Manatt on Health Reform: Weekly Highlights

This week...no clear consensus has emerged among congressional Republicans on how to manage potential King v. Burwell fallout; California will expand Medicaid to undocumented children; and New York is poised to become the first state to establish pregnancy as a qualifying event for Marketplace coverage outside of the open enrollment period.

KING V. BURWELL UPDATES:

Congressional Republicans Consider Extending Subsidies as King v. Burwell Contingency

Republicans in the House and Senate are crafting separate plans that would extend subsidies for limited periods of time if the Supreme Court rules in favor of the plaintiffs in King v. Burwell, reports Politico. The Senate plan would extend subsidies through a currently undefined period of time and repeal the Affordable Care Act’s individual and employer mandates. Senate Finance Chairman Orrin Hatch (R-UT) and Senator Lindsey Graham (R-SC) have acknowledged that subsidies could be extended through 2017, when a newly elected President would be responsible for a replacement plan. The House plan would provide subsidies through 2015, and by 2016 would allow states to opt out of all ACA regulations and to potentially receive block grants to set up a health program or help residents purchase a plan on or off the Marketplace. This program would also expire in 2017. There has been no clear consensus among congressional Republicans about how to handle potential King v. Burwell fallout, with at least three contingency bills proposed in the Senate.

Arkansas, Delaware, Pennsylvania Receive Contingent Approval to Create State-Based Marketplaces

CMS sent letters to the governors of Delaware and Pennsylvania granting conditional approval to operate State-based Marketplaces in 2016. This provides both states with the ability to preserve subsidies for residents who currently receive them if the Supreme Court rules for the plaintiffs in King v. Burwell. CMS also conditionally approved Arkansas to operate a State-based SHOP marketplace in 2016 and a State-based individual Marketplace in 2017. State legislation (SB343) signed by the Governor prevents implementation of the State-based Marketplaces before a Supreme Court decision in King v. Burwell is made, and if federal subsidies are not permitted through HealthCare.gov, the legislature has the authority to reassess the State’s Marketplace options and must reauthorize the policy to implement a State-based Marketplace.

FEDERAL NEWS:

CBO Finds Repeal of ACA Will Cost $137 Billion and Increase Uninsurance by Millions

The Congressional Budget Office (CBO) issued a report finding that repeal of the Affordable Care Act would add $137 billion to the federal deficit over 10 years. This estimate takes into account the net effects of the direct impact on federal revenues and spending that would increase the deficit by $353 billion, and the increase in economic output, which would reduce the federal deficit by $216 billion mainly through increasing the labor supply as consumers lose coverage. Additionally, the report estimates that the number of uninsured would increase by 19 million by 2016—and by 24 million through 2025.

Increase in Funding for Reinsurance Program Announced

CMS announced that it is increasing funding for insurers participating in Marketplaces that cover high cost enrollees. The reinsurance program for 2014 will increase the coinsurance rate on reinsurance payments to 100% of eligibility claims, up from 80% the previous year. The increase in funding is a result of lower-than-anticipated requests for reinsurance payments during the 2014 benefit year. Issuers will receive payments in August 2015.

OIG Questions CMS’ Internal Controls for Marketplace Financial Payments

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) published a report finding that CMS lacked internal controls to ensure the accuracy of nearly $2.8 billion in aggregate financial assistance payments to insurers on the Federally-facilitated and State-based Marketplaces. The report indicates that during the first four months of 2014, CMS relied on information it received from issuers to identify cost-sharing reduction payment rates, and did not have systems in place to ensure that financial assistance payments were made in the correct amounts or more confirmed enrollees. The report recommends fixes, including implementing computerized systems to maintain enrollee and payment information. CMS plans to implement a permanent process to authorize payments by late 2015 and generally agreed with the recommendations in the report, but noted that some were no longer applicable because of regulatory action and that internal and external reviews by an independent accounting firm found no significant issues with its processes.

MARKETPLACE ACTIVITY:

California: Study Finds Marketplace Data Analysis Helped Reduce Premiums

A new study published in Health Services Research found that Covered California's development of risk scores and demographic profiles of potential enrollees based on year one experiences helped drive down premiums for the 2015 Open Enrollment Period. As an active purchaser of health insurance products, Covered California used the data analysis when negotiating rates with insurers, which resulted in a decrease in premiums that saved consumers tens of millions of dollars.

New York: Marketplace Poised to Establish Special Enrollment Period for Pregnancy

The New York state legislature awaits Governor Andrew Cuomo’s (D) signature on S5548A, a bill that would make New York the first state to establish pregnancy as a qualifying event that triggers a “special enrollment period,” enabling a pregnant woman to obtain coverage through the New York State of Health Marketplace throughout the year. The bill, if enacted this year, would take effect on January 1, 2016.

STATE MEDICAID NEWS:

California: Governor Approves Medicaid Coverage for Undocumented Children

Governor Jerry Brown (D) approved the State budget for fiscal year 2015-2016, which will expand Medi-Cal coverage to 170,000 undocumented children under 19 years old starting May 2016. The approved budget includes approximately $40 million in new funding to support the initial expansion, which will cost the State an estimated $132 million per year once fully implemented. While the original budget bill would have expanded Medi-Cal coverage to all undocumented immigrants, including adults, the Senate narrowed the proposal to children to reduce the cost. A similar proposal to extend Medi-Cal benefits to all undocumented immigrants was rejected by the Legislature last year.

Florida: CMS Approves State's Uncompensated Care Funding Pool Proposal

In a letter to the State, CMS announced it has reached an agreement “in principle” with Florida on the size, duration, and methodology for distribution of the State’s Low Income Pool (LIP) funding. CMS authorized $1 billion in combined state and federal funding for the 2015 fiscal year and $608 million for 2016, the latter of which was “based on the volume of provider uncompensated care.” In its letter, CMS reiterated its principles for continuing this funding at a reduced rate, including “uncompensated care pool funding should not pay for costs that would be covered in a Medicaid expansion.” CMS can officially approve the LIP proposal after the federal comment period ends on June 27.

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