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New State Laws Require More Preventive Services From Insurers

January 8, 2019

A bevy of new state laws pertaining to health insurers took effect Jan. 1. It all adds up to a year of potentially higher costs for plans, with some states entering 2019 by protecting various Affordable Care Act (ACA) provisions by statute — and even more of them eying how to take advantage of the ACA’s state innovation waivers as the year progresses.

By Judy Packer-Tursman

A bevy of new state laws pertaining to health insurers took effect Jan. 1. It all adds up to a year of potentially higher costs for plans, with some states entering 2019 by protecting various Affordable Care Act (ACA) provisions by statute — and even more of them eying how to take advantage of the ACA’s state innovation waivers as the year progresses.

✦ In Minnesota, its statute now permits “certified reinsurers” not licensed in that state to work in the state if they meet certain bookkeeping and financial strength requirements. Another new law in Minnesota sets up a step therapy override process, under which a health plan enrollee and prescribing health care provider can override an insurer’s step therapy protocol.

✦ In New York, a law effective Jan. 1 requires health insurers to provide men with access to prostate cancer screening without copays or deductibles. The law also requires plans to make consumers aware of the new benefit.

✦ In Louisiana, a new law requires plans to cover follow-up preventive cancer screenings on at least an annual basis after a woman who has had a bilateral mastectomy following a breast cancer diagnosis finishes her active treatment.

✦ In Illinois, a law effective Jan. 1 requires insurers to provide “coverage for medically necessary expenses for standard fertility preservation services when a necessary medical treatment may directly or indirectly cause iatrogenic infertility to an enrollee.”

✦ In New Jersey, a new law called the Health Insurance Market Preservation Act creates a tax to encourage residents to buy insurance.

State innovation waivers under the ACA are likely to be a hot topic among state lawmakers this year, says Richard Cauchi at the National Conference of State Legislatures. In its upcoming legislative session, Wyoming is likely to become the first state this year to move forward on a federal application for a reinsurance program through the Section 1332 waiver, he notes.

In the first two years such waivers were allowed, 20 states enacted laws as the first step, Cauchi notes. Yet, as of Jan. 1, 2019, “just eight states have received HHS approval — with seven of those establishing state reinsurance programs that allow use of some federal and state funds resulting in some lower premiums for policies sold through exchanges.”

Meanwhile, seven other states have enacted legislation to apply for a reinsurance waiver, but their requests have not yet been filed or approved.

PBMs May Be Able to Handle Pressure From State Medicaid Programs

January 7, 2019

As states take a hard look at how they can reduce prescription drug spending in their Medicaid programs, they’ve put an already heavily scrutinized type of organization in their crosshairs: PBMs.

Ohio, for example, is forcing PBMs to abandon their current “spread pricing” models — in which PBMs pocket the difference between the amount they reimburse a pharmacy for a drug and the (usually higher) amount they charge a plan sponsor. Instead, they’ll move to a “pass-through” model, where PBMs will be paid an administrative fee by the Medicaid program and have to pay pharmacists the same amount that they bill the state for drugs, The Columbus Dispatch reported.

By Leslie Small

As states take a hard look at how they can reduce prescription drug spending in their Medicaid programs, they’ve put an already heavily scrutinized type of organization in their crosshairs: PBMs.

Ohio, for example, is forcing PBMs to abandon their current “spread pricing” models — in which PBMs pocket the difference between the amount they reimburse a pharmacy for a drug and the (usually higher) amount they charge a plan sponsor. Instead, they’ll move to a “pass-through” model, where PBMs will be paid an administrative fee by the Medicaid program and have to pay pharmacists the same amount that they bill the state for drugs, The Columbus Dispatch reported.

Most recently, Pennsylvania Auditor General Eugene DePasquale (D) released a report that advocates for legislation that would trade a spread-pricing model for a flat-fee model and allow the state’s Medicaid program to directly manage its prescription drug benefits instead of contracting with managed care organizations.

It might seem as though PBMs are facing a considerable threat from these moves, but industry experts say they are likely to be able to adjust to states’ changing preferences.

“I’d say that the PBMs’ business model could definitely change if more payers move toward this pass-through pricing model, but it doesn’t necessarily eliminate their role entirely,” says Tiernan Meyer, a director at Avalere Health. States can often be strapped for resources, and having a contractor administer pharmacy benefits instead of using their own resources to do so, “can be useful,” she adds.

What’s more, “the PBMs are very much used to this from other contracts that they hold, and they can certainly make money in a transparent environment,” says Robert Ferraro, R.Ph., a principal at the consulting firm Buck’s national pharmacy practice. “I think they would prefer a traditional model where their revenue wasn’t so easily identified by all their customers, but that doesn’t mean they can’t earn a very good living in a transparent or pass-through model.”

A more transparent approach to PBM contracting also helps smaller PBMs compete with the likes of UnitedHealth Group’s OptumRx, CVS Health Corp. and Cigna Corp.-owned Express Scripts Holding Co., because it simplifies the procurement process to an examination of administrative fees, he says.

North Carolina Blues Product May Save Money, but Holds Major Pitfalls for Members

January 3, 2019

A new individual and small-group product from Blue Cross and Blue Shield of North Carolina — which reimburses members directly for care at 140% of Medicare rates — could be one answer to the problem of how to hold policy costs down, some analysts say. But others warn that members may be unprepared for negotiating fees, especially for more complex care scenarios, and may be caught off guard by balance bills.

The product, offered for policy year 2019, is a non-Blues branded plan called myChoice with premiums that will be 33% lower, on average, for individual plans, the insurer says.

By Jane Anderson

A new individual and small-group product from Blue Cross and Blue Shield of North Carolina — which reimburses members directly for care at 140% of Medicare rates — could be one answer to the problem of how to hold policy costs down, some analysts say. But others warn that members may be unprepared for negotiating fees, especially for more complex care scenarios, and may be caught off guard by balance bills.

The product, offered for policy year 2019, is a non-Blues branded plan called myChoice with premiums that will be 33% lower, on average, for individual plans, the insurer says.

Under the plan’s rules, there are no restrictions on which providers a member can see, but the member — not the plan — is responsible for paying the provider. The insurer then will reimburse the member — not the provider — at up to 140% of Medicare rates, according to the North Carolina Blues plan. Members are responsible for any charges above 140% of Medicare rates, and balance billing does not count toward the plan’s deductible or out-of-pocket maximum.

This is “a new and untested approach,” says Mark Hall, professor of law and public health at Wake Forest University in Winston-Salem, N.C. “It is worth trying this approach, especially in areas where providers are reluctant to negotiate with health plans for substantial discounts. But it remains to be seen how well — or not — it will work,” he adds.

William DeMarco, founder and president of Pendulum HealthCare Development Corporation in Rockford, Ill., tells AIS Health, “for the consumer I see a lot of turmoil as fees go up even for the same doctor over time, so a lot of surprise bills will need to be dealt with. The insurer can blame the patient, and the doctor tells the patient if you do not like what he’s charging, go elsewhere.”

Joseph Paduda, principal at Health Strategy Associates, LLC., says that the patient education component of the plan will be critical for its success. “People are used to a standard type of health plan, and this puts a lot more responsibility on the patient to negotiate price and care. Some patients will be uncomfortable with this, and others will likely be surprised when they get a balance bill for much more than they expected.”

Judge OKs CVS Plan to Keep Aetna Separate Pending Review

January 2, 2019

Facing an unexpected judicial roadblock in the plan to combine their two business, CVS Health Corp. and Aetna Inc. successfully negotiated a deal to keep their PBM and health insurance operations separate for at least the next few months.

At the heart of the holdup is U.S. District Court Judge Richard Leon, who has the right to review the agreement that CVS and Aetna struck with the DOJ to resolve antitrust concerns with their deal.

By Leslie Small

Facing an unexpected judicial roadblock in the plan to combine their two business, CVS Health Corp. and Aetna Inc. successfully negotiated a deal to keep their PBM and health insurance operations separate for at least the next few months.

At the heart of the holdup is U.S. District Court Judge Richard Leon, who has the right to review the agreement that CVS and Aetna struck with the DOJ to resolve antitrust concerns with their deal.

CVS said it is currently operating Aetna’s health insurance business separately from CVS’s retail pharmacy and PBM business units, with Aetna maintaining control over pricing and product offerings. Aetna personnel will also retain their current compensation and benefits, and CVS will maintain a firewall to prevent the exchange of competitively sensitive information between the two companies.

Leon issued a Dec. 21 order accepting CVS’s plan, saying he’s satisfied that “so long as these measures remain in place, the assets involved in the challenged acquisition will remain sufficiently separate” to facilitate his review of the deal.

John Matthews, KPMG’s strategy leader for health care and life sciences, points out that if the restrictions remain in place for a long time — or potentially permanently — “then I think it actually really undermines the strategic rationale and value creation proposition for what the deal is intended to do.”

In particular, if the firms have to keep their PBM separate from their insurance business — in terms of both product offerings and data sharing — that could stymie “what was going to be exciting and different about the deal, which was it allowed them to combine pharmacy and benefit data to really understand total cost of care for certain key conditions,” he adds.

Whether that comes to pass largely depends upon timing, according to Matthews. “I think if they start getting into six, nine, 12 months, then it starts becoming a problem, even if it’s not a permanent injunction,” he says.

If ACA Falls, Some Health Insurers’ Earnings Will Take a Big Hit

December 27, 2018

On Dec. 14, a federal judge sent shockwaves into the health care sector by ruling that the entire Affordable Care Act is unconstitutional. While few legal experts expect the ruling to survive scrutiny by higher-level courts — and note that the law will remain intact as that legal process plays out — industry analysts are nevertheless warning that some insurers would be hit hard if the ACA is struck down.

The long-awaited decision concerns a lawsuit filed by 20 Republican state attorneys general in February, which argued that Congress’ elimination of the tax penalty associated with the individual mandate renders the entire ACA invalid. In his decision, U.S. District Court Judge Reed O’Connor agreed with that argument, going further than the Dept. of Justice’s stance that only the ACA’s protections for people with pre-existing conditions should be struck down.

By Leslie Small

On Dec. 14, a federal judge sent shockwaves into the health care sector by ruling that the entire Affordable Care Act is unconstitutional. While few legal experts expect the ruling to survive scrutiny by higher-level courts — and note that the law will remain intact as that legal process plays out — industry analysts are nevertheless warning that some insurers would be hit hard if the ACA is struck down.

The long-awaited decision concerns a lawsuit filed by 20 Republican state attorneys general in February, which argued that Congress’ elimination of the tax penalty associated with the individual mandate renders the entire ACA invalid. In his decision, U.S. District Court Judge Reed O’Connor agreed with that argument, going further than the Dept. of Justice’s stance that only the ACA’s protections for people with pre-existing conditions should be struck down.

If the higher courts do uphold O’Connor’s decision, “the impact will be significant,” Standard & Poor’s analyst Deep Banerjee wrote in a Dec. 17 report. In the absence of the ACA, some states might try to implement their own health care marketplaces, but without federal funds, both the subsidy-eligible market and the Medicaid expansion market “will see a meaningful increase in uninsured rates,” he noted.

“For health insurers, this would mean lower revenues and earnings from those business segments,” Banerjee said. “Insurers that are heavily concentrated in the individual and Medicaid markets without much diversification from Medicare and employer-based commercial markets would be hit hardest.”

Centene Corp. and Molina Healthcare’s earnings will be “meaningfully exposed” if O’Connor’s ruling is upheld on appeal, Leerink analyst Ana Gupte advised investors on Dec. 17. Both Anthem, Inc. and WellCare Health Plans, Inc. would have 3% earnings exposure if the ACA disappears, Gupte added, while Cigna Corp. has “very low single-digit earnings exposure,” UnitedHealth Group has 1% of its earnings at risk, and Humana Inc. has no exposure.

As for how the suit will ultimately fare, most legal experts “have long felt that the legal arguments advanced by the challengers are weak,” Christopher Condeluci of CC Law & Policy wrote in a Dec. 15 message to clients. “Based on this belief, I think most legal experts — including me — still feel that this legal challenge will fail at some point during the judicial process.”

NM Medicaid Buy-In Could Leverage Managed Care Structure

December 26, 2018

With the aim of expanding health care coverage and affordability for residents who would not otherwise qualify for Medicaid or federal subsidies to purchase Affordable Care Act marketplace coverage, several states are exploring the concept of allowing people to buy into their Medicaid programs. New Mexico may be the furthest along in that process, having commissioned a two-part study to seriously consider the financial implications of four different Medicaid buy-in scenarios.

By Lauren Flynn Kelly

With the aim of expanding health care coverage and affordability for residents who would not otherwise qualify for Medicaid or federal subsidies to purchase Affordable Care Act marketplace coverage, several states are exploring the concept of allowing people to buy into their Medicaid programs. New Mexico may be the furthest along in that process, having commissioned a two-part study to seriously consider the financial implications of four different Medicaid buy-in scenarios.

According to the report produced by Manatt Health, “Evaluating Medicaid Buy-In Options for New Mexico,” Medicaid is the largest payer in the state, covering more than 40% of the state population. By contrast, the BeWellNM marketplace covers about 50,000 individuals, or 2% of the population. While marketplace coverage may be affordable for some, there are various reasons why eligible individuals are opting out, such as rising premiums and cost-sharing affordability, especially if they do not qualify for federal subsidies, observed the report.

The report also suggests that individuals would pay premiums and cost-sharing, but by leveraging Medicaid’s purchasing power, provider networks and reimbursement rates, the cost of buy-in coverage would be less than the cost of private coverage. That report made a qualitative assessment of four options:

(1) Targeted Medicaid Buy-In Program, where the state offers Medicaid-like coverage off the BeWellNM marketplace to those not eligible for Medicaid, Medicare or subsidized marketplace coverage.

(2) Qualified Health Plan Public Option, where the state offers a lower cost public option product on the marketplace to individuals and small employers, although it could be expanded outside of BeWellNM for people who are not eligible to purchase individual coverage.

(3) Basic Health Program, a state-offered option for individuals with incomes up to 200% of the FPL who are not Medicaid-eligible and are otherwise eligible to purchase coverage through the marketplace.

(4) Medicaid Buy-In for All, where the state offers Medicaid coverage to everyone (except those covered by Medicare) as a lower-cost option off the marketplace.

According to Patricia Boozang at Manatt, the consulting firm and its actuarial partner Wakely Consulting Group are now in the second phase of the study, working “to develop an actuarial analysis that projects the number of people likely to be covered through one or two variations on the Option 1 Targeted Buy-in model” outlined in the paper.