Health Care Lawyer Blog

The Michigan Office of Financial and Insurance Regulation (OFIR) has received a $1 million federal grant to help the agency monitor insurance companies who unreasonably hike up the costs of coverage. The funds are part of a $250 million grant allocation provided for by the Patient Protection and Affordable Care Act, and other states will be receiving similar grants to promote oversight of insurance agencies.

Currently, under Michigan law OFIR has the authority to review and approve/reject rate increases proposed by Blue Cross Blue Shield of Michigan. However, OFIR does not have the legislative authority to conduct policy reviews, investigate complaints, or examine insurers. While the grant monies will not change the law, the funds are designed to allow OFIR to contract with consulting actuaries to perform a targeted, in-depth analysis and review of premium filings made by HMOs and commercial carriers.

OFIR will also conduct a study on the feasibility of posting health insurance rate information on a proposed website, and will create a public portal that will provide information to the public in a streamlined, consumer-friendly format. The $1M grant is in addition to funding that will be distributed to the states to help consumers appeal coverage decisions made by health plans and insurance companies.

For more information, visit http://www.healthcare.gov/center/grants/states/mi.html

You know the drill – you call your health care insurer to see if a certain procedure or drug is covered by your plan. After the friendly representative assures you it is, you go ahead and order the drug or procedure. However, a few weeks later you receive a hefty invoice for the allegedly “covered” procedure, leaving you in a nasty game of “He said, she said” and endless calls to your insurance company.

Relief from such scenarios may be on the way. Last week, the Departments of Health and Human Services (HHS), Labor, and the Treasury issued new regulations designed to help consumers appeal coverage decisions made by health plans and insurance companies, and to help boost the availability of resources to do so. The appeals regulations, which were issued pursuant to the Patient Protection and Affordable Care Act (PPACA), includes $30 million in Consumer Assistance Program grant funding to help states establish consumer assistance offices or strengthen existing ones. Consumers who live in the State of Michigan, for example, can appeal denied claims through the Office of Financial and Insurance Regulation.

While many insurance plans already include a mechanism by which consumers can appeal coverage denials, under PPACA such provisions are now mandatory. Additionally, for the first time patients will have the right to appeal coverage decisions to an outside, independent decisions-maker. Specifically, consumers in states who lack such outside determination laws will not have access to a Federal external review program.

For more information on the appeals regulations, check out the HHS Fact Sheet or contact Mercedes Varasteh Dordeski.

Starting July 1, the federal government will begin financing “high-risk” insurance pools, which are aimed at providing coverage for uninsured individuals with pre-existing or chronic conditions.

Under PPACA, the government has set aside $5 billion for states to set up the high-risk pools for individuals who have been insured for six-months or longer. The pools are intended to be a stopgap to extend coverage until state insurance exchanges begin operating in 2014. (Under PPACA, insurance exchanges will be required to cover individuals with pre-existing conditions.)

The pools will have no restrictions based on pre-existing conditions, and will offer low deductibles and co-payments, and a ban on annual or lifetime limits.

While the pools will be funded by government subsidies, individuals will still have to pay premiums – specifically, PPACA requires that premiums for the “high-risk” coverage must be the same as the standard rate for a healthy adult in that state.

Under the law, each state can decide whether it wants to run the new high-risk pool itself, or whether it wants to have the federal government run the program instead. Michigan, for example, intends to run the new pool itself with the $140 million it will receive from the government. According to the Michigan Office of Financial and Insurance Regulation, patients can enroll in the new plan in September, with coverage slated to start in October. (Click here for additional information on Michigan's plan.)

However, there is some debate over whether the $5 billion set-aside will be sufficient to fund the high-risk pools until 2014. Since PPACA gives the Secretary of Health and Human Services discretion to adjust the state awards in anticipation of a projected deficits, states may be left with the unflattering option of either shouldering the burden, or un-insuring its residents.

For more information on state insurance pools, visit the National Association of Insurance Commissioners website, which has a directory of state insurance departments. Individuals interested in signing up for the high-risk pools should contact their corresponding state agency.

Editor's Note: Today's post was authored by FHWN attorney Sue Nolan.

The details on a new federal income tax credit for certain employers who make nonelective contributions towards employee health insurance premiums will be published next month in the Internal Revenue Service Bulletin.

Specifically, the new credit is designed to help small employers who have relatively low-wage employees. Businesses with 10 or fewer full-time equivalent employees earning less than $25,000 a year on average will be eligible in 2010 for a tax credit of 35% of health insurance costs. Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits. On a state-by-state basis, this credit will change when the states set up Small Business Health Options Programs called "SHOP Exchanges" where small businesses can pool together to buy insurance. The SHOP Exchanges are required to be set up by 2014.

After the SHOP Exchanges are created, the tax credit will remain in place, increasing to 50% of health insurance costs for the first two years a company buys insurance through its state exchange.

Background

The Patient Protection and Affordable Care Act (PPACA) amends the Internal Revenue Code (by adding Section 45R) to provide a credit to small businesses for health insurance costs. The credit applies to any tax year beginning after December 31, 2009. There is a phase-out provision to limit the amount of the credit for small business employers who have more than 10 employees and/or whose average wage is higher than $25,000. Currently, there is a "transition" rule in place that applies until the sooner of 2014 or the time that the employer's state sets up a Small Business Health Options Program called "SHOP Exchange" where small businesses can pool together to buy insurance.

Current Provisions

Credit. The amount of the credit with respect to any eligible small business employer is equal to 35 percent (25 percent for a tax-exempt eligible small employer) of the lesser of (1) the eligible small employer's nonelective contributions for premiums paid for health insurance coverage for an employee or (2) an amount the Secretary of HHS determines is the average premium for the small group market in the State in which the employer is offering health insurance coverage or such area within the State as specified by the Secretary.

Phase-Out. The amount of the credit shall be reduced by the sum of the following:

(1) the amount of the credit multiplied by a fraction whose numerator is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.

(2) the amount of the credit multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.

The dollar amount specified in (d)(3)(B) is currently $25,000.00. The amount of any credit taken reduces the employer's deduction for health care expenses.

After the jump - definitions

Continue reading "New Tax Credit Gives Break to Small Employers Contributing to Employee Health Plans" »

A frequent topic on the Health Care Lawyer Blog has been combating fraud and waste in the health care industry – both waste due to negligence, and “behavioral waste,” which is the term used to describe monies spent on treating preventable illnesses, such as those associated with obesity, smoking and non-adherence to medical regiments.

Therefore, I was pleased to learn that the new PPACA legislation seeks to combat behavioral waste by allowing employers to give further reductions in health insurance premiums to employees who practice healthy behavior. Prior to PPACA, employers were allowed to give a discount of up to 20 percent of the costs of premiums for employees who reached certain health goals – for example, maintaining a healthy weight, quitting smoking, and keeping blood pressure, blood sugar and/or cholesterol within a healthy range. Under PPACA, that cap is now lifted. Starting in 2014, employers can allow discounts of 30 percent and up to 50 percent in the cost of individual or family health care premiums.

Starting in 2011, small businesses (defined as companies that have 100 or fewer employees working 25 or more hours per week) will be eligible to receive grant funding to help implement such wellness programs. There will also be technical assistance and other resources available to help employers evaluate and launch such wellness programs.

PPACA will also expand wellness discounts in the individual (i.e., non-employer sponsored) market – an initial demonstration project involving 10 to-be-determined states is to be launched in July 2014. Employers who want to learn more about seeing up a wellness incentive program should contact Mercedes Varasteh Dordeski.

(For more additional information about PPACA's wellness and prevention provisions, feel free to check out my article in this month's ABA Health eSource.)

A new prescription drug rebate formula found in the health reform bill (the Patient Protection and Affordable Care Act, or "PPACA") is designed to lower the costs of drugs sold to state Medicaid programs - unfortunately, instead of saving the states money, the provision may actually strip additional funds from several states' already cash-strapped coffers.

Specifically, the health law contains a provision designed to raise $38 billion over the next ten years by requiring drugmakers who sell to Medicaid to further discount their prices. While such "rebates" were previously divided between the states and the federal government, under PPACA a significant portion of the rebates will now go solely to the feds.

While some states may be able to offset these losses, PPACA may spell trouble for others - for example, according to California's deputy Medicaid director, the state may lose $50 million next year because of the revisions. Indiana's secretary of the Family and Social Services Administration estimated that losses for her state may amount for $400 million over 10 years.

Currently, drug firms must offer Medicaid programs a 15.1 percent rebate for most brand-name medications. Under PPACA however, the rebate is increased to 23.1 percent, and now includes certain generics. The changes are slated to take effect October 1 of this year.

By: Louis C. Szura

The new PPACA legislation includes a version of the previously proposed Physician Payment Sunshine Act, which requires drug, medical device, biological or medical supply manufacturers to disclose direct payments or transfers to physicians and teaching hospitals that are $10 or more (or total over $100 in a calendar year). It also requires those manufacturers to disclose any non-public ownership or investment interests of physicians and their immediate family members in the manufacturers. Those reporting requirements do not take effect until March 31, 2013 and the information will be available online to the public.

However, there are some significant limitations on these reporting requirements. First, there is no requirement to report payments made through third parties where the manufacturer does not known the identity of the physician. This means that typical survey and marketing research will not be covered. Second, certain transfers are not covered, including the loan of medical devices for under 90 days, product samples intended for patient use, discounts (including rebates) and other items. Third, in the case of payments made pursuant to product research or development of a new drug, technology or device in connection with a clinical investigation, the manufacture can delay reporting the payment for either four years or until the drug, device or technology is approved by the FDA. Overall, even with these limitations, the relationships between manufacturers and physicians will be clearer to the public. For additional information about these regulations, please contact Louis Szura.

I seem to be caught in an alarming pattern in which every time I leave the country, I return to fiscal and/or political turmoil. In September of 2008, for example, I departed to St. Lucia for a week and arrived back into the eye of the Wall Street collapse; Lehman Brothers had filed for bankruptcy, Fannie Mae and Freddie Mac had been placed in conservatorship, and general chaos reigned.

On Monday, I returned from a week in lovely Cabo San Lucas, Mexico in the wake of one of the most significant – and controversial – pieces of health care legislation in U.S. history. With the historic Patient Protection and Affordable Care Act (“PPACA”) now law and passage of the Reconciliation Bill looming (as of the time of this post, the bill had passed both the House and Senate and is awaiting President Obama’s signature), sweeping changes are scheduled to unfold during the next several years.

Some of the key provisions are as follows:

- Immediately, the Act will give small businesses a tax credit to help them pay for health insurance. Seniors will get a $250 rebate on prescription drug expenses. The federal government will begin providing significant funding to community health centers, eventually doubling the number of patients treated at these centers. The federal government will also provide funding to train additional primary care physicians, nurses and public health professionals to meet the increased demand for health care services.

- Within the next ninety days, individuals with pre-existing conditions will be able to purchase subsidized health insurance. Retiree health plans covering early retirees (ages 55 to 64) will qualify for a new federal reinsurance program which will reduce the costs of these plans, helping many Michigan businesses.

- In six months, all health plans will be prohibited from denying benefits to children because of pre-existing conditions or canceling coverage or a policy when a patient becomes sick or reaches a lifetime limit. Health plans will be required to permit young adults up to age 26 to remain on their parents' insurance policies. All new health plans will be required to provide free preventive care with no co-pays or deductibles.

- Beginning January 1, 2011, all insurance plans will be required to spend at least 80 percent of their revenues on paying claims. If an insurer spends too much on overhead, the insurer will be required to rebate some of the insurance premiums it collected.

- Many other significant changes will be made when Michigan's health insurance exchange is launched. Michigan residents and small businesses will be able to purchase insurance from the exchange at affordable rates. Michigan has until 2014 to launch this exchange. Once the exchange has been launched, no one can be denied insurance based on a pre-existing condition.

For a list of employer-specific considerations, please visit the linked article by FHWN attorney Michael Hamblin.

During the next weeks, the Health Care Lawyer Blog will continue to provide updates and details on the new PPACA, including new measures to fight "behavioral waste", new whistblower protection provisions, and amendments to the federal False Claims Act.