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Wolters Kluwer

Health Reform WK-EDGE

January 18, 2017

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In the News


·        Baker Botts LLP

·        Balch & Bingham

·        Cooper & Kirk PLLC

·        Hindman/Bynum, P.C.

·        Polsinelli PC

·        Quinn Emanuel Urquhart & Sullivan, LLP


·        Aetna Life Insurance Co.

·        Amgen Inc.

·        Amgen Manufacturing Limited


HEALTH CARE REIMBURSEMENT AND COMPLIANCE TOP STORY—Fed. Cl.: Congress intended for HHS to make ACA risk corridor payments each year to insurers

By Jeffrey H. Brochin, J.D.

The risk corridor program, as one of three premium stabilization programs under the Patient Protection and Affordable Care Act (ACA) (P. L. 111-148), was intended to reimburse insurers that covered high-risk individuals on an annual basis during the three-year period beginning January 1, 2014, the U.S. Court of Federal Claims ruled. Congress created the temporary risk corridors program to provide relief to insurers who, in the first three years of insurance market reforms, underestimated their allowable costs and accordingly set their premiums too low (Health Republic Insurance Company v. U.S. ,January 10, 2017, Sweeney, M.).

Background: When Congress enacted the ACA it provided benefits and risks for health insurance companies. Insurers would have access to a market of previously uninsured individuals, likely resulting in more customers, but because insurers lacked the data with which to predict the needs of the newly-insured individuals, they would be hampered in their ability to price qualified health plans to reflect the medical costs associated with the new and untested marketplace. To mitigate the risk faced by insurers, the ACA established three premium stabilization programs including a temporary risk corridors program. The Congressional Budget Office had assumed that collections under the program would equal payments to insurers and that therefore the program would be ‘budget neutral.’ However, after it was determined that certain policy changes affecting the 2014 market rules would lead to unexpected losses, HHS announced in October, 2015 that it would prorate risk corridors payments owed to insurers.

An Oregon insurer that provided health insurance on Oregon’s exchange in 2014 and 2015 calculated that it was entitled to payments of $7,884,886.15 for 2014. Because the risk corridors payments owed to insurers ($2.87 billion) greatly exceeded the risk corridors charges due from insurers ($362 million), HHS announced that each insurer entitled to a risk corridors payment for 2014 would receive only 12.6% of what it was owed. The Oregon insurer also estimated that for 2015 it was owed a risk corridors payment of approximately $15 million. In September, 2016, HHS announced that based on its preliminary analysis, all 2015 benefit year program collections would be used towards remaining 2014 benefit year risk corridors payments, and that no funds would be available at that time for 2015 benefit year risk corridors payments. The insurer filed suit in February, 2016 alleging that HHS did not fully pay the risk corridors payments to which it was entitled under the ACA and it also claimed consequential damages. The U.S. moved to dismiss the complaint contending that the court lacked subject matter jurisdiction because the insurer did not have a claim for presently due money damages and that the court lacked jurisdiction to grant the consequential damages. The court granted the motion as to the consequential damages but denied the motion as to the money damages.

Money-mandating provisions. The court found that section 1342 of the ACA and the regulations implementing the payment requirements were money-mandating provisions that entitled the insurer to seek money damages from the U. S. They referenced the statutory provisions that HHS "shall pay" specified amounts to eligible qualified health plans, and the implementing regulation which used the language that HHS "will pay" specified amounts to issuers of eligible qualified health plans. The U.S. contended that the court’s jurisdiction was limited to claims for presently due money damages, and that the insurer had not established that its damages were presently due because it had not yet obtained declaratory judgment for an amount. The court rejected the argument and found that the insurer’s entitlement to unpaid risk corridors payments was not dependent upon the insurer first obtaining a declaratory judgment. Furthermore, the court noted that the requirement that money damages be presently due was more a ripeness issue than one of jurisdiction.

Lack of payment deadline. The U.S. disputed the ripeness of the claim because HHS had not yet determined the total amount of payments due to the insurer, nor to other insurers under the risk corridors program. The argument was based on the fact that neither the ACA nor the implementing regulation expressly included a deadline for HHS to make risk corridors payments to insurers. In the absence of an explicit deadline, they asserted, HHS could defer payment to insurers until the conclusion of the three-year risk corridors program, or to whenever it had the funds available to make full payment. Because HHS was not under any present obligation to make risk corridors payments, and would not know the total amount owed to each insurer until 2017, the insurer’s claim was premature. This raised the primary issue as to whether risk corridors payments were due annually or at the end of the three year period.

Determining Congressional intent. Although the ACA did not explicitly provide a deadline for HHS to make risk corridors payments to insurers, it did contemplate that HHS would calculate risk corridors payments separately for each year of the program by incorporating the language directing HHS to "establish and administer a program of risk corridors for calendar years 2014, 2015, and 2016," as opposed to mandating a program for calendar years 2014 through 2016. In addition, Congress required HHS to calculate ‘payments in and payments out’ for each year of the program. Taken together, the court found a basis for reliable statutory construction as to Congressional intent approving a risk corridors payment program that provided for annual payments.

The court noted that Congress created the temporary risk corridors program to provide relief to insurers who, in the first three years of insurance market reforms underestimated their allowable costs and accordingly set their premiums too low. If the program did not provide for prompt compensation to insurers upon the calculation of amounts due, insurers might lack the resources to continue offering plans on the exchanges, and if enough insurers left the exchanges, one of the goals of the ACA, namely, the creation of effective health insurance markets, would be unattainable.

The case is No. 1:16-cv-00259-MMS.

Attorneys: Stephen Swedlow (Quinn Emanuel Urquhart & Sullivan, LLP) for Health Republic Insurance Co. Charles E. Canter, U.S. Department of Justice, for the United States of America.

Companies: Health Republic Insurance Co.; United States of America

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LIFE SCIENCES TOP STORY: Biosimilar dispute headed to the Supreme Court

By Kathryn S. Beard, J.D.

Biosimilar manufacturers will soon have a definitive answer on the timing of giving notice of commercial marketing, thanks to the Supreme Court. On January 13, 2017, the Court granted and consolidated Sandoz, Inc.’s petition for writ of certiorari and Amgen, Inc.’s conditional cross-petition for writ of certiorari. The dispute appeals the Federal Circuit’s July 21, 2015 decision holding that Amgen was entitled to an additional 180-day marketing exclusivity period because of Sandoz’s late notification of its intention to market a biologic product that is biosimilar to Amgen’s Neupogen® (see Court interprets biosimilar ‘enigma’ in favor of abbreviated biologic license applicant , July 22, 2015).

The Court also granted Apotex, Inc.’s motion for leave to file a brief as amici curiae; Apotex was involved in a similar dispute with Amgen (see Biosimilar applicant must give 180-day post-licensure notice to reference sponsor , July 6, 2016), though the Court denied Apotex’s petition for writ of certiorari earlier this term (see SCOTUS denies cert in biosimilar licensing dispute , December 12, 2016).

The Biologics Price Competition and Innovation Act (BPCIA), which was passed in 2010 as sections 7001-7003 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), created an abbreviated pathway for FDA approval of a "biosimilar" biologic product. Amgen originally brought suit against Sandoz in federal court asserting various violations of Amgen’s approved license for its cancer-fighting biologic Neupogen (filgrastim) and infringement of Amgen’s patent for a particular method of using filgrastim. The Court will be hearing arguments relating to Sandoz’s question regarding the 180-day notice of commercial marketing and Amgen’s cross-petition on the optionality of a process to settle patent disputes known as the "patent dance" (see Shall we dance? Biosimilars step toward new legal and regulatory future , March 31, 2016).

Makeup of the Court. Since the February 13, 2016, death of Justice Antonin Scalia, there have been eight Justices sitting on the Court. President Barack Obama’s nominee to replace Scalia, D.C. Court of Appeals Chief Judge Merrick Garland, was not considered by the Senate; President-elect Donald Trump plans to nominate a successor early into his term. In order to receive a vote in cases pending before the Court, a Justice must be seated on both the day of the oral argument and the day the written decision is released. Trump’s nominee will only be part of the decision if he or she is confirmed and duly sworn in before the oral arguments, which are not yet scheduled.

Companies: Sandoz, Inc.; Amgen Inc.; Amgen Manufacturing Limited; Apotex, Inc.

MainStory: TopStory NewsStory AgencyNews BiosimilarNews DrugNews TrumpAdministrationNews NewsFeed

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STRATEGIC PERSPECTIVES: 2016’s major health care, life sciences, and health reform developments

By Kathryn S. Beard, J.D.

Each year, the Wolters Kluwer Health Law Editorial team revisits the major legal and regulatory developments of the past year and provides that information to readers through a series of year-in-review Strategic Perspectives published in Health Law Daily and Health Reform WK-EDGE. This Strategic Perspective lists and links to all of the 2016 year-in-review stories for easy reference.

These 12 Strategic Perspectives provide a broad overview of 2016’s impact on Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), health care compliance, health reform, and the life sciences. They also preview 2017, and provide information about what the incoming Donald J. Trump (R) Administration and the 115th Congress have pledged to do.

Health Care Compliance

Strategic Perspectives following actions taken by the HHS Office of Inspector General (OIG) and others to enforce the False Claims Act (FCA) (31 U.S.C. §3729), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (P.L. 104-191), and the Anti-Kickback Statute (AKS) (42 U.S.C. §1320a-7b) included:

·        Top 5 Things to Know About Cybersecurity as 2016 Ends (December 13, 2016);

·        OIG’s 2016 Analysis of Top 5 Proposed Arrangements Types (December 21, 2016);

·        Top 5 Things to Know About the OIG’s 2017 Work Plan (December 29, 2016); and

·        A Look Back at 5 FCA Cases Appealed in 2016 (January 4, 2017).

Medicare and Medicaid

The following Strategic Perspectives related to Medicare and Medicaid reimbursement and litigation, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10), and administrative decisions issued by the Departmental Appeals Board (DAB) and the Provider Reimbursement Review Board (PRRB):

·        Counting Down the Top 5 MACRA Developments of 2016 (December 9, 2016);

·        Top 5 Medicaid Litigation Actions of 2016 and a Look at 2017 (December 14, 2016);

·        Five 2016 DAB Decisions with Unusual Facts and Resolutions (December 20, 2016); and

·        Five Things to Know About the PRRB in 2016 (December 27, 2016).

Health Reform

One Strategic Perspective focused on 2016’s major developments related to the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148): Top 5 ACA-Related Bills, Cases, and Final Rules of 2016 (December 7, 2016).

Life Sciences

Strategic Perspectives about judicial and regulatory interpretations of the federal Food, Drug and Cosmetics Act (FDC Act) (21 U.S.C. §301 et seq.) included:

·        The FDA’s Top 5 Drug and Device Actions in 2016 (November 29, 2016);

·        Are the Top Five Food Issues in 2016 a Prelude to 2017? (December 2, 2016); and

·        Examining the Top Five 2016 Drug & Device Decisions (December 22, 2016).

Trump Administration White Paper

The Trump Administration will likely have significant impact on several areas of law, how corporations do business, and individuals. The white paper Trump’s Win Expected to Bring Significant Legal and Regulatory Changes discusses potential changes to these areas including: Tax, Health, Life Sciences, Labor and Employment, Federal Securities, Banking and Finance, Antitrust and Competition Law, Energy and Environmental Law, Government Contracts, Employee Benefits, Payroll, and Pension and Retirement.

Read further, "Trump’s Win Expected to Bring Significant Legal and Regulatory Changes."

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GENERAL REFORM TOPICS—FEDERAL LEGISLATION: House and Senate pull out all the stops to halt ACA

By Bryant Storm, J.D.

The repeal and replacement of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) will take place at the same time, according to House Speaker Paul Ryan (R-Wis). Ryan’s announcement was made the day after President-elect Trump announced the repeal and replacement of the ACA would be done "essentially simultaneously." Lawmakers have already begun paving the way for repeal of the health law with the passage of resolutions in the House and Senate. Republicans in both houses of Congress are relying on unorthodox measures to affect repeal and replacement of the ACA.

Concurrent resolution. The concurrent resolution (S. Con. Res. 3), which passed 51-48 without amendment, authorizes repeal through the budget resolution process—a mechanism requiring only a simple majority vote for success. The budget resolution also allows Republican senators to avoid the threat of a filibuster. The resolution instructs House and Senate committees to develop repeal legislation by January 27, 2017

Objections. Democratic senators voiced objections to the action during the voting roll call. In turn, Democrats raised objections to the resolution, noting that repeal would remove protections for rural hospitals, block patient access to affordable drugs, and undermine money-saving aspects of Medicare. As the Democrats made objections, the presiding officer, Senator Cory Gardner, (R-Colo) banged his gavel to note that debate is not allowed during a vote.

Timeline. The resolution instructs House and Senate committees to develop repeal legislation by January 27, 2017. Some Republican Senators sought to delay the deadline, expressing concerns that January 27 would be too soon to draft repeal legislation. Senator Rob Portman (R-Ohio) said the "date is not a date that is set in stone." Portman indicated the drafting of a repeal bill could take longer.

House passage. On January 13, 2017, the House passed the concurrent resolution by a vote of 227-198. Concurrent resolutions are non-binding and do not require the approval of the president; therefore, the concurrent resolution is in effect and will not be presented to either President Obama or President Trump for signature.

House rules. The House resolution (H.R. 5), which passed 234-193, instructs the Congressional Budget Office (CBO) to analyze all bills that will cause a net increase in direct spending except for bills pertaining to the repeal or replacement of the ACA—a limitation that lies in conflict with the CBO’s declaration that its "work reflects the agency’s objective, impartial, and nonpartisan analytical judgment." The resolution seeks to further upend the status quo under its Title II with a proposal to repeal the Chevron and Auer doctrines to "end judicial deference to bureaucrats’ statutory and regulatory interpretations." Limitation on those doctrines would significantly impact the rulemaking and interpretive powers of HHS, CMS, and the FDA.

Legislation: FederalLegislation NewsFeed AgencyNews GeneralNews TrumpAdministrationNews

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ACCESS TO HEALTH CARE SERVICES—N.D. Texas: No cause of action for gender identity discrimination under ACA §1557

By Jeffrey H. Brochin, J.D.

Section 1557 of the Patient Protection and Affordable Care Act (ACA) (P. L. 111-148) does not provide a cause of action for discrimination based on gender identity, a federal court in Texas ruled. Furthermore, an Executive Order cannot be relied upon to clarify a legislative act (Baker v. Aetna Life Insurance Company, January 13, 2017, Fitzwater, S.).

Background: An employee with a well-documented history of suffering from gender dysphoria (formerly referred to as gender identity disorder) filed an action against Aetna Life Insurance Company and her employer arising from the denial of coverage of the costs of her breast augmentation surgery. She claimed that the denial was based solely on the basis of her male birth gender. She was also denied short-term disability plan (STD Plan) benefits for coverage of her post-surgery recovery because surgery to treat gender dysphoria did not qualify as treatment of an illness. She alleged that Aetna and her employer discriminated against her on the basis of gender identity in violation of Section 1557 of the ACA. She also alleged gender discrimination in violation of Title VII of the Civil Rights Act of 1964 (Title VII). Aetna moved to dismiss her ACA claim for failure to state a cause of action and the court granted their motion.

Proposed rule inapplicable. The employee cited a 2015 Proposed rule (80 FR 54204) that would prohibit denial of health services on the basis of gender identity or gender assigned at birth. However, the court ruled that the effective date of the part she referenced was either July 18, 2016 or January 1, 2017, depending upon what the part required, and therefore it did not apply to her claim.

Effect of Executive Order. She also cited Executive Order 13672, which prohibits federal contractors and subcontractors from discriminating on the basis of gender identity, and asserted that Aetna and her employer were federal contractors. The effect of the Executive Order, she claimed, was to clarify an issue left "somewhat ambiguous" in Section 1557 that discrimination against transgender persons under the ACA was prohibited. The court disagreed and ruled that Title VII reasoning has not been applied to any statute referenced in Section 1557 of the ACA. Accordingly, the employee was unable to point to any controlling precedent that recognized a cause of action under Section 1557 of the ACA for discrimination based on gender identity, and that count of her complaint was dismissed with prejudice.

ERISA claim in relation to the ACA. The second count of the employee’s complaint alleged that Aetna wrongfully denied benefits to her under her STD Plan in violation of ERISA. She asserted that she was protected from discrimination based on gender identity in the administration of health care benefits under Section 1557 of the ACA, but did not enjoy similar protections under ERISA, and, that it was impossible for an ERISA plan offered by an employer to exist that was not also subject to Section 1557 of the ACA. She sought a good faith extension of existing law to remedy this issue. The court ruled that it was for Congress and not the court to decide whether to create in ERISA a protection that the statute did not already provide, and the court had already concluded that Section 1557 of the ACA did not provide a cause of action for discrimination based on gender identity.

The case is Civil Action No. 3:15-CV-3679-D.

Attorneys: Michael J. Hindman (Hindman/Bynum, P.C.) for Charlize Marie Baker. Stephen E. Fox (Polsinelli PC) for L-3 Communications Corp. Earl Bowen Austin (Baker Botts LLP) for Aetna Life Insurance Co.

Companies: L-3 Communications Corp.; Aetna Life Insurance Co.

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MEDICAID EXPANSION—E.D.N.C.: Court’s halt of Medicaid expansion request may span presidential administration change

By Bryant Storm, J.D.

North Carolina’s request to expand its Medicaid program under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) may now be decided by incoming Trump Administration officials, after a federal district court granted a temporary restraining order (TRO) preventing HHS from acting on the request for 14 days or until the court takes further action. The temporary halt was initiated by a complaint filed by state Senate Leader Phil Berger (R) and state House Speaker Tim Moore (R) (Berger v. Burwell , January 14, 2017, Flanagan, L.).

Complaint. The complaint alleges the incoming North Carolina administration, led by Governor Roy Cooper (D), unlawfully worked together with the outgoing Obama Administration to expand the state’s Medicaid program. In addition to violating state law requiring general assembly approval of Medicaid expansion, the complaint alleges, the Medicaid expansion request would "saddle North Carolinians with hundreds of millions of dollars of annual Medicaid expenses." The lawsuit, which does not name Cooper as a defendant, asserts that he has exceeded his executive authority.

Next steps. Before the court are HHS’ motion to vacate the TRO and the North Carolina lawmakers’ motion for preliminary and permanent injunctive relief. The court will hear the additional motions on Friday, January 20, 2017.

The case is No. 5:17-cv-25-FL.

Attorneys: Nicole Jo Moss (Cooper & Kirk PLLC) for Phil Berger. Joel L. McElvain, U.S. Department of Justice, for Sylvia Burwell, Secretary, U.S. Department of Health and Human Services.

Companies: U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services; North Carolina Department of Health and Human Services

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BIOSIMILARS—NOTICES: Naming biological products in the public domain

By Sarah E. Baumann, J.D.

The FDA wants manufacturers of biologicals to give each originator biological product, related biological product, and biosimilar product a proper name that is a combination of the core name and a distinguishing suffix that is devoid of meaning and composed of four lowercase letters. In a Guidance titled, "Nonproprietary Naming of Biological Products," the agency contended that the naming convention will enhance pharmacovigilance, ensure the safe use of products, and advance appropriate practices and perceptions regarding biological products. The guidance applies to originator and related biological products licensed under section 351(a) of the Public Health Service Act (PHS Act), biosimilar products licensed under section 351(k) of the PHS Act, and biological products approved under the federal Food, Drug, and Cosmetic Act (FDC Act) on or before March 23, 2020, when they are deemed to be licensed under section 351 of the PHS Act on March 23, 2020 (Notice , 82 FR 4345, January 13, 2017).

A proprietary name is one that is trademarked and registered for private use. Nonproprietary names are not trademarked, are in the public domain, and may be used by the public. Names for biological products licensed under the PHS Act will be proper names—which reflect scientific characteristics of a product, e.g. chemical structure and pharmacological properties—consisting of a core name and an FDA-designated suffix. For originator biological products, FDA will use a core name that is the adopted name designated by the United States Pharmacopeial Convention (USP) United States Adopted Names (USAN) Council for the relevant biological substance. For related biological products or biosimilar products, the core name will be the core name identified in the proper name of the previously licensed product. A distinguishing suffix will be attached to the core name with a hyphen; the suffix must be devoid of meaning and composed of four lowercase letters. Nonproprietary names will appear thusly: replicamab-cznm. Applicants for names should submit up to 10 proposed suffixes to the FDA in accordance with the Guidance in order of preference.

The FDA believes the naming convention will aid in tracking down specific dispensed products when other mans are not readily accessible or available, facilitate accurate identification of products by health care practitioners and patients, and minimize inadvertent substitution of any such products that have not been determined to be interchangeable. The FDA is continuing to consider the appropriate suffix format for interchangeable products.

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FRAUD AND ABUSE—FINAL RULES: HHS OIG’s exclusion authority loosens, allows more discretion

By Kayla R. Bryant, J.D.

The HHS Office of Inspector General (OIG) now has more flexibility to choose when to exclude noncompliant and fraudulent providers from participation in federal health care programs. Under authority granted by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), HHS can now apply its permissive exclusion power to more individuals in the event that a waiver is requested, particularly when the exclusion would cause access to care issues for beneficiaries. Due to certain comments, the agency made several changes since issuing its Proposed rule (73 FR 26809) in May 2014 (Final rule , 82 FR 4100, January 12, 2017).

Comments and changes. The OIG received a number of objections to its Proposed rule’s section clarifying that there is no time limit to exclusions imposed on providers who have committed fraudulent activities, including making false statements (see Codification of OIG’s statutory authority to waive exclusions proposed , May 9, 2014). The objections included reminders that courts may not defer to an agency’s interpretation of a limitation period and concerns about an increased administrative burden on providers to retain documentation indefinitely. Due to the comments received, the OIG has decided to codify a ten-year limitations period, noting that "older conduct is less relevant to current trustworthiness."

Also due to comments, the OIG is not finalizing the proposed temporal change of applying certain exclusions to providers. A commenter noted that if finalized, this regulation would not protect beneficiaries from providers who left employment in the industry, committed an offense leading to conviction, and then re-entering the industry.

Although the agency did not receive comments on the proposal that would have removed aggravating and mitigating factors for certain exclusions, the agency has reconsidered and will leave the factors in place.

Early reinstatement. The added flexibility in the revised regulations is reflected in the excluded provider’s ability to submit a request for early reinstatement in the event that a state licensing authority has issued a new license or chosen not to take adverse action. In this event, the OIG will consider the circumstances that formed the basis of the exclusion. The agency has also chosen to shorten the presumption against reinstatement period to three years for unlicensed individuals.

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CONTRACEPTION COVERAGE—OTHER AGENCY ISSUANCES: No changes made to the accommodations in preventative care services coverage for women

By Paige Arnold, J.D.

A joint Frequently Asked Question (FAQ) regarding the implementation of the Affordable Care Act (ACA) (P.L. 111-148) was prepared by the Departments of Labor (DOL), HHS, and Treasury (collectively, The Departments) to address concerns of preventative services for women. At this time, no changes have been made to address the concerns of religious objectors while providing protection of equal health coverage of women, specifically as related to contraceptive coverage, according to the Departments’ findings (ACA FAQ Implementation 36 , January 9, 2017).

Background. In 2011, the ACA was amended to require coverage of women’s preventative services. The amended regulations included an exemption of coverage from contraception requirements for religious organizations. Subsequently, an accommodation was added for eligible organizations that object on religious grounds to providing coverage for contraceptive services. After the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751 (2014), accommodations were extended to closely held for-profit entities.

Then in 2016, the Departments published a request for information (RFI) that asked for input from employers and other interested parties in light of the Supreme Court’s opinion and request for supplemental briefing in another case, Zubic v. Burwell, 136 S. Ct. 1557 (2016). Specifically, the RFI sought feedback to determine if there could be a balance in the modifications to the existing accommodation procedures that would protect equal health coverage to affected women and resolve the objections based of religious grounds.

No changes to the accommodations. As a result of the RFI, the Departments determined that there are no modifications to the accommodation regulations at this time. While the comments submitted to the Departments addressed the concerns of both sides, there was no obvious feasible approach presented. The RFI sought comments in many areas addressed by the Court, including in part, issues regarding notification to issuers without certification, alternative approaches such as separate contraceptive-only coverage, and self-insured plans.

As to notification to issuers without certification, the Departments found that the elimination of written notification would create administrative problems and potential legal liabilities for issuers and would hinder women’s access to care. Furthermore, requiring affected employees to enroll in separate contraceptive-only coverage raised concerns that it would be costly and administratively burdensome, and compromise accessibility to equal coverage for women. Under the current accommodation regulations objecting employers are permitted to use a separate enrollment card for contraceptive coverage. Finally, there were no options offered for oral notification to third-party administrators of self-insured plans that would include providing full and equal contraceptive services to women enrolled in those plans.

The accommodations to the regulations will remain without modification at this time.

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DRUGS—OTHER AGENCY ISSUANCES: A rollback of the ACA may substantially worsen the opioid epidemic

By Lindsey Firnbach, J.D.

New studies have linked the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) to the progress made towards diminishing the opioid crisis in the United States. The Office of the Assistant Secretary for Planning and Evaluation (ASPE), in a recent issue brief, stated that the ACA has allowed many Americans to gain insurance coverage. Evidence implied that the increase in coverage has improved outcomes for Americans suffering with opioid use, other substance use and mental health disorders. The ASPE suggests that a rollback of the ACA might greatly affect the care and coverage for those with substance use disorders and mental health disorders, and that it may undermine the progress made towards combating the opioid epidemic (ASPE Brief , January 11, 2017).

The ACA increased the amount of insured Americans in the United States, and its provisions, as well as the provisions of the Mental Health Parity and Addiction Equity Act (MHPEAEA), have required that insurance coverage include treatment for substance use and mental health disorder benefits. Prior to the ACA, mental illness and substance use could be considered as a pre-existing condition, and could cause a denial of coverage or coverage at higher rates. According to the ASPE, after the implementation of the ACA, the share of people foregoing mental health care was greatly reduced, and there was improved access to care for those with mental health disorders and substance use disorders. Additionally, the share of hospitalizations for uninsured substance use or mental health disorders decreased, providers have become motivated to provide treatment for substance use and mental health disorders, and some States used opportunities under the ACA to create models of coverage for individuals with opioid use disorders.

The ASPE predicted that the opioid crisis could be greatly worsened if the ACA is repealed or rolled back. It believes that a repeal or rollback would cause an increase of uninsured individuals, including individuals suffering from substance use or other behavioral health conditions. In order to continue to fight the opioid epidemic, the ASPE believes that continued insurance coverage is essential, and therefore is wary that a repeal or rollback of the ACA will undermine the progress made towards the opioid epidemic.

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PENALTIES—CBO REPORTS: Uninsured numbers, premiums projected to rise with ACA repeal

By Anthony H. Nguyen, J.D.

Enactment of the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015 (H.R. 3762), which would repeal portions of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), would cause the number of uninsured Americans and the insurance premiums in the non-group market to rise immediately. With a new Congress and presidential administration, the previously rejected legislation will likely be revisited. According to a Congressional Budget Office (CBO) report in collaboration with the Joint Committee on Taxation (JCT) and by request from Senate minority leaders, the number of uninsured Americans would increase by 18 million in the first new plan year following enactment and premiums in the non-group market would increase by 20 to 25 percent in that same year. The legislation would repeal portions of the ACA related to penalties and subsidies, but leave the ACA’s insurance market reforms intact (CBO Report , January 17, 2017).

Bill background.H.R. 3762 would make two primary sets of changes. First, the bill would eliminate the individual mandate penalty, as well as the requirement that large employers offer their employees health insurance that meets specified standards (also known as the employer mandate). Second, roughly two years after enactment, the bill would also eliminate the ACA’s expansion of Medicaid eligibility and the subsidies available to people who purchase health insurance through a marketplace established by the ACA.

Impact. Once Medicaid eligibility expansion and subsidies are eliminated under the proposed law, the uninsured rate would rise to 27 million with a projected 32 million uninsured in 2026. As for premiums in non-group markets, those are expected to rise 50 percent in the year following elimination of Medicaid expansion and market subsidies. Premiums would be double the amount by 2026.

Most of those reductions in coverage would stem from repealing the penalties associated with the individual mandate. However, the CBO and JCT also noted that insurers in some areas would likely leave the non-group market in the first new plan year following enactment. These departures would be in anticipation of further reductions in enrollment numbers and higher average health care costs among enrollees who remained after insurance subsidies were eliminated. The CBO and JCT projected that roughly 10 percent of the population would be living in an area that had no insurer participating in the non-group market.

The number of people purchasing health insurance is expected to drop, as the individual mandate is eliminated. Older Americans and less healthy people would not drop coverage, if possible, but younger and healthier Americans like would drop out without a mandate. In turn, the average health care costs among the people retaining coverage would be higher, and insurers would have to raise premiums in the non-group market to cover those higher costs. Any movement by insurers out of the non-group market would also place further upward pressure on premiums because the market would be less competitive.

ReportsLetters: CBOReports NewsFeed AccessNews AgencyNews CostSharingNews EmployerMandateNews EnrollmentNews EssentialBenefitNews GroupMarketReformNews HealthInsuranceExchangeNews IndividualMandateNews InsurerNews MedicaidExpansionNews PenaltyNews PremiumNews PremiumTaxNews

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ACCOUNTABLE CARE ORGANIZATIONS (ACOs)—NEWS: ACO-affiliated hospitals outperform when it comes to readmissions

By Bryant Storm, J.D.

Hospitals affiliated with accountable care organizations (ACOs) more quickly reduce the rate at which patients discharged to skilled nursing facilities (SNFs) are readmitted within 30 days, according to a Commonwealth Fund study. Researchers discovered that, while all hospitals reduced readmissions between 2010 and 2013, ACO-affiliated hospitals reduced readmissions more rapidly. However, another study revealed a fault within ACOs, namely that ACOs with a high proportion of minority patients perform less well on quality measures.

Readmissions. The first study examined whether ACO-affiliated hospitals in metropolitan areas are more effective than other hospitals in reducing readmissions from SNFs. Researchers evaluated readmissions data from 2010 to 2013 across nearly 8000 diagnoses. All hospitals over that time period reduced readmissions, likely due to new Medicare policies penalizing readmissions. However, from 2007 to 2013, Pioneer ACO hospitals reduced their 30-day readmissions by 3.1 percentage points, Medicare Shared Savings hospitals reduced readmissions by 4.0 points, and non-ACO hospitals decreased readmissions by 2.9 points. Additionally, adjusting for clinical and demographic characteristics, researchers found, from 2007 to 2013, a relative reduction in all-cause readmissions of 17.7 percent for Shared Savings hospitals, 14.9 percent for Pioneer ACO hospitals, and 13.1 percent for non-ACO hospitals. Researchers concluded that the relative success of ACOs was based upon improved discharge practices or improved communication with SNFs.

Minorities. Another study analyzed the racial and ethnic disparities in health care outcomes among ACOs. The study examined health care outcomes to determine the relationship between (1) the share of an ACO’s patients who are members of racial or ethnic minority groups and (2) the ACO’s performance on quality measures. Researchers found that ACOs serving a high number of minority patients performed similarly to other ACOs on most observable characteristics and capabilities. However, having a higher proportion of minority patients was associated with worse scores on a significant number quality measures. The study found that ACOs with a high proportion of minority patients may have particular difficulties with quality during the ACOs early years of participation.

IndustryNews: NewsStory AccountableCareNews AccessNews HospitalReadmissionNews PenaltyNews QualityNews

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BLOG TRACKER—Noteworthy blog posts and other commentary

The week’s most insightful, intriguing, or entertaining blog posts from the health, benefits, employment, and tax law communities:

·        Affordable Care Act Review: Fitness Enthusiasm Wanes Early: ACA-Related Congressional Actions January 5-12, by R. Pepper Crutcher, Jr.

·        Health Affairs Blog: What Could President Trump Do Through Executive Order To Dismantle The ACA?, by Timothy Jost

·        RegBlog: The Unhealthy Return to Individual Responsibility in Health Policy, by Allison Hoffman

·        To the Point: States That Leaned in on the Affordable Care Act Have Much to Lose, by Sabrina Corlette, Emily Curran and Justin Giovannelli

·        The Upshot: The Biggest Changes Obamacare Made, and Those That May Disappear, by Margot Sanger-Katz

Have you seen (or written) a blog post that fits the bill? Send the HRWE editors a note at, with a link to the suggested post.

Attorneys: R. Pepper Crutcher, Jr. (Balch & Bingham).

IndustryNews: NewsStory AccessNews AgencyNews CadillacTaxNews CostSharingNews EmployerMandateNews EnrollmentNews GeneralNews HealthInsuranceExchangeNews IndividualMandateNews InsurerNews MedicaidExpansionNews MedicalDeviceTaxNews PenaltyNews PremiumNews PremiumTaxNews TrumpAdministrationNews WellnessNews

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GENERAL REFORM TOPICS—NEWS: Value-based payments and EHRs expected to continue trajectory during reform

By Kayla R. Bryant, J.D.

Despite the uncertainty surrounding health care reform under the upcoming Trump administration, health law experts project that the transition to value-based payments and further development of electronic health record (EHR) systems will be a constant in the coming years. Four of Avalere Health’s senior vice presidents offered their opinions during the 2017 Healthcare Industry Outlook webinar, making educated guesses about what upcoming changes the industry may see.

What will change? The webinar started with the topic on everyone’s mind: what will happen to the Patient Protection and Affordable Care Act (ACA)? Broadly, the presenters expect that federal spending on health care will be capped and states will be granted more flexibility in designing their Medicaid programs. Reduction of regulations to encourage the private sector to provide a range of products in a competitive market is also to be expected.

The likelihood of repeal was discussed for several different ACA sections. The most likely to be repealed were the individual and employer mandates, subsidies, industry taxes, Medicare tax for high earners, and cuts to disproportionate share hospitals. Certain reforms, like protection for pre-existing coverage, drug related provisions, and changes to Medicare Advantage and Medicaid payment provisions are considered likely to remain. Subjects likely to be up for serious debate are Medicaid expansion, the Center for Medicare & Medicaid Innovation (CMMI), essential health benefits, and the preventive services coverage requirement.

Other areas. The focus on quality and value in health care is not expected to waver during the new administration. In light of significant regulatory and policy barriers, providers are unable to establish outcome-based contracts and create more innovative payment arrangements. More flexibility in the ability to establish and agree on value between parties is expected to be a policy pressure point.

The value discussion typically focuses on provider performance, but the presenters noted that drugs are an important value consideration, especially in light of rising costs. The traditional approach to determining drug value is expected to evolve, as frameworks had previously been established based on clinical benefit, toxicity, and product cost, which ignored patient considerations and relied too much on data from limited populations. In addition to incorporating more real world data, drug value frameworks have begun to focus on not only on health outcomes, but patient experiences and financial considerations during treatment.

Although "virtually every hospital" is using some sort of EHR system, interoperability continues to be a sticking point. In the near future, the ability to more effectively use, share, and interact with data is expected to improve. Continued advancements in studying data is also expected to change the way providers practice, including big advances in population health.

Companies:Avalere Health

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PROVIDER PAYMENTS—PRESS RELEASES: CMS model aimed at improving Pennsylvania’s rural health

By Bryant Storm, J.D.

CMS is increasing access to hospitals in rural Pennsylvania while reducing the growth of hospital expenditures under the new Pennsylvania Rural Health Model. The model will be jointly administered by CMS and the Pennsylvania Department of Health. Funding for the model will be provided in advance of services, in set amounts, to allow greater tailoring of care to community needs.

Rural health. The model, which is authorized by Section 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), functions by providing participating hospitals fixed amounts of money in advance (funded by all participating payers), which the hospitals will use to cover the costs of inpatient and outpatient services they provide. The model allows rural hospitals the flexibility of predictable funding to redesign care, improve quality, and meet community needs.

Participation. The model is open to all critical access hospitals and acute care hospitals in rural Pennsylvania. CMS intends to provide a portion of the funding—$25 million—to start the project. The initial funding will be used for operation, data analytics, quality assurance, and technical assistance. The model will have seven performance years, beginning January 12, 2017 and ending December 31, 2023.

IndustryNews: PressReleases AccessNews AgencyNews MedicarePartANews ProviderPaymentNews ProgramIntegrityNews QualityNews

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REGULATION TRACKER—Information on pending or recently adopted regulations and regulation amendments

This Health Law Regulation Tracker includes a Proposed Rules Comment Calendar and a Table of Final Rule Effective Dates.

New Proposed rules. On January 12, 2017, CMS published aProposed rule that would specify: (1) the qualifications needed for qualified practitioners to furnish and fabricate, and qualified suppliers to fabricate prosthetics and custom fabricated orthotics; (2) accreditation requirements that qualified suppliers must meet in order to bill for prosthetics and custom-fabricated orthotics; (3) requirements that an organization must meet in order to accredit qualified suppliers to bill for prosthetics and custom-fabricated orthotics; and (4) a timeframe by which qualified practitioners and qualified suppliers must meet the applicable licensure, certification, and accreditation requirements. In addition, this rule would remove the current exemption from accreditation and quality standards for certain practitioners and suppliers. Comments on the rule are due by March 12, 2017.

See the Regulation Tracker for details.

New Final rules. On January 13, 2017, CMS published a Final rule revising the conditions of participation (CoPs) that home health agencies (HHAs) must meet in order to participate in the Medicare and Medicaid programs. The requirements (1) focus on the care delivered to patients by HHAs, (2) reflect an interdisciplinary view of patient care, (3) allow HHAs greater flexibility in meeting quality care standards, and (4) eliminate unnecessary procedural requirements. The changes are part of CMS’ effort to achieve broad-based, measurable improvements in the quality of care furnished through the Medicare and Medicaid programs, while at the same time eliminating unnecessary procedural burdens on providers. The regulations will be effective on July 13, 2017.

On January 12, 2017, the HHS Office of Inspector General (OIG) published a Final rule amending the regulations relating to exclusion authorities under the authority of the HHS OIG. The rule incorporates statutory changes, early reinstatement provisions, and policy changes, and clarifies existing regulatory provisions. The regulations will be effective February 12, 2017.

On January 17, 2017, CMS published a Final rule revising the procedures that HHS follows at the administrative law judge (ALJ) level for appeals of payment and coverage determinations for items and services furnished to Medicare beneficiaries, enrollees in Medicare Advantage (MA) and other Medicare competitive health plans, and enrollees in Medicare prescription drug plans, as well as appeals of Medicare beneficiary enrollment and entitlement determinations, and certain Medicare premium appeals. In addition, this rule revises procedures that HHS follows at CMS and the Medicare Appeals Council levels of appeal for certain matters affecting the ALJ level. The regulations will be effective March 20, 2017.

On January 18, 2017, CMS published a Final rule finalizing changes to the pass-through payment transition periods and the maximum amount of pass-through payments permitted annually during the transition periods under Medicaid managed care contracts and rate certifications. The rule prevents increases in pass-through payments and the addition of new pass-through payments beyond those in place when the pass-through payment transition periods were established, in the final Medicaid managed care regulations effective July 5, 2016. The regulations will be effective March 20, 2017.

See the Regulation Tracker for details.

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