Feb 25, 2013

Weekly Washington Health Care Update

This Week:

1. Congress

House of Representatives

  • District Work Period -- No Votes


  • State Work Period -- No Votes

2. Administration

Health and Human Services (HHS)

Department of Labor (DOL)/Treasury/HHS

3. State Activities

4. Regulations Open for Comment

5. Reports

Health and Human Services -- Office of the Inspector General (HHS-OIG)

Medicaid and CHIP Payment and Access Commission (MACPAC)

Employee Benefit Research Institute


1. Congress

House of Representatives

  • District Work Period -- No Votes


  • State Work Period -- No Votes

2. Administration


Final Essential Health Benefit (EHB) Rule Released

Wednesday, HHS finalized a rule establishing health insurance benefits that must be covered beginning in 2014, pursuant to the Affordable Care Act (ACA). The new rule, which will take effect next year and which is estimated to cost more than $100 million, sets the standards for insurers under the health reform law. It also aims to help consumers choose health care plans that best suit them, with easier comparisons, and to significantly expand access to mental health services. According to CMS's Center for Consumer Information and Insurance Oversight (CCIIO), "... this rule outlines health insurance issuer standards related to the coverage of essential health benefits (EHB) and the determination of actuarial value (AV), while providing significant flexibility to states to shape how EHB are defined." For information from HHS, please visit

Final Rate Review, Health Insurance Market Rules Released

On Friday, HHS released a final rule to implement provisions related to fair health insurance premiums, guaranteed availability, guaranteed renewability, single risk pools and catastrophic plans, pursuant to the ACA. The final rule also clarifies the approach used to enforce the applicable requirements of the ACA with respect to health insurance issuers and group health plans that are nonfederal governmental plans. Finally, the rule amends the standards for health insurance issuers and states regarding reporting, utilization and collection of data under the federal rate review program, and revises the timeline for states to propose state-specific thresholds for review and approval by the CMS. The provisions of this final rule generally apply to health insurance coverage for plan or policy years beginning on or after Jan. 1, 2014. For information from HHS, please visit

"State Innovation Model" Awardees Named

Last week, HHS announced $285 million in State Innovation Model awards aimed at helping states design and implement new health care delivery and payment models. The goal of the State Innovation Model initiative, which was created by the ACA, is "to create multi-payer models with a broad mission to raise community health status and reduce long-term health risks for beneficiaries of Medicare, Medicaid, and the Children's Health Insurance Program," according to HHS. Arkansas, Maine, Massachusetts, Minnesota, Oregon and Vermont will each divide $250 million in grant money to implement State Health Care Innovation Plans, while 19 other states will split $35 million in order to design and test State Health Care Innovation Plans currently being developed. For more information from CMS's Center for Medicare and Medicaid Innovation, please visit:


Preventive Services, Exchange Certification Topics in Newest Set of ACA FAQs

Last week, the Administration released the 12th set of FAQs on ACA, providing answers to 20 questions regarding limitations on cost sharing and coverage of preventive services under the health care law. The guidance, produced by the departments of Labor, Health and Human Services, and Treasury, clarified, among other things, that non-grandfathered health plans must offer coverage for a wide variety of government-approved contraceptive methods without cost sharing, and that plans that do not have in-network providers for a required preventive service must still cover out-of-network provision of that service without cost sharing. Moreover, the FAQ clarified that states can certify health plans for online exchange markets by submitting a letter to HHS without the "blueprint" requirements used for federal approval of state-based exchanges and state partnership exchanges. To view the guidance document, please visit

3. State Activities

Four More States Apply to Establish Partnership Exchanges

In the wake of the Feb. 15 deadline for states to decide whether or not to partner with the federal government in establishing a health insurance exchange in their state, Iowa, Michigan, New Hampshire and West Virginia have submitted applications to operate state partnership exchanges with HHS, bringing the total number of states that have applied to either run their own exchanges or partner with the federal government to 24, plus the District of Columbia. States that have already received conditional approval for a partnership exchange include Arkansas, Delaware and Illinois. Conditional approval means HHS has found that the states are likely to be ready to open the online health insurance markets for enrollment by Oct. 1 to sell individual and small group plans that take effect Jan. 1, 2014.

Florida Medicaid Waiver Application Progresses

In a letter to Florida's Agency for Health Care Administration, CMS Medicaid Director Cindy Mann indicated that the CMS and Florida had reached an "agreement in principle" with regard to Florida's Section 1115 waiver request to expand Medicaid managed care throughout the state. According to Mann's letter, "We have made significant progress in agreement upon terms of a demonstration that will ensure access to high quality health care services for Florida's Medicaid beneficiaries. We are eager to continue working together and have reached agreement in principle on granting the waiver." The letter set forth three criteria that Florida will need to incorporate into its demonstration project, including assurance of a comprehensive quality strategy, and development of enhanced stakeholder engagement strategies.

Florida Gov. Scott Ultimately Supports Medicaid Expansion

In what is arguably one of the biggest developments in the ongoing saga of state decisions pursuant to the ACA, such as what type of health insurance exchange to establish and whether or not to expand Medicaid, Florida Gov. Scott announced last week that the state would support expanding the program to nearly 1.2 million low-income residents of his state. "While the federal government is committed to pay 100 percent of the cost of new people in Medicaid, I cannot, in good conscience, deny the uninsured access to care." The announcement, which stands in stark contrast to Scott's previous opposition to Medicaid expansion, came shortly after CMS communicated an "agreement in principle" had been reached regarding Florida's Section 1115 waiver request to expand Medicaid managed care throughout the state.

Virginia Governor Still Opposes Medicaid Expansion, Legislature Not Sure

While Florida Gov. Scott decided to change his previously stated position on Medicaid expansion, Virginia Gov. McDonnell took the opportunity last week to reiterate to state lawmakers his ongoing opposition to the expansion. "Please understand that I cannot and will not support consideration of an expansion of Medicaid in Virginia until major reforms are authorized and completed, and until we receive guarantees that the federal government's promises to the states can be kept without increasing the immoral national debt," he wrote. However, in the same week, Virginia lawmakers indicated they were closing in on a compromise that would create a 10-member conference committee to authorize the expansion after the desired Medicaid reforms have been implemented.

South Carolina Alternative to ACA Coverage Provisions

While most states have been busy deciding whether or not to expand their Medicaid programs to take advantage of the generous federal matching funds provided by the ACA, Republicans in South Carolina have been working to craft legislation that would instead provide incentives for hospitals to steer nonacute patients to less costly care settings, such as free health clinics. Specifically, the proposal would direct $35 million to hospitals that steer nonemergency cases away from expensive emergency rooms. The proposal would also allocate an additional $10 million to the state's 20 federally qualified health clinics to help absorb the cost of the additional patients they're expected to treat. Funds would also be available to assist the state's rural hospitals in covering the cost of uncompensated care, as well as to expand the state's tele-medicine program and repay the student loans of doctors who practice in rural areas.

4. Regulations Open for Comment

NEW -- ACA's "Whistleblower" Protection Rule Proposed

On Friday, DOL published an interim final rule that would implement the employee protection (whistleblower) provision of Section 1558 of the Affordable Care Act, to provide protections to employees of health insurance issuers or other employers who may have been subject to retaliation for reporting potential violations of the law's consumer protections (e.g., the prohibition on denials of insurance due to pre-existing conditions) or affordability assistance provisions (e.g., access to health insurance premium tax credits). The interim rule also establishes procedures and time frames for the handling of retaliation complaints, including procedures and time frames for employee complaints to the Occupational Safety and Health Administration (OSHA), investigations by OSHA, appeals of OSHA determinations to an administrative law judge (ALJ) for a hearing de novo, hearings by ALJs, review of ALJ decisions by the Administrative Review Board (ARB) (acting on behalf of the Secretary of Labor) and judicial review of the Secretary's final decision. Comments will be received until April 23, 2013.

DOL's press release

View the rule

CMS Seeks Information on Brokers and Agents

CMS has announced it will collect licensing and other identifying information to register health insurance brokers and agents for federal health insurance exchanges. According to a notice published Feb. 7, health insurance brokers and agents would submit "basic identifying information on the exchange portal during the initial registration phase." When registration is completed, brokers and agents would be routed to CMS's Learning Management System "to access and complete required training and exams." User names and ZIP Codes for the brokers and agents would then be used to record training history and to communicate the results with the federally facilitated exchange (FFE). Comments are due by April 8.

Medicare Part C and Part D Payment Policy Guidance Released

On Friday, CMS announced proposed payment and policy guidance for Medicare Advantage (Part C) and Medicare prescription drug (Part D) plans for 2014. In its 2014 Advance Notice and draft Call Letter, CMS noted that in addition to reductions in Medicare Advantage premiums extending through 2013, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310, down from $325 in 2013, and cost-sharing amounts will also be lower. Comments on the proposed Advance Notice and draft Call Letter must be submitted by March 1, 2013. The final 2014 Rate Announcement and Call Letter, including the final MA and FFS growth percentage and final benchmarks, will be published on Monday, April 1, 2013. For more information, please visit:

CMS also announced a proposed rule implementing the Affordable Care Act's medical loss ratio requirements for Part C and Part D plans. Specifically, Medicare health and drug plans will be required to meet a minimum medical loss ratio of at least 85 percent of revenue on clinical services, prescription drugs, quality improvements and/or direct benefits to beneficiaries in the form of reduced Medicare premiums beginning in 2014.

Comments on the proposed rule must be received by April 16. To view the proposed Medical Loss Ratio Requirements for MA and Part D go to

Clinical Laboratory Rule

CMS has issued a proposed rule that would change existing regulations governing the proficiency testing (PT) process mandated by the Clinical Laboratory Improvement Amendments of 1988 (CLIA). As currently written, regulations dictate that any laboratory that intentionally refers a PT sample to another laboratory for analysis will automatically lose its CLIA certificate for at least one year. The proposed rule would reform Medicare regulations that CMS has identified as unnecessary, obsolete or excessively burdensome on health care providers and suppliers, as well as certain regulations under CLIA. This proposed rule would increase the ability of health care professionals to devote resources to improving patient care, by eliminating or reducing requirements that impede quality patient care or that divert resources away from providing high-quality patient care.

The proposed rule includes a related provision to existing regulations that would implement the recently enacted Taking Essential Steps for Testing Act of 2012 (TEST Act), which gives CMS the express authority to impose alternative sanctions in the event of a PT referral.

Comments will be accepted until April 8, 2013.

FDA Seeks Comments on Rx Drug Labeling Initiative, Proposed Pilot Project

The U.S. Food and Drug Administration (FDA) has issued final regulations amending the content and format of prescribing information for human drug and biologic products. According to the agency, the goal of the regulation "is to provide more informative and accessible prescribing information, resulting in a better risk communication and management tool." Among other provisions, the final rule would revise current regulations to require that the prescribing information of new and recently approved products include highlights of the prescribing information (Highlights) and a table of contents (Contents) for the full prescribing information (FPI). Comments must be submitted by March 8.

Draft Guidance for Alzheimer's Drug Development

As part of the National Plan to Address Alzheimer's Disease, the FDA has issued draft guidance to help drugmakers develop treatments for Alzheimer's disease before dementia sets in. "The purpose of this guidance is to assist sponsors in the clinical development of drugs for the treatment of various stages of Alzheimer's disease (AD) that occur before the onset of overt dementia. Specifically, this guidance addresses the FDA's current thinking regarding the selection of patients with early AD, or patients who are determined to be at risk of developing AD, for enrollment in clinical trials." Comments will be accepted until April 8.

CMS, IRS Propose Rules Individual Mandate Exemptions

On Jan. 30, CMS and IRS issued proposed rules outlining exemptions from the individual mandate requirement of the Affordable Care Act. The proposed rules will "help to ensure that the [individual mandate penalty] applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage," according to a joint CMS-IRS fact sheet. Specifically, the proposed rule would allow exemptions from the penalty for nine categories of individuals, including those who would have been eligible for Medicaid under the expansion allowed by the ACA, but live in a state that opts to not expand.

Other notable provisions include:

Religious Conscience: Under the proposed rule, the religious conscience exemption would apply to members of religious sects that are recognized as conscientiously opposed to accepting insurance benefits. The Social Security Administration currently administers the process for recognizing the groups under the law.

Self-Funded Student Plans: HHS said self-funded student health plans satisfy the ACA's minimum coverage requirements, though the proposed rule could allow the self-funded plans to set caps on certain benefits.

Family Subsidies: The proposed IRS rule states that the agency will consider individual coverage affordable if there is an offer for insurance where the premiums are 9.5 percent of household income or less, and assumes that the spouse or children of the individual would have affordable coverage as well. Family premium subsidies will not be available to the families of workers who can afford individual insurance through their employers.

Comments are due March 18 for the HHS proposed rule and May 2 for the IRS proposed rule. IRS has scheduled a public hearing May 29.

Employer Health Care Coverage of Dependents Under ACA

Treasury and IRS released a notice of proposed rules (REG-138006-12) Dec. 28 on employer-provided health care coverage related to ACA's employer "shared responsibility" provisions, which were added to the tax code under Section 4980H. Starting in 2014, employers with at least 50 full-time and/or full-time equivalent employees (FTEs) will be required to offer affordable health care coverage that provides a minimum level of coverage or pay a penalty. These proposed regulations would affect only employers that meet the definition of "applicable large employer" as described in these proposed regulations. As discussed in section X of this preamble, employers may rely on these proposed regulations for guidance pending the issuance of final regulations or other applicable guidance. This document also provides notice of a public hearing on these proposed regulations.

Comments on the proposed rule must be received by March 18, 2013.

Guidance for Industry Abuse-Deterrent Opioids -- Evaluation and Labeling

The FDA has issued guidance intended to assist sponsors who wish to develop formulations of opioid drug products with potentially abuse-deterrent properties (abuse-deterrent formulations). Specifically, the guidance explains FDA's current thinking about the studies that should be conducted to demonstrate that a given formulation has abuse-deterrent properties, how those studies will be evaluated, and what labeling claims may be approved based on the results of those studies. FDA will accept comments on the guidance received by March 11, 2013. See FDA's press release

Food and Drug Administration (FDA) Proposes New Food Safety Rules

The FDA has proposed new rules on food safety, including regulations on good manufacturing practices standards for growing, handling and packaging produce. Specifically, to minimize the risk of serious adverse health consequences or death from consumption of contaminated produce, the FDA is proposing to establish science-based minimum standards for the safe growing, harvesting, packing and holding of produce, meaning fruits and vegetables grown for human consumption. FDA is proposing these standards as part of its implementation of the FDA Food Safety Modernization Act (FSMA). These standards would not apply to produce that is rarely consumed raw, produce for personal or on-farm consumption, or produce that is not a raw agricultural commodity. The proposed rule would also set forth procedures, processes and practices that minimize the risk of serious adverse health consequences or death, including those reasonably necessary to prevent the introduction of known or reasonably foreseeable biological hazards into or onto produce and to provide reasonable assurances that the produce is not adulterated on account of such hazards.

Another proposed rule would amend FDA's current regulation for Current Good Manufacturing Practice In Manufacturing, Packing, or Holding Human Food (CGMPs), which requires domestic and foreign facilities that are required to register under the Federal Food, Drug, and Cosmetic Act (FD&C Act) to establish and implement hazard analysis and risk-based preventive controls for human food. FDA also is proposing to revise certain definitions in FDA's current regulation for Registration of Food Facilities to clarify the scope of the exemption from registration requirements provided by the FD&C Act for "farms."

Comments on both proposed rules are due by May 16, 2013.

Additional Medicare Tax for Wealthy Beneficiaries

This proposed regulation addresses issues relating to Additional Hospital Insurance Tax on income above threshold amounts ("Additional Medicare Tax"), as added by the Affordable Care Act. Specifically, the proposed regulation provides guidance for employers and individuals relating to the implementation of Additional Medicare Tax. This document also contains proposed regulations relating to the requirement to file a return reporting Additional Medicare Tax, the employer process for making adjustments of underpayments and overpayments of Additional Medicare Tax, and the employer and employee processes for filing a claim for refund for an overpayment of Additional Medicare Tax. The document also provides notice of a public hearing scheduled for April 4, 2013, on these proposed rules. The deadline for submitting comments on the proposed regulation is March 1, 2013.

5. Reports

Health and Human Services -- Office of the Inspector General (HHS-OIG)

Millions in Medicaid Overpayments Not Collected

According to a report released by the HHS-OIG last week, despite recovering a substantial portion of identified Medicaid overpayments over the past decade, it failed to reclaim $226 million. "As of December 2012, CMS reported collecting $987,481,600 of the $1,213,085,167 in Medicaid overpayments that it had sustained in the 147 audit reports covered by our review. However, CMS had not collected the remaining $225,603,567 because it had not always proceeded with the collection process in a timely manner," the report stated. HHS-OIG recommends CMS "must aggressively and in a timely manner" collect all the overpayments. HHS-OIG also recommends that CMS collect the remaining money and "review and address delays in resolving OIG audit recommendations and promptly pursue corrective actions." Overpaid states include Florida, Massachusetts, New York, Indiana, Illinois, Kansas, Louisiana, Missouri, New Jersey, Oregon and Pennsylvania.

Medicare Overpaying for Infusion Drugs

According to a report issued Feb. 20 by the HHS-OIG, the federal government is paying 54 to 122 percent above market price for infusion drugs, which are administered through a device such as a catheter or needle, because of the way in which Medicare payments for those drugs is currently structured. Specifically, the report found that Medicare could pay 44 percent less ($334 million dollars between 2005 and 2011) for the drugs if it instead used the average sales price (ASP) figures for infusion drug reimbursement, as it does with all others, rather than the current average wholesale price (AWP) calculation. While most drugs covered under Medicare Part B pay a percentage of ASP, provisions under the Medicare Prescription Drug Improvement, and Modernization Act of 2003 exclude infusion drugs used with durable medical equipment (DME) from the ASP payment model. As it now stands, reimbursement for infusion drugsis calculated by taking 95 percent of 2003 list prices established by drug manufacturers and publishers of drug reference guides and, unlike the ASP calculation, is not based on real sales data. Many previous OIG reports have shown that AWP for infusion drugs significantly surpass drug acquisition costs, and that Medicare payment amounts for DME infusion drugs exceeded ASPs by a range of 54 percent to 122 percent annually. "Our results once again show that AWPs are unrelated to actual prices in the marketplace and that reliance on an AWP-based payment methodology has cost Medicare hundreds of millions of dollars," the report said. The agency anticipates including DME infusion drugs in future competitive bidding efforts, however, no official announcement of definitive plans has surfaced for their inclusion.

States to Have Enrollment Technology Ready for 2014 Deadline

OIG reported Feb. 20 that 37 of 45 states, with the exception of Florida, Idaho, Nebraska, New Hampshire, and Oklahoma anticipate having their respective streamlined enrollment systems for health subsidy programs (such as CHIP, Medicaid) ready by the Jan. 1, 2014, ACA deadline, despite many states' having previously reported serious funding challenges to technologically updating their age-old enrollment systems. While states do have the option to adopt a CMS enrollment system template if they do not wish to create their own personalized forms, as of April 2012, 40 states reported the intention to create their own forms. CMS continues to oversee the enrollment system process as the deadline approaches and says it remains dedicated to helping all states update their enrollment systems: "CMS has tailored it technological assistance and support activities according to the agencies engaged in each state," said Marilyn Tavenner, acting administrator to CMS in a December 2012 letter to OIG. States, however, seem to be seeking more information on how enrollment systems for health subsidy programs will interact with the cross-agency federal hub. More information on the Feb. 20 OIG report can be found here.

Medicaid and CHIP Payment and Access Commission (MACPAC)

February Meeting

Recently, the Medicaid and Children's Health Insurance Program (CHIP) Payment and Access Commission (MACPAC) met to discuss their March 2013 Report to Congress. Topics under consideration for the report include an update on Medicaid primary care physician payment increase, CMS initiatives to improve data for program operations and evaluation, program eligibility as it relates to provisions within the ACA, and issues regarding the dual-eligible population. Summaries of each session are availablehere.

Employee Benefit Research Institute

Health Reimbursement Account (HRAs) and Health Savings Account (HSAs) Utilization

According to a report recently released by the Employee Benefit Research Institute (EBRI), the percentage of workers reporting that their employers contribute to the account increased. The report, "Employer and Worker Contributions to Health Reimbursement Arrangements and Health Savings Accounts, 2006--2012," found that among those with employer contributions, overall contribution levels for individuals with employee-only coverage increased in 2012, and have been increasing since 2009. In addition, between 2006 and 2011, the percentage of individuals with employee-only coverage contributing nothing to an HSA decreased from 28 percent to 11 percent, and the percentage of individuals contributing $1,500 or more increased from 21 percent in 2006 to 44 percent in 2011.


Part D Enrollment High, Beneficiaries Active Consumers

Medicare Part D enrollment increased from 25.8 million in 2009 to 35 million in 2013, with an enrollment increase of 12 percent from 2012 to 2013 alone, an Avalere Health report revealed. The Washington-based health advisory firm found that almost 70 percent of eligible Medicare beneficiaries enrolled in the Part D drug benefit plan in 2013, and that the majority of beneficiaries of Part D selected the prescription drug plans (PDP). Furthermore, nearly 3 million beneficiaries opted for low-premium plans in preferred pharmacy networks. The report concluded that market competition continues to drive down the cost of premiums, and that premiums are very stable -- increasing, on average, by approximately 2 percent across the market, despite a large range of price increases for all top 10 PDP. CMS analysis estimated recently, however, that in 2014 Part D PDP would have lower copayments and deductibles than in the previous year. More information on the Avalere Health report can be found here.

If you have any questions, please contact Stephanie Kennan, Senior Vice President, or Brian Looser, Assistant Vice President, at McGuireWoods Consulting. Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal's "The Influence 50," an annual report of the top public affairs firms in Washington, D.C.


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