The Wall Street Journal (5/17, Radnofsky, Subscription Publication) reports on new guidance by the Obama administration regarding state health insurance exchanges. CMS’s Steve Larsen remarked, “We strongly encourage states to engage us in a partnership model if they are not ready to proceed with a full state-based exchange.”

Kaiser Health News (5/17, Appleby) reports, “States must provide details to the federal government by Nov. 16 – just 10 days after the presidential election – on how they will run online insurance marketplaces,” and “those that don’t meet the deadline – or that can’t operate their own marketplaces, called exchanges – will have it done for them by the federal government, starting in January 2014.” Larsen “said the initial approach would be an open marketplace, but he told reporters that in future years other options may be explored.” He “reiterated the government’s stance that the court will uphold the law and that the president will be re-elected, and he said ‘states should turn their attention to moving forward.’”

CQ (5/17, Subscription Publication) reports that in a news release, HHS said, “This guidance describes how HHS will consult with a variety of stakeholders to implement an FFE, where necessary, how states can partner with HHS to implement selected functions in an FFE, and key policies organized by exchange function.”

The Washington Post (5/17) reports in its “Wonkblog” that “there is certainly a big difference between committing to the task of setting up exchanges – and actually following through. Health policy analysts have questioned whether the feds have sufficient resources for the task in front of them.” The Cato Institute’s Michael Cannon remarked, “A lot of states will be in a holding pattern until the election. The question is, can HHS get states up and running in a year? I don’t see how they can do it.”

Reuters (5/17, Morgan) reports that according to HHS Secretary Kathleen Sebelius, 34 states and the District of Columbia have received federal grant money to aid in the establishment of exchanges. She remarked, “What this shows is that states are making real progress in delivering quality, affordable health coverage to their residents and they want to be up and running by January 2014.”

Senate Finance Committee Chairman Max Baucus (D-MT) thinks he might have a good way to come up with a long-term solution to the perennial Medicare “doc fix” problem—ask four former Medicare administrators for their best ideas!

When the federal payment agreement for Medicare participating providers expires on January 1^st of next year, doctors will receive a 30 percent pay cut if Congress doesn’t act to change the terms of the deal.  Policymakers on both sides of the aisle are unwilling to let such extreme cuts to take effect, but no one has been able to come up with a good long-term alternative financing solution.

In a roundtable discussion in the Finance Committee last week, Senator Baucus decided to task four former Medicare administrators—Gail Wilensky, Bruce Vladeck, Thomas Scully and Dr. Mark McClellan—to come up with short- and long-term ideas to solve the problem.  All four have agreed to present their best ideas to the committee within the month, although Gail Wilensky, who headed the Medicare program under George H.W. Bush, commented that no current replacement proposals that she knows of are “ready for ‘prime time.’”

Meanwhile, in an unrelated effort over in the House, Representative Allyson Schwartz (D-PA) and Joe Heck (R-NV) introduced bipartisan legislation last week which would repeal the current sustainable growth rate system of paying Medicare providers and replace it with a new system to boost payment rates to doctors for four years using a variety of new payment models.

On Thursday, May 10th, the House approved a bill that would replace much of the mandatory budget sequester cuts slated to go into effect next January with other savings, including significant cuts to Medicaid. However, scheduled cuts to Medicare would take effect. In addition, the House-passed measure would fully eliminate PPACA’s public health and prevention fund.

Since the Super Committee failed to come to an agreement on budget cuts last year, across-the-board spending cuts known as the budget sequester are on the horizon for virtually all government programs, including the defense department. Military leaders from all political backgrounds have warned about the dangers of imposing such cuts on the military at this point in the war on terror. In a party-line vote, the House voted to block automatic cuts to the Pentagon budget, which were required as part of last year’s debt-ceiling agreement. The Medicaid reductions and cuts to other PPACA programs would occur instead.

Senate Majority Leader Harry Reid (D-NV) immediately indicated that the Senate would not take up the House bill, and the White House issued a veto threat. Yet elements of the bill could re-emerge in more serious negotiations likely to occur later this year over sequester, as well as the possible extension of the Bush tax cuts and the so-called “doc-fix.”

Also on the hill last week, the House Energy and Commerce Committee approved on Thursday FDA user fee legislation. The bill was very carefully negotiated and passed the committee with a rare show of bipartisanship. The Senate HELP Committee approved its own version of the legislation last month. It has not been announced when floor votes will be held on the bills in their respective chambers, but many are thinking it will be next week.

The federal Department of Health and Human Services (HHS) released final rules last Friday to let health insurance carriers know how they must distribute consumer rebate checks that may be issued due to the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) requirements.  MLR rebates will be sent to qualifying health insurance consumers by August, so health plans were very anxious to receive the final word on how they are to comply.

The big news is that unlike an early draft, the final regulation doesn’t require health insurance carrier to tell all health insurance consumers their MLR ratio for the past year.  In the first draft of the rule, consumers in fully-insured individual and employer-sponsored plans would have had to receive a notice about their carrier’s MLR calculation, even if they were not owed a rebate.  The health insurance carriers lobbied against this requirement, saying that it would be both confusing to consumers and administratively cumbersome (and the cost of MLR notices falls squarely in the administrative cost bucket in the MLR tally).  The carrier community instead asked that they only be required to send notices to the small percentage of consumers who would be receiving a rebate.

Unfortunately, the health insurance community was not entirely able to get out of sending all consumers a notice.  For just 2012, fully insured major medical plan carriers have to send all consumers a “basic notice requirement” telling consumers about the law and saying they’ve met the law’s minimum MLR standards.  The notice won’t have to include the actual MLR performance data, but it must tell consumers that they can find out their carrier’s actual MLR data on www.healthcare.gov.  Limited medical benefit plans and expatriate plans, which abide by different MLR requirements, will not have to send any notices to customers who are not due a rebate.

There is a study published in the May 2012 issue of Health Affairs around the potential impact of consumer driven health plans (CDHPS) on the American health care system entitled “Growth Of Consumer-Directed Health Plans To One-Half Of All Employer-Sponsored Insurance Could Save $57 Billion Annually”.

As my good friend and colleague Greg Scandlen pointed out in a post earlier today, “Most of the media reports have been reasonably accurate, see The Hill and The Washington Post, but have missed the real potential in the study.  The media reports have focused on the study’s conclusion that if half the people with employer-based plans were in a consumer driven plan, the system-wide savings would be $57.1 billion. But this is a mid-range estimate that assumes an equal mix of HRA and HSA approaches. The study acknowledges that HSAs are far more cost-effective, and estimates that, if all of these people were in HSA plans the annual savings would be $73.6 billion.”

I finally just now got around to watching the 56 minute documentary, produced by PBS, entitled “Steve Jobs: One Last Thing”.

Fortunately because I am an Amazon Prime member it didn’t cost me a cent to stream.  Even if you aren’t an Amazon Prime member, in my opinion it is very much worth the $3.99 that Amazon charges to stream it (which, BTW, is $1 less than what iTunes, Steve’s creation, charges).  The link for the Amazon video stream is http://amzn.to/K3nTep.

Last Friday, the House Ways and Means’ Committee’s Oversight Subcommittee examined the limitations imposed by PPACA on the purchase of over-the-counter medications with Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Accounts (HRAs). Later that day, their Subcommittee on Health held a hearing to review the bipartisan support for implementing a Medicare premium support system to modernize and improve the financial solvency of this federal program.

Finally, the House Ways and Means Committee issued a report last week on the impact the health reform law is likely to have on employer-provided healthcare coverage. The analysis, based on information provided by members of President Obama’s Council on Jobs and Competitiveness, shows that the healthcare law is raising costs, fostering uncertainty that impedes growth and planning, and putting pressure on employers to consider dropping employee health coverage altogether.

The House of Representatives voted last Friday to prevent federal student loan interest rates from doubling from 3.4 to 6.8 percent this coming July by using the last $11.9 billion in the healthcare reform law’s preventive health fund as a pay-for. The House approved the bill 215-195, with 30 members of the GOP voting in opposition. However, 13 Democrats joined with their Republican colleagues in support of the measure.

PPACA’s prevention fund, which has been tapped by Congress and Obama administration before as a partial means of financing the payroll tax break, would be completely eliminated if H.R. 4628 is signed into law. The fund has been billed by some as a slush fund for HHS and by others as a crucial means of preventing public health problems and preserving access to health services for women in particular. In reality, the truth is somewhere in the middle. Many of the small-scale public health prevention and cost containment programs authorized by PPACA, like tobacco prevention and immunizations and a program to help hospitals stamp out the transmission of costly and life-threatening infections, get their funding from this source. However, this fund is also responsible for things like “community transformation grants” which critics contend have been used to build playgrounds in politically-motivated areas. Not to say that playscapes aren’t important, but that may not be the best use of federal healthcare program dollars.

Senate Democrats, particularly Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA), have harshly criticized the use of PPACA’s prevention fund as a pay-for, and President Obama has issued a veto threat to the House-passed bill. As the Senate is out of session this week, there will be no action on the measure there until next week. However, Senate Majority Leader Harry Reid (D-NV) has begun the process for floor consideration of an alternative measure which would fund the rate reduction by closing a tax loophole that allows some “S Corporations” to avoid paying Medicare taxes on their earnings.

On April 26th the Kaiser Family Foundation released a report estimating the impact the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) provisions will have on health insurance consumers this year in the form of premium rebate checks that are supposed to be mailed to health insurance consumers this coming August.

While the total amount of all projected rebates at first  seems to be large—$1.3 billion—when you read the fine print of the report, it becomes clear that these rebates aren’t quite the windfall that some people have been predicting. Furthermore, the coverage disruptions, loss of agent services, and higher overall premiums caused by both the MLR requirements specifically and PPACA generally, frankly negate any consumer benefit the rebates may provide.

The highest rebates are estimated to be paid in the individual market, where the best guess is that 31% of insurance consumers nationally will be getting a yearly rebate of about $127 per person. In the small group market about 28% of groups will be eligible for a rebate, with the average amount going to employers expected to be $21 per enrollee. In the large group market, 17% of fully-insured large groups are sharing an estimate of $541 million in rebates. That translates to an average of $14 per enrollee over a year’s time. Given that the average cost of employer-provided family health insurance is now about $13,000 per year, it’s doubtful that many people will find $14 to be a real savings.

That’s also assuming that any of the group insurance beneficiaries even see the money directly. Kaiser based its estimates on preliminary data that health insurance carriers provided to their state department of insurance and the National Association of Insurance Commissioners on April 1st. Actual rebate amounts, which will be reported to HHS by the heath insurance carriers using a slightly different form, have not yet been calculated and could vary. In addition, individuals and employers may receive a future premium credit from the insurance carrier, rather than an actual rebate check. Also, very significantly for most employer groups, the MLR rules allow employers to keep the portion of the rebate directly attributable to their employer contribution and use the remainder of the funds to benefit the employer plan generally.

So the bottom line with fully insured, employer-sponsored plans most employees won’t see any direct rebate cash.

The IRS has just issued Revenue Procedure 2012-26, which provides the 2013 cost-of-living contribution and coverage adjustments for HSAs, as required under Code Section 223(g). Most contribution limits and the out-of-pocket amounts have been increased for 2013.

• HSA contribution limits are being increased from $3,100 to $3,250 for self-only coverage, and from $6,250 to $6,450 for family coverage.  The Age 55 catch-up contribution limit remains at $1,000.
• The maximum out-of-pocket amounts for a qualifying high deductible health plan (HDHP) are being increased from $6,050 to $6,250 for self-only coverage, and from $12,100 to $12,500 for family coverage.
• The minimum deductible amounts for a qualifying high deductible health plan (HDHP) are being increased from $1,200 to $1,250 for self-only coverage, and from $2,400 to $2,500 for family coverage.

For a copy of Revenue Procedure 2012-26, visit http://www.irs.gov/pub/irs-drop/rp-12-26.pdf.