Healthcare Reform - Affordable Care Act (ACA)

By W. Karl Baker

With the recent passing of the six month anniversary of the Pension Protection and Affordable Care Act and the Healthcare and Education Reconciliation Act of 2010, collectively referred to as the Affordable Care Act (ACA), much has been in the press about the state of this legislation. September 23rd was the day in which many new rules went into effect. The purpose of this article is to provide an update as to some of the changes that have been implemented effective September 23, 2010 along with other key points relating to healthcare reform. I have attempted to scan the headlines since September 23rd to identify a few interesting topics and will provide very brief summaries of those topics. The subject is charged with political sensitivity, along with a flurry of rules and stories; thus, these synopses are by no means comprehensive.

Timely Filing Deadline

CMS recently issued rules required by the ACA concerning timely filing requirements for fee-for-service Medicare claims. Prior to the new rules, the deadline for Medicare Part A and Part B was the end of the calendar year following the federal fiscal year (ending September 30) in which the service was performed. The new rule simply reduces the deadline to one calendar year after the date of service. There are rules applicable as to whether the claim date is based on the “from” or “through” date depending on the provider type. These new rules are effective for all claims for dates of service on or after January 1, 2011.

Coverage for Children with Pre-Existing Illness

Effective September 23, 2010, insurers are prohibited from denying coverage of children up to 19 with pre-existing medical conditions. This is not to say that obtaining insurance will be easy, as these policies will be expensive due to the fact that insurance companies are obviously planning for high costs for these types of policies and some insurers are even considering no longer selling these products. An estimated 90,000 children with existing insurance will receive additional coverage for pre-existing conditions according to the Department of Health and Human Services. They also estimated that 31,000 – 72,000 uninsured children with pre-existing conditions will gain coverage between now and 2013.

Health Insurance for Adult Children

Effective September 23rd children through the age of 26 may now be covered under their parent’s health insurance coverage. Technically, the coverage becomes effective with a health policy at the beginning of a plan year. This even includes married children or financially independent children, however, their spouses or children are not included. The Department of Health and Human Services estimates that this new provision could impact 1.2 million people between the ages of 19 and 25 that are currently uninsured.

Preventive Services

Effective September 23rd, insurers are prohibited from charging copayment deductibles for preventative services such as breast cancer screenings and cholesterol tests. There are certain grandfathered provisions.

Access to Physician

Effective September 23rd consumers directly choose which primary physician, gynecologist, obstetrician or pediatrician they want to see from an approved list of providers, as opposed to the insurance company making the choice. Access to these physicians, of course, is dependent upon whether the doctor is accepting new patients and whether there is an appointment available in the near future.

Out of Network Emergency Room Care

Insurers are no longer allowed to enforce higher co-payments or deductibles when seeking services from out of network emergency rooms due to a medical emergency. There are certain grandfathered provisions in this provision.

Expiration of Annual Limits on Coverage

Annual limits on coverage will be expiring effective September 23rd. They will be raised to $750,000 for all employment plans and new individual plans. They will be rising to $1.5 million after September 23, 2011 and to $2 million on September 31, 2012.

Lifetime Limits

Insurers will be prohibited from setting dollar limits on lifetime coverage.

Republican’s Pledge to Reveal Healthcare Law

Not coincidentally, the GOP formally issued a physician paper known as “A Pledge to America” which stated their intentions to repeal the ACA should they gain control of Congress

Healthcare’s Reform on Insurance

It should be no surprise that with the increased access to coverage, insurance companies are feeling pressure to raise prices. The new legislation has already impacted negotiations between hospitals and insurance companies for covered services. Due to reducing Medicare and Medicaid payments, hospitals are seeking higher payments from insurance companies; however, insurance companies are under pressure by employers and by the states to reduce payments. Of course this is creating chaos and now are threats of contracts being terminated.

Views of the Healthcare Reform

A recent poll taken in September 2010 indicated that approximately 40% of those polled believed that the healthcare law did not do enough to change the healthcare system in America. This lends support to the general thought in the industry and most experts that there will be major legislation in the near future that will revise the ACA even though it will likely not fully repeal the law. If the Republican platform has any influence over these changes, look for changes in the following areas: tort reform, health insurance across state lines, ability to purchase access to health insurance across state lines, expanded health savings accounts, strengthening doctor/patient relationships, revisions to insurance rules concerning access to coverage for patients with pre-existing conditions, and prohibition of tax payor funded abortion.

Expanded Primary Care

HHS secretary Kathleen Sebelius announced on Tuesday, September 28th that $320 million in grants will be issued to expand primary care physician workforce as a part of the ACA. This included a large grant to the University of Vermont.

Accountable Care Organizations (ACO)

There have been several reports of hospitals across the country taking a lead in developing and setting up ACOs. However, legal hurdles are popping up due to potential anti-trust laws. This seems to be an unintended consequence and look for additional developments and perhaps a lowering of standards regarding anti-trust laws.

Corporations Jumping into the Fight

There have been several reports of corporations threatening to drop healthcare coverage on their employees due to the new law. This is due to the fact that premiums for coverage are already on the rise as mentioned earlier. As an example, McDonald’s corporation has warned federal regulators that it is considering dropping health insurance coverage for nearly 30,000 hourly restaurant workers unless changes are made to the law. This is due to the fact that there is a requirement that insurers spend at least 80% - 85% of its premium revenue on medical care. More on that ratio later. On October 4th, 3M Company announced that it would soon stop offering health insurance coverage to its retirees due to the healthcare reform law. This is another example of corporations responding to the reform.

Lawsuits Against the ACA

Upon passage of the ACA, there were several states and interest groups that filed lawsuits claiming the law was unconstitutional on the basis that legislation can’t be enacted that requires Americans to obtain coverage. Early court rulings have been issued. A US judge in Michigan has ruled against a group that filed a lawsuit on the day that the ACA was signed. This judge ruled that the congress had the authority to enact the law under the Commerce Clause of the US Constitution and was within its authority to impose a penalty for those who failed to obtain health insurance. The group filing the lawsuit filed six claims against the law, the judge has only ruled on two of those claims and four are still pending. This was the first ruling issued since the law was passed in March 2010. In a continued effort to improve access to the nation’s indigent, the Obama administration announced an award of $727 million to community health centers around the nation in early October 2010 to help build new clinics and improve the safety net. These awards will be issued to 143 clinics and will impact 745,000 underserved patients. These clinics represent just over 10% of the total clinics across the country.

Nursing Home Coverage

In an effort to study the healthcare industry, a report was released by the Kaiser Family Foundation indicating that Medicare spending on beneficiaries who reside in skilled nursing facilities are receiving an excessive and disproportionate amount of spending due to high hospitalization and emergency room visits. According to these reports, 1.7 million Medicare beneficiaries who are in long term care for all of 2006 or who died in care before the year’s end, cost the program an average of $14,538 per person, which is more than twice the average expenditure for all Medicare beneficiaries that year. Look for more to come about this study.

Healthcare costs for Seniors

The actuary for the Centers for Medicare and Medicaid has issued a study predicting that seniors will also be victims of the healthcare law as it’s predicted that their out of pocket costs will increase due to changes in Medicare Advantage plans. These changes may be in the form of price increases or reductions in benefit packages. An interesting note, the health insurance company Humana sent letters to 930,000 beneficiaries enrolled in its Medicare Advantage plans warning that the new law could hurt their benefits. CMS directed Humana to stop the mailings.

Medical Loss Ratios

On Thursday, October 21st, insurance regulators recommended rules defining how much insurers must spend on patient medical care (medical loss ratio). These rules were issued in response to the ACA which requires insurers to spend at least 80% of revenue on direct medical care beginning in 2011 or issue rebates to consumers if they fail to hit the target. The issue is what to include in medical costs when calculating the ratio. The final rules include in the definition costs for quality improvement along with payments to doctors, nurses, hospitals and other providers but the rules to do not allow for costs of fraud control efforts or billing. The recommendation also includes federal and state taxes but not taxes on investment income. Interesting costs of note that would be excluded from the medical loss ratio thereby putting additional pressure on that ratio include broker commissions on investments. Other provisions that failed to pass include allowing insurance companies to average medical spending nationwide rather than state by state, calculations and a complex “credibility adjustment” formula to allow insurers, especially small ones, to hit the medical spending targets even when the calculation is less than 80%.

Conclusion

As you can see there are many topics being discussed and studied in relation to healthcare reform. The study of this law will be a work in process in the foreseeable future. The purpose of this article is to highlight a few of the major topics and any of these headlines that are of interest can be studied in greater detail. Look for updates to these topics and the addition of new topics as the country and our leaders continue to address issues. Look for opportunities in your organization to provide input on these topics or others and be involved so that our industry’s voice is heard.

Read my previous article about the Patient Protection and Affordable Care Act to learn more about healthcare reform.

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