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Perspectives

Health Care Current: October 1, 2013

Health insurance exchanges: now taking orders…

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

My Take

Health insurance exchanges: now taking orders…

Common wisdom says, don’t rush to dine at a new restaurant the day it opens; instead, wait a few weeks or a month so the staff learns its way around the kitchen, menu winners are perfected (and flops are remedied) and early patrons’ reviews appear on social media.

Similarly, consumers are being counseled by sources ranging from POLITICO Pro1 to Forbes.com2 not to rush to select a health plan today, October 1, when the Affordable Care Act (ACA)-mandated state health insurance exchanges (HIX) open for enrollment. As with any new process or system, there is the potential for items that require attention and modification. Also, HIX stakeholders including, states, federal agencies, health plans, technology vendors, employers and others, may need time to perfect operations.

There are high levels of uncertainty surrounding both the overall volume and the timing of HIX enrollment.The Congressional Budget Office (CBO) estimates that approximately 24 million people may purchase coverage through HIXs by 2020.3 Of that total, the CBO projects that seven million will purchase coverage during the initial six-month enrollment period. More recent estimates from a variety of private sector sources project substantially lower initial enrollment, with some projecting around four million enrollees. Enrollment is likely to come in waves, including pent-up demanders, early adopters, holiday shoppers and last-minute movers. We don’t have perfect precedents on which to base our estimates; however, on a large-scale, national level, the Medicare Part D rollout in 2005 and 2006 is a good analogous experience. Approximately 5.4 million beneficiaries enrolled by January 1, 2006, when the first prescription drugs were covered by this new entitlement program. By the end of the first benefit year, enrollment more than doubled to 13.2 million.4

Challenges ahead for HIX stakeholders
The interdependencies of operating an exchange require that each party stays coordinated and honest as to their status and roadblocks. Here are some of the challenges facing the primary HIX stakeholders―states, commercial health plans and employers―and suggested focus areas for the initial six-month open enrollment period.

States
States are required to open their HIX doors on October 1, but some establishments are more ready than others. As of this writing, 16 states have built their own exchange; seven are partnering with the federal government to help run the state’s exchange in 2014; and the remainder have opted to use the federal exchange in year one.5 (They may be able to convert to a state-based exchange later or continue using the federal exchange.)

Enabling exchange enrollment is a complicated endeavor for states. They need to coordinate processes and information technology (IT) systems with the federal hub; with individual commercial insurance plans; and with third parties, such as the National Association of Insurance Commissioners’ (NAIC) System for Electronic Rate and Form Filing (SERFF), which enable companies to send and states to receive, comment on and approve or reject insurance industry rate and form filings.

Some states’ systems and processes are up to the task; others may default to taking more paper applications or using call centers at the beginning of the enrollment period, with the goal of getting to more a technology-based solution over time. Also, while some states have heavily promoted the October 1 date, others have not, perhaps driven by a “let’s not over-advertise and under-deliver,” philosophy: these states may want to make sure their system works well before they have a grand opening, so to speak.

As it was during HIX development, collaboration and reuse will be important to help states get through their “soft” opening. Continued participation in knowledge-sharing calls and leveraging existing deliverables and software will be beneficial as states go through the initial days of implementation.

Health plans
From a health plan perspective, January 1 will be at least as important a date as October 1, as plans must be ready to accurately pay claims and issue premium bills with the dawn of the new year. This is not to discount the complexity and challenges inherent in the October 1 launch of processing enrollment transactions, including making sure people are signed up for the right plan, with the right copays and deductibles, at the right premium level, with the right federal subsidy calculations. Both October 1 and January 1 are major milestones for plans, which are grappling with challenges both external (such as HIX data exchange) and internal (such as new or enhanced information systems). With so many new variables involved in issuing ID cards, mailing welcome kits, sending premium bills, paying claims, answering customer service calls, interfacing with brokers and agents, responding to provider inquiries and dealing with new government data systems and rules, there are considerable opportunities for glitches to occur. And they will.

Employers
Deloitte’s 2012 Survey of U.S. Employers reveals that three in five employers are familiar with HIXs.6 Most employers also are aware that the employer mandate has been deferred until 2015. But most don’t realize that they still must comply with reporting requirements and inform their employees about the existence of exchanges, how they work, their plan options, etc.

Employees need more and better information to help them understand HIX, their coverage options and potential eligibility for tax credits and Medicaid programs. Some states and the federal government have recently launched or have planned campaigns to increase awareness.7 However, the standard communication materials published by the government and being adopted by many health plans are somewhat complex. Employers would be wise to send out their own notices about the exchanges or add a cover letter to the government materials to help employees understand their contents and why reading them is important.

Deloitte’s employer survey findings suggest most employers will be taking a "wait and see" approach to HIX enrollment; however, recent media reports indicate large employers are starting to shift select populations to the private exchanges. With employer penalties and reporting deferred until 2015, the coming months would be a good time to formulate a long-term HIX strategy to address the implications of HIX and other reform-related programs on their organization. The health insurance marketplace is changing and there are options for employers and employees that didn’t exist a year ago. Employers need to understand these changes so they can determine their approach moving forward.

Big days ahead
The October 1 opening of HIX enrollment is worthy of the considerable media coverage it is generating because it marks a key milestone in U.S. health care reform: enrolling in exchanges offers a light at the end of the tunnel for people who currently don’t have and/or can’t afford health care coverage. However, the specific date of October 1 is likely overhyped because that is just the first day in a six-month initial enrollment period.

Many health care stakeholders are looking beyond October 1 and the HIX launch to the prospect of “HIX 2.0,” when the industry starts to think about transitioning from better coverage to better outcomes. This transition likely will be one of continuous innovation rather than big-bang evolution; next October’s enrollment period will see the debut of new menu items, as will the one after that. Things could get exciting the longer the HIX restaurant is open for business.


Pat Howard, National Sector Leader, State Health Care, Deloitte Consulting LLP

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Greg Scott, National Sector Leader, Health Plans, Deloitte Consulting LLP

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Rick Wald, National Practice Leader, Employer Health Care Community, Deloitte Consulting LLP

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Sources
1 “Obamacare D Day becomes a soft launch,” politico.com, September 14, 2013. http://www.politico.com/story/2013/09/obamacare-october-1-launch-96784.html. Accessed September 19, 2013
2 “Health Insurance Exchanges: Don’t Everyone Show Up at Once,” Forbes.com, September 18, 2013. http://www.forbes.com/sites/insidepatientfinance/2013/09/18/health-insurance-exchanges-dont-everyone-show-up-at-once/. Accessed September 19, 2013.
3 Congressional Budget Office Projections. Health Insurance Exchanges: CBO's May 2013 Baseline. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsurance
Coverage_2.pdf.
As cited in Will they come? Consumers and health insurance exchanges: Awareness, preferences and concerns, Deloitte Center for Health Solutions, 2013.
4 http://kff.org/data-collection/medicare-health-and-prescription-drug-plans/
5 http://www.deloitte.com/assets/Dcom-UnitedStates/Local Assets/Documents/Health Plans/us_hp_hix_IndividualMarketCompetition_81313.pdf
6 Insurance innovations have set the health reform ball rolling: value and quality are next.
Employer Views: Selected results from Deloitte’s 2013 Employer Survey, Deloitte Center for Health Solutions, 2013.
7 Enroll America. www.enrollamerica.org, Accessed 9/3/2013.

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Implementation & Adoption

HHS report says health insurance exchange plan options to be plentiful

Last Wednesday, the U.S. Department of Health and Human Services (HHS) released a report detailing health plan choices for consumers purchasing on HIXs starting January 1, 2014. The report concluded that consumers living in the 36 states where HHS will either fully run or partner with the state to run the exchange will have an average of 53 health plans to choose from and most (95 percent) consumers will have at least two different insurance companies to choose from and live in states with average premiums below earlier estimates. Highlights:

  • Young adults will have an average of 57 health plans to choose from; the weighted average lowest monthly premiums for a 27-year-old in the 36 states will be $129 for a catastrophic plan, $163 for a bronze plan and $203 for a silver plan (before tax credits).
  • Average premiums will be 16 percent lower than original CBO projections, before federal tax subsidies.
  • In 15 states, the second lowest cost silver plan will be less than $300 per month―a savings of $1,100 a year per enrollee compared to expectations.
  • HHS notes that roughly 25 percent of the insurance companies participating in HIX are new to the individual market.
  • After tax credits are taken into account, 56 percent of uninsured Americans may qualify for health coverage for less than $100 per person per month.

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Congress will purchase insurance through D.C. SHOP exchange; Administration announces delay in SHOP online enrollment

Monday, the U.S. Office of Personnel Management (OPM) released a final rule clarifying how members of Congress and their staff will purchase health plans through HIXs. All Congressional staff members will be required to enroll in the District of Columbia (D.C.) SHOP exchange whether or not they work or outside of the D.C. metro area. No members of Congress or their staff will be eligible for premium tax credit subsidies regardless of their income; however, they will all receive a federal employer contribution. Congressional members will now have until October 31, a one-month delay, to designate which staff will be declared “official office” staff and are required to purchase insurance through the D.C. SHOP exchange and which staff members will remain in the Federal Employees Health Benefits program.

Related: due to technical issues, small business owners will not be able to enroll online in the Small Business Health Options Program (SHOP) exchange until November 1, a month later than expected. Instead, small businesses that wish to apply prior to November must submit their enrollment applications via fax or mail starting October 1. SHOP plans will still take effect January 1 as scheduled, providing coverage for an estimated two million people.

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CMS proposes rule for alternative health plan

Last Friday, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule which outlines the framework for the Basic Health Program (BHP), an alternate insurance coverage program created by the ACA that would provide tax subsidies for people earning between 138 percent and 200 percent of the federal poverty line (FPL)―too much to qualify for Medicaid, the Children's Health Insurance Program (CHIP), or other minimum essential coverage. According to the proposed rules, certification, eligibility, enrollment and cost-sharing systems will mirror those implemented for HIXs, Medicaid and CHIP. A state that operates a BHP will receive federal funding equal to 95 percent of the amount of the premium tax credits and the cost-sharing reductions that would be given to eligible individuals if they were to enroll in a qualified health plan through a HIX (a.k.a., marketplace). In February, CMS delayed the BHP launch date to January 1, 2015, a year later than its original launch date. Insurance coverage for BHP must meet the same standards as basic coverage under the ACA and the monthly premiums may not be more expensive than the second lowest cost silver plan on the state HIX.

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Avalere Health analysis shows a reduction in MA options

Medicare beneficiaries will have 5.3 percent fewer Medicare Advantage (MA) plan options in 2014, according to an analysis conducted by Avalere Health. The decrease in plan options, the first since 2011, is attributed to a combination of new health insurer fees; payment cuts resulting from the ACA, changes to the CMS risk adjustment model and to new medical loss ratio (MLR) requirements (minimum MLR of 85 percent). The report indicates that MA plans will reduce the number of preferred provider organization (PPO) plans, private fee-for-service (PFFS) plans, special needs plans (SNP) and chronic condition special need plans (C-SNP) that they offer. Health maintenance organization (HMO) plan options, however, will increase slightly by 2.6 percent from 2013 to 2014. Prescription drug plans (PDP) premiums are projected to increase an average of 5.1 percent in 2014.

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On the Hill & In the Courts

Federal government begins shutdown, most ACA activities continue

Late last night, the Senate rejected (54-46) a third version of the House resolution to fund the federal government in fiscal year (FY) 2014. The legislation included language to delay the ACA’s individual mandate for one year (until January 1, 2015) and prohibit the government from providing employer contributions for the health plans of legislatures and Congressional staff members purchased on HIXs. Both chambers exchanged pieces of legislation several times last week in an attempt to avoid the first government shutdown since 1996. Highlights:

  • On September 20, the House passed (230-189) a bill to keep the government funded through December 15, while defunding the ACA.
  • Friday, the Senate rejected the House bill, and passed (54-44) a bill which would avoid a government shutdown until November 15, and continue to fund the ACA. The Senate version of the resolution removed the language from the House defunding the ACA and was returned to the House to be passed, or amended.
  • Over the weekend the House passed (232-192) a resolution to fund the government through December 15, while delaying ACA provisions that have not yet been implemented, and repealing the law’s 2.3% medical device excise tax.
  • Monday afternoon, the Senate rejected (54-46) the amended House resolution; the House submitted to the Senate a revised version of the resolution on Monday evening.

In the event of a shutdown, a contingency plan released last weekend from HHS will be put into place to allow multiple health care related services to remain open on a limited basis. Anticipated impact of government shutdown on federal health agencies:

  • HHS: “HHS’ contingency plans for agency operations in the absence of appropriations would lead to furloughing 40,512 staff…grant-making and employee-intensive agencies [would have] the vast majority of their staff on furlough, and agencies with a substantial direct service component [would have] most of their staff retained.”
  • ACA: “CMS would continue ‘large portions’ of Affordable Care Act activities, including coordination between Medicaid and the Marketplace, insurance rate reviews, and assessment of a portion of insurance premiums that are used on medical services.”
  • FDA: “FDA would continue limited activities related to its user fee funded programs, including activities in the Center for Tobacco Products, if the government shuts down…But FDA would have to furlough 45 percent of its 14,800 employees, and would be unable to support the majority of its food safety, nutrition and cosmetics activities.”
  • CMS: “Medicare would continue largely without disruption...Other non-discretionary activities, including Healthcare Fraud and Abuse Control, Center for Medicare & Medicaid Innovation and Pre-existing Condition Insurance Plan activities would continue...However, CMS would be unable to continue discretionary funding for healthcare fraud and abuse strike force teams, resulting in the cessation of their operations.”

Sources: Department of Health and Human Services, “Fiscal Year 2014 Contingency Staffing Plan for Operations in the Absence of Enacted Annual Appropriations;” InsideHealthPolicy.com, “Mandatory ACA Funding, Carryover FDA User Fees Would Help HHS In Event Of Shutdown,” September 30, 2013.

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FDA releases guidance for medical mobile apps

Last Wednesday, the U.S. Food and Drug Administration (FDA) issued highly anticipated guidance to help bring clarity and predictability to industry manufacturers and developers of mobile medical applications (apps)—software on mobile communication devices or accessories that attach to mobile devices. Mobile medical app manufacturers will now be required to register with the FDA and provide a list of all the mobile medical apps they are marketing. For now the agency will only regulate apps related to or used as medical devices, however, the guidance provided a substantial list of apps which “may meet the definition of medical device but for which FDA intends to exercise enforcement discretion.” Highlights:

  • The FDA will closely regulate apps that:
    1. Are intended to be used as an accessory to a regulated medical device
    2. Transform a mobile platform into a regulated medical device by using attachments, display screens, sensors similar to the device itself, or that perform patient-specific analysis and provide patient-specific diagnosis, or treatment recommendations (e.g. electrocardiograph, apps that measure physiological functioning during CPR, or apps that can connect and access data from a perinatal monitoring system that transfer fetal heart rate and uterine contractions to another location for remote monitoring)
  • Apps not considered medical devices include: medical textbooks or other reference materials, educational tools for medical training for health care providers, information for general patient education, or automated general office operations in a health care setting
  • A mobile medical app, like other devices, may be classified as class I (general controls), class II (special controls in addition to general controls), or class III (premarket approval)

"Since 2011, when the initial draft guidance was issued, the industry has expressed much angst and hand-wringing over where and how the line between unregulated apps and regulated medical devices would be drawn. Consequently, while a few developers have created robust applications that were clearly medical devices and sought FDA approval, many others have been reluctant to wade into the gray area, ostensibly fearing regulatory issues. Similarly, potential investors would often cite regulatory concerns. However, the FDA’s rules have always sat squarely in the agency’s responsibility to protect the public’s health by focusing on apps that might pose a risk to a user’s safety if it malfunctioned. These are mainly those which either serve as regulated devices (like an electrocardiogram), control regulated devices, or transmit data from regulated devices. By contrast, apps for tracking fitness or for accessing personal health information or electronic health record data would be watched, but not regulated, though with some enforcement discretion depending on whether they met a risk threshold. While there are still some unresolved issues which other FDA workgroups are addressing (such as medical apps and other IT platforms for decision support), the FDA’s ruling provides some clear guidance for innovators as to which side of the line their products will fall."—Harry Greenspun, MD, Senior Advisor, Health Care Transformation and Technology, Deloitte Center for Health Solutions, Deloitte LLP

Related: in the September 24 edition of the Health Care Current we included an update about the FDA’s final rule on unique device identification system for medical devices. The latest @Regulatory Special Bulletin discusses implications this final rule has for medical device manufacturers. To access the latest newsletter, visit the website here.

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House members urge delay of “two-midnight” rule, CMS allows grace period

U.S. Representative Allyson Schwartz (D-PA), along with a bipartisan coalition of more than 100 House members, urged CMS Administrator Marilyn Tavenner to delay implementation of the fiscal year 2014 Hospital Inpatient Prospective Payment System (IPPS) rule, otherwise known as the “two-midnight” rule, which would take effect October 1. The IPPS rule, issued August 2, stipulates that if a Medicare patient needs medical treatment requiring a two-night hospital stay and is admitted as such, Medicare Part A will cover the cost. If a Medicare patient needs medical services spanning less than two nights in a hospital, they will be billed on an outpatient basis, which would be covered under Medicare Part B. Representative Schwartz and the coalition argue that the IPPS rule could cost Medicare patients more for a shorter stay if beneficiaries are billed under Medicare Part B, resulting in higher out-of-pocket costs. The letter also expressed concerns about the short timeline hospitals have to comply with the IPPS rule and educate physicians about the changes. In response, CMS announced in an Open Door Forum last Thursday that Medicare Administrative Contractors and Recovery Auditors will not question providers’ decisions to admit patients prior to December 31 and are therefore forbidden from handing out financial penalties to medical entities who mistakenly admit patients for overnight care that could have been handled on an outpatient basis. CMS intends to use the three-month grace period to investigate patient admissions at hospitals and to then use that data to evaluate hospitals’ compliance with the IPPS rule, in addition to creating and providing education and guidance for hospitals and physicians about implementing the rule.

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Lawmakers agree on legislation to regulate compounding pharmacies

House and Senate health policy leaders came to a bi-partisan, bicameral agreement last Wednesday regarding oversight of non-traditional compounding pharmacies, The Drug Quality and Security Act. The legislation would replace a collection of state and federal regulations with national standards designed to track drugs throughout the compounding process and monitor their safety through the supply chain, as well as to require post-market surveillance. Under the Act, traditional compounding pharmacies will remain under the jurisdiction of state boards of pharmacy while larger compounding pharmacy operations will be regulated by the FDA. For more information on compounding, see the September 24 Health Care Current.

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Around the Country

Attorneys general urge regulation of e-cigarettes to youth

Last Tuesday, Attorneys General Martha Coakley of Massachusetts and Mike DeWine of Ohio co-sponsored a letter with 38 other attorneys general urging the FDA to meet its intended deadline of October 31 to propose regulations for ingredients, advertising and sale of electronic cigarettes (e-cigarettes) to youth. E-cigarettes are powered by a battery and operate by turning nicotine-laced liquid into vapor. E-cigarettes can be bought and sold online and advertised on television. In September 2010, the FDA issued several warning letters to e-cigarette distributors for violations of the Federal Food, Drug and Cosmetic Act including “violations of good manufacturing practices, making unsubstantiated drug claims and using the devices as for drug delivery.” Some experts claim e-cigarettes are less harmful than traditional cigarettes, but public health officials are concerned that e-cigarettes could function as a gateway drug for more harmful tobacco products. According to FDA, the safety and efficacy of e-cigarettes has not been fully studied and there is no way of knowing whether e-cigarettes are safe for their intended use, how much nicotine or other potentially harmful chemicals are being inhaled during use and/or if there are any benefits associated with using them.

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NAMD: states still working to have Medicaid programs ready by October 1

A survey of 20 states conducted by the National Association of Medicaid Directors (NAMD) shows that states are still working to complete the ACA required changes to their Medicaid programs and some states will not be ready by October 1. All states in the survey reported being at least half-way to completing necessary testing to connect to the federal data hub, as of September 15. The survey found most states were also close to completion on updating their enrollment and eligibility systems, streamlining their application process and remodeling their income verification systems for the Modified Adjusted Gross Income (MAGI).

Note: NAMD’s examined nine tasks the states needed to complete and states did not have to answer all questions.

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Florida proposes expansion to LIP program

Florida is seeking federal approval for expansion of its Low Income Pool (LIP) program, which provides hospitals and health care providers with additional funds to care for low-income and uninsured patients. LIP was created in 2006 using a federal waiver and is currently set to expire on June 30, 2014. The state Agency for Health Care Administration will submit a $3 billion, three-year expansion proposal to the House Health Care Appropriations Subcommittee by November 22.

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Arkansas releases HIX premium rates

Last Monday, premium rates were announced for all 71 qualified health plans offered by four insurance carriers (Blue Cross and Blue Shield Multi-State, Celtic Insurance Company, Arkansas Blue Cross and Blue Shield and QCA Health Plans, Inc.) that will be sold on the Arkansas HIX. A press release issued by State Insurance Commissioner Jay Bradford announced premiums that were as much as 25 percent lower than what had been initially requested for individual rates and stated that most residents will not pay full premium price due to premium tax credit assistance. As in all states, premium costs will be based on age, family size, geography and tobacco use. The average base-line premium cost for a 30-year-old will be $284.74 per month and the average base-line premium cost for family consisting of two 40-year-olds with two children will be $948.82, before premium tax credits are applied.

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Breaking Boundaries

mHealth Evidence tool provides state-of-the-art insights

In an effort to provide scientific proof to support the emerging field of mHealth technology, a major university has developed mHealth Evidence, an online database for global mHealth resources. This reference tool is designed to help researchers, software developers, program managers and other key decision-makers locate documentation on the feasibility, usability and efficacy of mobile technologies used in health care. The tool currently indexes over 5,000 global evidence sources including peer-reviewed and grey literature from high, middle and low resource settings. The literature has been cataloged, categorized and graded to allow users to quickly get up to speed on the current state-of-the-art. This catalog can provide resources for a solid evidence base to support mHealth interventions and the ability to incorporate known best practices and learn from previous failures. The goal is to provide a tool to make informed decisions on the design and implementation of mHealth projects.

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Mathematical model aims to reduce reactions to implanted devices

A computer model that better understands the body's reaction to medical implants, such as stents, catheters and artificial joints is ready for use, according to researchers from the University of Texas at Arlington. Researchers applied mathematical modeling, which previously had been used to decipher the complex system involved in wound healing, to improve the biocompatibility of medical devices and identify the timing and dosages of treatments for reactions.

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