Health Plan Weekly

In Win for Managed Care, Trump Administration Drops Rebate Rule

July 16, 2019

In a move that Wall Street analysts deemed a win for the managed care industry, the Trump administration decided to withdraw a proposed rule that would have overhauled the prescription drug rebate system in Medicare Part D.

The proposed rule, first released in February, would have removed safe-harbor protections under the federal anti-kickback statute for rebates paid by drug manufacturers to PBMs, Part D plans and Medicaid managed care organizations, and it would have created a new safe-harbor protection for point-of-sale drug discounts.

By Leslie Small and Judy Packer-Tursman

In a move that Wall Street analysts deemed a win for the managed care industry, the Trump administration decided to withdraw a proposed rule that would have overhauled the prescription drug rebate system in Medicare Part D.

The proposed rule, first released in February, would have removed safe-harbor protections under the federal anti-kickback statute for rebates paid by drug manufacturers to PBMs, Part D plans and Medicaid managed care organizations, and it would have created a new safe-harbor protection for point-of-sale drug discounts.

Citi analyst Ralph Giacobbe told investors his firm expects the news “to be favorable most specifically to entities with larger PBM exposure (Cigna Corp., CVS Health Corp./Aetna and UnitedHealth Group) as it eliminates the uncertainty and overhang that the rebate rule had on those companies.”

Meanwhile, industry experts expressed surprise at the administration’s pullback on the rebate proposal and its timing.

“My initial reaction is it’s surprising given the amount of capital the administration has put into this policy,” says Matt Kazan, a principal in Avalere Health’s policy practice. He adds dropping the rebate rule increases the likelihood that the Trump administration will move forward on other proposals to show progress in its vow to lower drug costs.

Kazan points to various implications for health plans in the rebate rule’s demise. “Certainly, a lot of the uncertainty about 2020 and 2021 goes away in terms of bidding and Part D,” he says. But if Congress makes structural changes to Part D that it’s considering, he says there could be greater liability for plans in the catastrophic phase of the benefit.

States’ 2020 Agendas Target PBMs, Reinsurance and Opioid Crisis

July 10, 2019

Going into 2020, state lawmakers likely will continue to target prescription drug prices with proposals largely aimed at PBMs, but they may also tackle bills on a wide range of topics, including reinsurance, the opioid epidemic and maternal mortality.

More than 260 bills to rein in the cost of prescription drugs — many of which specifically banned common PBM business practices — cropped up in the U.S. this past spring, and Gerard (Jerry) Vitti, founder and CEO of Healthcare Financial, Inc., says he anticipates more of the same going forward.

By Jane Anderson

Going into 2020, state lawmakers likely will continue to target prescription drug prices with proposals largely aimed at PBMs, but they may also tackle bills on a wide range of topics, including reinsurance, the opioid epidemic and maternal mortality.

More than 260 bills to rein in the cost of prescription drugs — many of which specifically banned common PBM business practices — cropped up in the U.S. this past spring, and Gerard (Jerry) Vitti, founder and CEO of Healthcare Financial, Inc., says he anticipates more of the same going forward.

“The debate will be around drug pricing — around half of the [2019] bills are PBM-related,” Vitti tells AIS Health.

While pharmacy and drug pricing measures are likely to heat up again in states through the fall and into 2020, other issues of interest to insurers also are likely to get some attention.

For example, lawmakers in additional states are likely to approve proposals asking CMS to grant them Affordable Care Act Section 1332 waivers to implement reinsurance programs designed to lower premiums in their individual marketplaces, says Alex Shekhdar, founder of Sycamore Creek Healthcare Advisors.

State lawmakers also are likely to continue tackling the opioid crisis, using federal funding to finance various prevention and treatment programs, he says.

Going forward, “we continue to see more red states attempt to expand Medicaid under flexible arrangements,” Vitti notes. These arrangements might include work requirements, even though courts struck down Medicaid work requirements in Arkansas and Kentucky.

Vitti notes that some conservative-leaning states also may consider Medicaid beneficiary cost-sharing, adding, “there really is an appetite in state legislatures for these types of conservative policies.”

Centene, Molina Will Pay Less Than Estimated Into Risk Adjustment Program

July 9, 2019

Some health insurance companies received welcome news when CMS released its summary report on risk adjustment transfers for the 2018 benefit year.

The Affordable Care Act’s permanent risk adjustment program, which applies to the individual and small-group markets, redistributes funds between health plans with lower-risk enrollees and those with higher-risk enrollees.

By Leslie Small

Some health insurance companies received welcome news when CMS released its summary report on risk adjustment transfers for the 2018 benefit year.

The Affordable Care Act’s permanent risk adjustment program, which applies to the individual and small-group markets, redistributes funds between health plans with lower-risk enrollees and those with higher-risk enrollees.

Centene Corp. estimated that it would have to pay $928 million into the risk adjustment program for 2018, but would actually end up owing $669 million, according to analyses from Credit Suisse and Citi. Another winner appeared to be Molina Healthcare, Inc., as its risk adjustment payable is $93 million less than what was accrued on its balance sheet at the end of 2017, Evercore ISI analysts noted.

Some Blues plans, meanwhile, are set to receive sizeable payouts, with Blue Shield of California ($975 million), Health Care Service Corp. ($655 million) and Blue Cross Blue Shield of Florida ($536 million) leading the pack, according to Credit Suisse’s A.J. Rice.

Some have blamed the risk adjustment program for contributing to the massive financial losses that led many of the ACA-created Consumer Operated and Oriented Plans (CO-OPs) to shutter. The CO-OP New Mexico Health Connections even filed a lawsuit challenging the federal government’s decision to make the program budget neutral and use statewide average premiums in the risk adjustment formula.

While that litigation is ongoing, “there’s no danger” that the risk adjustment program will disappear, according to Katie Keith, a research professor at Georgetown University’s Center on Health Insurance Reforms. “The biggest risk is that CMS has to make changes to its risk adjustment methodology,” she tells AIS Health via email, adding, “but I think even that is unlikely.”

Lawmakers Make Efforts to End Surprise Medical Bills, Ultimate Impact Remains Unknown

July 3, 2019

The Senate Health, Education, Labor and Pensions (HELP) Committee on June 26 advanced wide-ranging bipartisan legislation aimed at lowering health care costs by protecting patients against surprise medical bills and targeting drug prices by clamping down on PBMs.

“This [Senate] bill seems to have strong momentum and will keep moving before the election,” says Caroline Pearson, a senior fellow at NORC at the University of Chicago. Still, “it’s impossible to know whether it will actually pass,” Pearson tells AIS Health.

By Jane Anderson

The Senate Health, Education, Labor and Pensions (HELP) Committee on June 26 advanced wide-ranging bipartisan legislation aimed at lowering health care costs by protecting patients against surprise medical bills and targeting drug prices by clamping down on PBMs.

“This [Senate] bill seems to have strong momentum and will keep moving before the election,” says Caroline Pearson, a senior fellow at NORC at the University of Chicago. Still, “it’s impossible to know whether it will actually pass,” Pearson tells AIS Health.

“The debate over surprise bills continues to be complicated, as health plans and providers do not agree on what the payment should be for out-of-network charges,” Pearson explains. “As the bill has progressed, providers and payers remain split on appropriate reimbursement.”

Generally speaking, providers favor an arbitration model to resolve the payment question, Pearson says, noting, “providers are concerned that any other fixed payment amount constitutes rate-setting.” Meanwhile, “for health plans, individual arbitration with many different providers has the potential to be very burdensome. These payers would prefer a fixed reimbursement benchmark.”

Overall, America’s Health Insurance Plans President and CEO Matt Eyles said in a statement that the bill would hinder competitive negotiations by stripping insurers and PBMs of leverage to lower costs “without addressing the root cause: high drug prices set and controlled by manufacturers who enjoy government-granted monopolies through the patent system.”

It’s too soon to tell how the bill’s provisions might affect consumers, Pearson says. “Efforts to increase transparency about which providers are in-network are helpful for consumers, but only if that information is easy to use,” she says. “The real consumer impact will depend on the final details of the bill and how it is implemented through regulation.”

Employers Appreciate Increased Flexibility in New HRA Rule

July 2, 2019

The Trump administration touts its recent release of final regulations expanding employers’ flexibility in offering health reimbursement arrangements (HRAs) to their employees as promoting more consumer choice and likely to cover more uninsured workers.

Under the regulations, starting on Jan. 1, 2020, employers will be able to offer stand-alone HRAs to help certain employees buy individual health insurance policies. Or they may offer “excepted-benefit” HRAs to reimburse employees for certain medical expenses with annual employer contributions of up to $1,800.

By Judy Packer-Tursman

The Trump administration touts its recent release of final regulations expanding employers’ flexibility in offering health reimbursement arrangements (HRAs) to their employees as promoting more consumer choice and likely to cover more uninsured workers.

Under the regulations, starting on Jan. 1, 2020, employers will be able to offer stand-alone HRAs to help certain employees buy individual health insurance policies. Or they may offer “excepted-benefit” HRAs to reimburse employees for certain medical expenses with annual employer contributions of up to $1,800.

“Philosophically, it’s a big change, giving employees flexibility to go out on the [individual] market and find coverage,” says Nicole Tapay, principal at Avalere Health. “I think in the near term you’ll see most likely the small employers will be giving it a closer look, [deciding] whether they want to use this flexibility to give them more predictability on costs.” Insurers offering coverage in the individual market “may see it as an opportunity,” she says, while those offering group plans may want to tweak their offerings over time to anticipate employer shifts.

The HRA regulations come with guardrails to protect the individual market. “Opponents will say [these regulations] will cause employers to dump their older and sicker workers onto the individual market,” says Dorian Smith, national practice leader for Mercer’s law and policy group, “while proponents will say there are guardrails.”

Smith notes Mercer’s clients generally are larger employers, most of whom have already decided on their 2020 offerings and would need to provide 90-day notice of changes for calendar year plans.

But for mid-2020 or calendar year 2021, “they might consider [HRAs] for certain employees, like part-time workers not eligible for the group health plan….It still provides a way to offer something different from the employer across the street.”