’s enactment), the rules, entitled Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments and Food Labeling; Calorie Labeling of Articles of Food in Vending Machines were published in the April 6, 2011 Federal Register and the public is invited to submit comments by July 5, 2011.