WellAware - Health Policy News Feb 4 2011

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WellAware

Health Policy News from M2

February 4, 2011

WellAware is a weekly update on actionable health policy news for the business and investing community.

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Federal

Judge Vinson Rules Entire Health Reform Law Unconstitutional
Judge Roger Vinson of Federal District Court in Pensacola, FL, has become the second judge to rule that the federal health reform law is unconstitutional. However, unlike the Virginia judge who issued a ruling in December, Vinson concluded that the insurance requirement was so “inextricably bound” to other provisions of the Affordable Care Act that the unconstitutionality of the provision required the invalidation of the entire law.

“The act, like a defectively designed watch, needs to be redesigned and reconstructed by the watchmaker,” Judge Vinson wrote.

The judge did not immediately enjoin the law pending appeals, a process that could last two years. But he wrote that the federal government should adhere to his declaratory judgment as the functional equivalent of an injunction.

That left confusion about how the ruling might be interpreted in the 26 states that are parties to the legal challenge. David B. Rivkin Jr., a lawyer for the states, said the ruling relieved the plaintiff states of any obligation to comply with the health law. “With regard to all parties to this lawsuit, the statute is dead,” he said.

However, the White House asserted that the opinion should not deter the continuing implementation of the law.


Mississippi Judge Throws Out Health Reform Challenge
On Thursday, a federal judge in Mississippi threw out a lawsuit that challenged the constitutionality of the health reform law.

The decision comes just a few days after a Florida judge ruled the whole law unconstitutional, in a case brought forward by 26 states.

The Mississippi judge found that the plaintiffs lacked the standing to sue, but offered them 30 days to amend their petition. The 10 individuals that brought the case forward argued that the law’s requirement to buy insurance violated their rights.

What does it mean?

Now that there are five conflicting rulings on the law, the issue is expected to eventually go to the Supreme Court.

Fundamentally, the individual mandate and lowering premiums go hand-in hand. (see Not in the News Yet story below). If people wait until they are sick to buy insurance, prices will stay high.

“Healthcare Economist” blogger Jason Shafrin provides an illustrative example of the importance of getting everybody paying into the health system.

Shafrin provides a theoretical example showing that with the individual mandate, average premium for all enrollees would be $5,250. In contrast, he says that the average premium for all enrollees, if only the sick are insured, the premium would be $10,000.

Link to decision
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Link to blog


HHS Has Granted Waivers from Financial Requirements to 733 Employers and Union-Affiliated Insurers (“Mini-Med” Plans)
Hundreds of employers have received federal waivers from a new requirement under health reform. Government data shows 733 applicants, mainly employers and union-affiliated insurers but also some states, received an exemption from a requirement that puts their plans on the hook for up to $750,000 in eligible medical bills for each covered worker this year. Most of those plans now have reimbursement limits that are a fraction of that amount. The exemptions cover approximately 2.2 million people.

The provision at issue targets plans that provide less than comprehensive coverage, called "mini-med" health plans. These lower-cost plans offer limited benefits but are popular with workers for providing access to doctor's visits, medications and often some protection for larger bills.

Companies warned HHS Secretary Sebelius that they would have to drop this coverage because it doesn't meet the health law's mandate that they provide much more expensive benefit plans.

Link to article
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63% of Employers Are “Likely” or “Highly Likely” To Pass Health Reform Costs On To Employees
More than 40% of employers said that they are likely, and another 23% said that they are “highly” likely, to pass along any direct or indirect health reform-related cost increases to employees, according to research from the Employee Benefit Research Institute (EBRI) and the Society for Human Resource Management (SHRM).

Two surveys found that few (10%) are unlikely or “highly” unlikely (2%) to pass along cost increases related to health reform, while 23% were unsure whether cost increases would be passed along to workers.

The studies noted that while the majority of employers are likely to pass along cost increases onto workers, only 30% of employers said that they were likely to pass along any cost decreases that were directly or indirectly related to the law. And, while 23% were “highly” likely to pass along these cost increases, only 10% were “highly” likely to pass along similar cost decreases.

Link to survey results


Health Care-Related IPOs Dominate Market
Of the 11 IPOs expected in the U.S. the week of January 31, seven are health-care-related, and several early-stage companies are trying to raise money although they don’t yet have any product approvals. “The best of the bunch are Epocrates Inc., which makes a mobile-device application for doctors, and Tornier N.V., which sells orthopedic products such as joint replacements and bone fixation devices,” according to the Wall Street Journal.

Epocrates is hoping the third time is charm. The firm filed an IPO in 2008 and again in 2010, but withdrew both. This week’s offering was successful and raised more than anticipated.

Epocrates says almost half of U.S. physicians use its app, “which helps them look up drug data on Apple, BlackBerry and Android devices, phones and tablets. Epocrates makes money through deals with pharma companies that send “clinical alerts” through its platform.” An electronic health record platform for small physician practices is in the works.

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State

Aetna Leaving Colorado Individual Market
Aetna has filed documents with the Colorado Insurance Division stating it is pulling out of the individual market in Colorado because it doesn't think it can remain competitive in the market. "Aetna Life Insurance Company has determined it can no longer meet the needs of its consumers while remaining competitive in the Colorado individual health market," Mary V. Anderson, a counsel to Aetna, writes in a December 21, 2010 letter to the Colorado Insurance Division.

Under Colorado law, the move prohibits Aetna from re-entering the state's individual health market for the next five years. This means they will not be able to sell individual policies in 2014, when the market is expected to expand significantly with health reform's mandated purchase of health insurance.

Link to article


Iowa Insurance Commissioner to Trim Wellmark’s Proposed Rate Increase
Iowa's insurance commissioner plans to trim a premium-increase proposal from Wellmark Blue Cross and Blue Shield, the state's main health insurer. The company sought to raise individual policyholders' rates an average of 11 percent, after raising them 18 percent last spring.

Commissioner Susan Voss, who listened to or read the comments of hundreds of outraged customers, said Wellmark could raise the rates an average of 8.5 percent, starting in April. Wellmark provides coverage to three-quarters of Iowans who buy their own health insurance. The increase in the base rate will affect about 46,000 people.

Voss said she based her decision partly on the opinions of two actuaries, who determined the request for an 11 percent increase was excessive.

Link to article


Medicaid Cuts Continue across U.S. – OH, SC, TN, TX
In Ohio, if no changes are made, Medicaid will cost state taxpayers an additional $1.6 billion next year. This would be a 49 percent jump in the state's share of costs, pushing to $4.9 billion the cost to the state for the next fiscal year.

Most of the increase to Ohio is due to the loss of federal stimulus money. The federal government has been covering a higher share of Medicaid costs to help states during the recession, but that help ends June 30. In addition, state officials are projecting an increase in enrollment and utilization of services, both of which also will drive up costs.

Gov. John Kasich (R) must deliver his state budget plan for the next two years on March 15.

The administration also will evaluate the rates paid to hospitals, nursing homes, doctors and other care providers, which could bring more immediate savings than efforts such as preventive care.

Kasich is among 33 Republican governors who have asked the Obama administration to let states cut Medicaid enrollment without losing federal aid. Under the health reform law, states that restrict eligibility in their programs lose federal support, which generally covers about 60 percent of costs.

The state Medicaid director in South Carolina has told lawmakers he needs $228 million in the next several months or the state will have to cut hundreds of thousands of patients from the Medicaid rolls.

Tony Keck's testimony before House and Senate budget writers sets the stage for a major clash over how the state will pay its bills. The decision about whether to allow the Department of Health and Human Services to operate with a deficit will be made next week by the Budget and Control Board, which is chaired by Gov. Nikki Haley (R). Some state lawmakers, mainly Senate President Pro Tem Glenn McConnell, R-Charleston, have insisted the agency make do with the funding the legislature allocated and not come back for more.

In addition, to prepare for another deficit within the Health and Human Services Department next budget year, lawmakers are considering allowing the agency to cut the rates it pays doctors, hospitals and nursing homes that treat Medicaid patients. The agency's budget shortfall for the upcoming fiscal year that begins July 1 could reach nearly $500 million.

Tennessee officials are preparing to cut $300 million in Medicaid spending by limiting doctor and hospital visits. Republican Gov. Bill Haslam has warned of an estimated to be a $1 billion budget gap in Tennessee.

TennCare, the state's Medicaid program, proposes to reduce state spending by $103 million, mostly with a cap of eight doctor and hospital visits a year for poor patients enrolled in the expanded program. The state cuts would erase $203 million more in federal matching funds.

In Texas, the head of the state’s health and human services agency is expected to tell state senators that the Medicaid program needs an additional $6 billion in funding.

He plans to tell state senators that Medicaid estimates they’ve been looking at are off by several billion dollars. They’ve been working with a base budget that does not take into account the cost of adding 250,000 people who are expected to join the rolls of Medicaid.

The additions to the Medicaid program come from typical growth in the number of eligible people and are not the result of federal health care reform. The higher price tag is due to medical costs rising through inflation, more people using the program and more services being provided, said a spokeswoman for the state's Health and Human Services Commission.

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Montana Supporters Move Forward With Health Insurance Exchange Rhode Island Also Moves Ahead With Its Exchange
The day after a federal judge declared the national health reform law unconstitutional, Montana businesses and consumer groups came to the state capital to support a bill laying the groundwork for a key element of the law: a state-based health insurance exchange.

Supporters of House Bill 124 said that even though courts could void the federal law, Montana should start working on the health insurance exchange, both to help consumers and to pre-empt the federal government from creating the exchange instead.

HB124, prepared by Democratic state auditor Monica Lindeen, who regulates insurance in the state, could face an uphill battle in the Republican-controlled legislature, where many members have vowed to do all they can to delay or block implementation of the federal health reform law.

Rhode Island has also taken its first step toward creating an insurance exchange. Senate President M. Teresa Paiva Weed, a Newport Democrat, filed legislation to establish the exchange. The legislation positions Rhode Island to be named an “early innovator” under the federal health-care law and thus win additional federal money to develop the exchange.

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Wisconsin Creates Office of Free Market Health Care to Oppose Health Reform
Republican Gov. Scott Walker has created a new office to fight federal health care reform, a bold move that may put Wisconsin in the forefront of states where newly elected Republican governors are challenging President Barack Obama's signature legislation.

Walker said he created the Office of Free Market Health Care with an executive order to simultaneously create a health care exchange in Wisconsin, as required under the federal health care reform bill, while also exploring "all opportunities and alternative approaches" that would free Wisconsin from establishing that exchange. Failure by states to establish an exchange would mean the federal government would step in to set one up. By law, each state must have one in place by 2014.

By simultaneously creating an exchange and looking for ways to get out of one entirely, however, Walker is preventing the federal government from having any role in how the state's exchange works.

Former Gov. Jim Doyle (D) had been a champion of Obama's efforts and gained national prominence for finding ways to insure roughly 98 percent of the state's population.

Link to article



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Not in the News...Yet

Concept of the Week: Adverse Selection
Adverse selection occurs in health insurance when a plan enrolls more unhealthy than healthy individuals. The Affordable Care Act’s provisions requiring insurers to cover those with pre-existing conditions and to stop the practice of rescission encourages less healthy people to seek coverage – increasing the likelihood of adverse selection.

The individual mandate in the Affordable Care Act is a mechanism to reduce the likelihood of adverse selection. Getting more healthy people to buy coverage lowers costs for everyone. The concept is simple: an insurer needs more people paying premiums than filing claims for the system to work.

This week two reports were released warning about the importance of preventing adverse selection as ACA is implemented.

First, the National Academy of Social Insurance (NASI) in a toolkit for states creating health exchanges warned about several ways the operations of Exchanges in the states could increase adverse selection. For example, an Exchange that requires higher certification standards for plans offered inside the Exchange versus outside the Exchange will cause qualified health plans in the Exchange to be more expensive. This would, in turn, lead to adverse selection because “healthy people…more interested in lower premiums and less interested in the additional standards…” would purchase plans outside the Exchange – driving costs up inside the Exchange.

Second, a report from the Center for Retirement Research at Boston College about the implementation of the voluntary, long term care insurance program Community Living Assistance Services and Supports, or CLASS, similarly warned about the importance of controlling for adverse selection.

The report asserts “broad participation” is key and “the success and solvency of CLASS will depend primarily on the extent of participation from American workers, especially the young and healthy. For broad participation, employers must decide to offer the plan and individuals automatically enrolled must not opt out.”

Adverse selection is at the core of the arguments about whether to have an individual mandate. As this drama continues to unfold, adverse selection will continue to be at the heart of whether any of these health care market system changes will work.

Link to NASI report
Link to CLASS brief



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Releases of Note

AdvaMed Says Device Recalls In Europe, U.S. Occur At Similar Rates
Medical device recalls in Europe and the U.S. occur at about the same rate, even though the approval process in the U.S. takes significantly longer, according to a report released by the Advanced Medical Technology Association (AdvaMed).

The report examines the rate of safety recalls for medical devices in Europe from 2005-2009 and compares them with the level of similar recalls in the U.S. The study focused on those products recalled because of significant health risks and found an average recall rate in Europe of 21 per year, compared to the tens of thousands of devices on the market. This is almost identical to the rate of equivalent recalls in the U.S.

“The results of this study suggest little difference between absolute number of serious recalls between the U.S. and EU regulatory systems,” the report says. “The distribution of the serious recalls is similar across therapeutic areas and reasons for recall, suggesting that differences between the two systems do not ultimately affect performance.”

“The FDA should focus on resolving key performance issues to provide patients timely access to life-saving and life-changing medical technology and improve American competitiveness,” Stephen Ubl, AdvaMed President and CEO said. The AdvaMed-sponsored report was prepared by Boston Consulting Group.

Link to release
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Study Finds Gap between Supposed Benefits of EHRs and Empirically Demonstrated Benefits; EHRs May Also Introduce New Risks, Including Over-Reliance on Clinical Decision Support
“There is a large gap between the postulated and empirically demonstrated benefits of eHealth technologies,” according to a meta-analysis released by PLOS Medicine (the UK’s Public Library of Science). In addition, there is a “lack of robust research on the risks of implementing these technologies, and their cost-effectiveness has yet to be demonstrated, despite being frequently promoted by policymakers and `techno-enthusiasts’ as if this was a given.”

Therefore, “it is vital that future eHealth technologies are evaluated against a comprehensive set of measures, ideally throughout all stages of the technology's life cycle,” according to the authors.

The researchers divided eHealth technologies into three main categories: “(1) storing, managing, and transmission of data; (2) clinical decision support; and (3) facilitating care from a distance.”

“The researchers found that despite the wide support for eHealth technologies and the frequently made claims by policy makers when constructing business cases to raise funds for large-scale eHealth projects, there is as yet relatively little empirical evidence to substantiate many of the claims made about eHealth technologies.”

“For example, the researchers only found limited evidence that some of the many presumed benefits could be realized; importantly, they also found some evidence that introducing these new technologies may on occasions also generate new risks such as prescribers becoming over-reliant on clinical decision support for e-prescribing, or overestimate its functionality, resulting in decreased practitioner performance.”

Link to report



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