Manatt on Health Reform: Weekly Highlights

Louisiana's Governor pushes ahead on Medicaid expansion, while expansion is blocked by Wyoming's Legislature; Massachusetts plans to submit a 1332 waiver application to preserve its merged markets; and CBO lowers its 2016 Marketplace enrollment projections from 21 million to 13 million.

STATE & FEDERAL MEDICAID UPDATES:

Louisiana: Administration Moving Ahead With Medicaid Expansion

On his second day in office, Governor John Bel Edwards (D) issued an executive order moving the Medicaid expansion in Louisiana forward with an effective date of implementation no later than July 1, 2016. The Executive Order highlights the federal dollars that have been foregone by Louisiana by not having expanded as well as anticipated General Fund savings that the state expects as a result of expansion. In his first week in office, the Governor and Secretary of the Department of Health and Hospitals (DHH) Rebekah Gee also met with CMS officials and are reported to be optimistic about working through the matters that will require federal approval in time for a July 1 implementation.

Vermont: Governor's Final Budget Proposal Aims to Close Medicaid Funding Gap

Governor Peter Shumlin (D) presented his sixth and final budget proposal to the State Legislature, highlighting his plan to cover Medicaid costs and close a $68 million budget gap by increasing revenue without raising income or sales taxes for Vermont's residents. Governor Shumlin proposed paying for Medicaid largely through a new 2.35% provider tax on physicians and dentists not affiliated with a hospital (there is an existing 6% provider tax on hospitals and affiliated physicians). Revenue from this source would generate an estimated $17 million in State funds, resulting in an additional $20 million in federal funds, which would be used to increase Medicaid reimbursements for primary and dental care. Of note, Governor Shumlin's initial proposal included an estimated $2.25 million in savings from decreasing Medicaid eligibility for pregnant women from 213% of the federal poverty level (FPL) to 138% of the FPL. The Governor rescinded that portion of his proposal less than 24 hours after the announcement, citing the potential negative health impacts on the population.

Wyoming: Committee Votes to Remove Medicaid Expansion From Governor's Proposed Budget

The Wyoming Legislature's Joint Appropriations Committee voted seven to five to remove Medicaid expansion from the 2017-2018 budget proposed by Governor Matt Mead (R). Governor Mead's administration estimated that expansion could extend coverage to over 20,000 Wyoming residents while saving the State's general fund approximately $33.4 million over the next two years. Inclusion of Medicaid expansion in the State budget was considered the best chance for expansion legislation to pass this year, though the Legislature could still consider a stand-alone bill or budget amendment during the legislative session.

CMS Releases Final Rule on Medicaid Covered Outpatient Drugs

CMS's recent final rule provides detailed guidance on implementation of several Affordable Care Act provisions regarding the financing of Medicaid covered outpatient drugs including: the calculation of Federal Upper Limits; the definition of the Average Manufacturer Price; and drug sales that are subject to rebates and those rebate amounts. While the ACA provisions became effective on October 1, 2010 and a proposed rule elaborated on them in February 2012, this final rule largely consists of new definitions for already existing concepts and provide detailed guidance on implementation. The final rule, which is likely to have an impact on many drugs' prices paid for many drugs, is effective April 1, 2016; however, three provisions become effective April 1, 2017 following states' submission of State Plan Amendments (SPA). States will need to comply with setting aggregate upper limits for certain drugs, comprehensively describe the payment methodology for prescription drugs, and delineate the process for assuring that changes in prescription drug payments satisfy statutory and regulatory requirements.

FEDERAL & STATE MARKETPLACE NEWS:

2016 HealthCare.gov Premiums Average $113 per Month With APTC

A new report released by the Department of Health and Human Services found that 83% of the 8.5 million HealthCare.gov enrollees whose coverage went into effect on January 1, 2016 qualify for advanced premium tax credits (APTC), and have an average monthly premium of $113 after tax credits are applied. Without the APTC, the average monthly premium for those same enrollees would be $408. The report also found that nearly 70% of Marketplace consumers could purchase a plan with a monthly premium of $100 or less after applying APTC, and approximately 60% could do so for less than $50 after applying APTC. Of the 3.6 million individuals who had 2015 coverage and returned to HealthCare.gov to shop for 2016, 60% switched plans, saving them an average of $43 per month after applying APTC.

Insurer Participation in State-Based Marketplaces Stable in 2016

In 2016, nine of the 17 State-based Marketplaces (SBMs) experienced no decline in the number of participating insurers, while three experienced a net gain of insurers, according to a new report by The Commonwealth Fund. Of the five SBMs that experienced a net loss, three are the result of CO-OPs closing, while two SBMs lost insurers that were unable to gain market share or secure requested premium rates. The report attributes state-designed Marketplace participation rules, such as Maryland's prohibition on insurers offering products outside of the Marketplace unless they participate in the Marketplace, as key to maintaining strong levels of participation.

California: Marketplace Board Proposes New Revenue Mechanism, May Consider New Insurers

California's State-based Marketplace, Covered California, has proposed a process for certifying qualified health plans for the 2017 plan year that requires all Marketplace insurers to pay a fee equal to 3.5% of gross premiums instead of the current per member per month participation fee. Under the proposed process, Covered California will accept applications for a multi-year contract term (2017-2019), which will be reviewed and approved by the board in July 2016. The board also noted that it may consider new entrants to the Marketplace in 2018 and 2019 if the applicant is a newly-licensed carrier or a Medi-Cal managed care plan. The board is expected to vote on the proposals on February 18.

MORE FEDERAL & STATE HEALTH REFORM ACTIVITY:

CBO Reduces Marketplace and Medicaid Enrollment Projections

The Congressional Budget Office's (CBO) budget and economic forecast for 2016 to 2026 estimates that Marketplace enrollment will increase to 13 million in 2016, far less than CBO's previous 21 million projection. The number of individuals receiving premium subsidies will also be lower than expected: 11 million people per month versus the previously projected 15 million. Despite the reduced projections, CBO forecasts Marketplace and Medicaid enrollment growth continuing. According to the report, monthly Medicaid enrollment will be 77 million individuals in 2016, an additional one million people compared to 2015, which will increase Medicaid expenditures by 8.8% to $31 billion. Marketplace subsidy expenditures will increase by 47% to $56 billion in 2016. Outlays for the ACA's risk adjustment and reinsurance programs are expected to rise nearly 78% from $9 billion in 2015 to $16 billion in 2016, though payments will be offset by associated revenues. The CBO also estimates that a repeal of the Cadillac and medical device taxes would add $256 billion to the deficit over the 10-year-period.

Massachusetts: Marketplace Plans 1332 Waiver to Preserve Merger of Individual and Small Group Markets; Additional Waivers Contemplated

Representatives from the State-based Marketplace, the Massachusetts Health Connector, recommended seeking a 1332 waiver to permit small group insurance to be sold with quarterly premium rate setting and non-calendar-year plan years while preserving the State's merged individual and small group market risk pools. The draft waiver application is expected at the end of January, with submission to CMS in early March and implementation as early as January 2017. Policy issues, such as eligibility gaps that prevent some lower-income residents from accessing subsidies (the so-called "family glitch"), are also under consideration for additional 1332 waivers during a second phase of work. The two-phase approach was recommended partly in response to recent federal guidance indicating a high bar for federal review of waiver applications.

Vermont: Administration Releases Proposed All-Payer Healthcare System Details

Governor Peter Shumlin (D) and the head of the Green Mountain Care Board unveiled details of its all-payer system proposal, which would give the State control of rates paid under Medicare, Medicaid, self-insured health plans and commercial insurance, and would create a statewide capitation payment model. The federal government would allow Medicare to participate in Vermont's proposed system in exchange for the State coordinating Medicaid and commercial insurer participation, and committing to financial targets and quality goals. The plan also proposes to hold annual per capita increases in healthcare spending to 3.5% over five years, with a maximum growth rate of 4.3%. Accompanying these spending targets are quality measures that ensure residents see better health outcomes, including: increasing access to primary care, reducing the prevalence and improving the management of chronic diseases, and addressing the substance abuse epidemic. Under the proposed model, residents would be able to see their provider of choice and Medicare and Medicaid recipients would see no reduction in benefits. The State is negotiating terms of the all-payer Medicare waiver with CMS in anticipation of implementing the model in January 2017.

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