Manatt on Health Reform: Weekly Highlights

Media is abuzz with speculation on the potential impact of King v. Burwell—arguments begin tomorrow, March 4th, at 10 a.m. Many consider the case the greatest threat to the Affordable Care Act since SCOTUS upheld the individual mandate three years ago. Meanwhile, health reform marches on in the states, with New Jersey proposing cuts in charity care and increases in provider reimbursement and Rhode Island establishing a working group to “reinvent Medicaid.”

FEDERAL NEWS

King v. Burwell: What If?

Now that King v. Burwell Week has arrived, stakeholders are speaking out about what could happen if the Supreme Court rules to terminate subsidies for residents of the 34 states that have federally run health insurance marketplaces. The broad impact has been well documented. Without subsidies – which reduce premium costs by as much as 89% for some Americans – some 7 to 8 million HealthCare.gov enrollees are at risk of losing coverage. Polls suggest that the public is in support of maintaining the subsidies. The Washington Post reported on a poll conducted by Independent Women’s Voice, an organization committed to challenging the Affordable Care Act (ACA), that found that in HealthCare.gov states 75% of respondents think it is very or somewhat important to restore subsidies if the Court rules to shut them down, and 62% of Republican respondents said it is very or somewhat important. HHS Secretary Burwell wrote a letter to lawmakers saying that HHS does not have a back-up plan to “undo the massive damage” that would ensue if HealthCare.gov subsidies are shut down. Even opponents of the ACA are starting to contemplate a back-up plan. In a Washington Post opinion column, Republican Senators Lamar Alexander (R-TN), Orrin Hatch (R-UT) and John Barrasso (R-WY) wrote that congressional Republicans will provide “financial assistance to help Americans keep the coverage they picked for a transitional period,” but details remain vague. Republican Congressmen John Kline (R-MN), Paul Ryan (R-WI), and Fred Upton (R-MI) followed with a column in TheWall Street Journal telling readers that House Republicans have formed a working group to “propose a way out for the affected states if the court rules against the administration.” The extent to which a ruling against the legality of the subsidies impacts consumers may be in states’ hands. Affected states are largely Republican-led, and The Washington Post reports that at least 6 Republican-led states may revisit their decision to forgo State-based Marketplaces. SCOTUS will likely issue its ruling in June.

IRS Will Not Require Taxpayers to Submit Amended Returns—And Will Forgive Underpayments—As a Result of HealthCare.gov Tax Form Error

The IRS is not requiring those consumers who were enrolled through the Federal Marketplace in 2014 and received 1095A tax forms with incorrect information to amend their federal income tax return if they had already filed. While some tax filers would have owed money back to the Federal government, some would have received a refund. Consumers will not receive the refund, if one is due, unless they decide to file an amended return. The Treasury Department stated that a tax filer is likely to benefit from refiling if the 2015 premium for their benchmark plan is less than the 2014 premium listed on the updated form.

More than Half of Consumers “Auto-Renewing” Actively Shopped for New Plans on Federal Marketplace

HHS announced that of the 4.2 million Federally-facilitated Marketplace enrollees who were automatically re-enrolled in the same, or a similar, plan for 2015 coverage as they had in 2014, 2.2 million returned to the Marketplace to update their information for 2015, and more than half of those who returned switched plans for 2015 coverage. Andrew Slavitt, the agency’s Acting Administrator, stated that the numbers reflect a Marketplace in which customers are more actively engaged in choosing health coverage compared to typical consumers with employer-sponsored coverage or Medicare. In total, 8.8 million people enrolled in coverage on HealthCare.gov between November 15 and February 22. In addition, after final processing of consumers’ citizenship/immigration status information, HHS reduced the estimate of the number of people who will lose coverage at the end of February due to unverified citizenship/immigration status issues from 200,000 to 90,000.

Report Finds U.S. Health System Can Absorb Increases in Use of Healthcare Services

Increases in the use of healthcare services by those newly insured through the Affordable Care Act (ACA) will not lead to strain on the service delivery system, according to a Commonwealth Fund report. The analysis demonstrates that utilization rates vary significantly across states; 7 states are expected to experience an increase in primary care visits that exceeds 5% while 17 states are expected to experience an increase that exceeds 4%, while the U.S. average increase is 3.8%. Overall, the report projects roughly 20.3 million additional primary care visits nationally, with the newly insured accounting for more than a third of these visits. For states experiencing large increases in use of healthcare services, the report recommends changes to the delivery system structure and increasing use of telemedicine.

GOVERNORS’ MEDICAID BUDGET PROPOSALS

New Jersey: Governor's Budget Proposal Cuts Charity Care, Increases Medicaid Provider Reimbursement

Governor Chris Christie’s (R) Fiscal Year 2016 budget proposal included a 22.8%, or $148 million, cut to charity care payments to hospitals, which the administration argued would be partially offset by a $45 million increase in Medicaid provider reimbursements. The State has enrolled nearly 500,000 additional individuals through Medicaid expansion, but has one of the lowest Medicaid reimbursement rates in the country. The proposed budget would also increase the Department of Human Services budget by 0.8% to $6.7 billion and the Department of Health’s budget by 7.3% to $396 billion, NJ.com reported.

Wisconsin: Governor Proposes Major Changes in Eligibility and Cost-Sharing for Childless Adults

Governor Scott Walker’s (R) proposed 2015-2017 Executive Budget calls for Wisconsin to seek a waiver from the federal government to impose monthly premiums for all enrolled childless adults, as well as higher premiums for those engaged in “risky health behaviors.” The budget also recommends limiting a childless adult’s Medicaid eligibility to 48 months, and requires that all childless adults enrolled or applying for coverage submit to a drug test. The proposals, which push the boundaries of what has been approved in the past, would require sign-off from CMS.

MARKETPLACE STRUCTURAL CHANGES

Massachusetts: Governor Continues Marketplace Board Shake-Up

Four members of the Health Connector Board appointed by previous Governors—Jonathan Gruber, Rick Jakious, George Gonser Jr., and John Bertko—resigned at Governor Charlie Baker’s (R) request, The Boston Globe reported. The 11-member board consists of four Governor appointees, three attorney general appointees, and four State officials. Over the last two months the Governor has replaced the Health Connector’s executive director and altered the structure of seats reserved for certain state officials, permitting two of the Governor’s Cabinet members to be on the Board. The Governor has yet to announce his four new appointments to replace those who stepped down.

Oregon: Bill to Move Marketplace Functions to State Agency Heads to Governor's Desk

The Oregon House of Representatives voted 42-14 in support of Senate Bill 1, which would eliminate Cover Oregon and transfer management and operations of the Marketplace to the State’s Department of Consumer and Business Services. The bill comes in response to difficulties faced by Cover Oregon in 2014, which led the State to rely on the Federal Marketplace for some eligibility and enrollment functions in 2015. The legislation also ensures that the Marketplace will be subject to financial management statutes, personnel and State contracting laws, restrictions on purchasing, and oversight by the Legislature. Governor Kate Brown (D) has pledged to sign the bill.

MORE STATE MEDICAID & MARKETPLACE NEWS

California: Marketplace Delays Offering Stand-Alone Adult and Family Dental Coverage

While Covered California had anticipated offering stand-alone adult and family dental coverage starting in January during the 2015 open enrollment period, the Marketplace recently confirmed that stand-alone adult and family dental coverage will not be available through the Marketplace in 2015, as reported by The San Diego Union-Tribune. Technical issues with Covered California’s enrollment system prevented the Marketplace from making these plans available. The Marketplace continues to offer pediatric dental benefits included in qualified health plans and hopes to begin offering stand-alone adult and family dental plans during the 2016 open enrollment period.

Rhode Island: Governor Establishes Working Group to Reinvent Medicaid

Through Executive Order, Governor Gina Raimondo (D) established a working group tasked with conducting a comprehensive review of the State's Medicaid program to identify short and long-term opportunities for delivery system reform. The working group must assess existing programs that have resulted in savings and improved quality and those that consume a disproportionate share of Medicaid dollars; opportunities under the ACA to strengthen fiscal and care delivery models; and State regulations that hinder the modernization of the Medicaid program, among other matters. The working group, whose members will be appointed by the Governor, is expected to deliver a report by the end of April outlining recommendations for consideration in the Fiscal Year 2016 budget, with a multi-year transformation plan expected by July 1.

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