Stakeholders From All Sides Brace, Rally As King Heads To Court

Vol. 3, No. 9 — March 4, 2015
Exchange Round-Up
Stakeholders From All Sides Brace, Rally As King Heads To Court
Congressional Democrats pitched a last-minute defense of the Affordable Care Act Tuesday (March 3) as President
Obama’s signature law again heads to the U.S. Supreme Court, this time for oral arguments in King v. Burwell, while at
the same time key members of the GOP raced to put forth viable solutions should the court rule that subsidies cannot
flow through the federal exchanges — a result that the GOP is hoping for, but which could cause significant political
fallout.
The lawsuit questions whether subsidies for health insurance premiums can be offered through the federal marketcontinued on page 4
Congressional Aide: Ryan’s King Fix Wouldn’t Limit Employer Tax Exclusion
A Republican House aide tells Inside Health Policy that House Republicans’ fix to a potential Supreme Court ruling
to end premium subsidies for those insured by the federal exchange would not cap employer-sponsored subsidies to
offset the costs of the GOP plan to offer advance-able, refundable tax credits, but instead would pay for the credits with
“savings from the eliminated subsidies.” But health care experts say if the court axes the federal subsidies then providing credits after the fact would actually cost the federal government. The aide says that is a “baseline issue” that he was
confident could be addressed.
In several opinion pieces — most recently a Monday editorial in the Wall Street Journal penned by the the chairs of
continued on page 6
Senate Dems Press HHS For Pregnancy Special Enrollment Period
More than three dozen Senate Democrats asked HHS in a letter Monday (March 2) to add pregnancy to the list of
major life events that would trigger a special enrollment period (SEP) in federally run exchanges, less than two weeks
after CMS opted not to create any new exceptions for SEPs in the final 2016 benefit and payment parameters rule
released Feb. 20.
“This is a critical protection — good maternity care is essential for the well-being of children, and studies show that
maternal mortality rates are three to four times higher for women who do not receive prenatal care,” the letter states.
“However, if a woman becomes pregnant at a time outside of the Open Enrollment period and is uninsured, or enrolled
continued on page 8
Senate GOP’s ‘Transitional’ ACA Plan Vague On Details
A trio of key GOP senators Monday (March 2) pledged to push legislation offering financial assistance on a
transitional basis to help Americans keep their health plans should the Supreme Court rule the ACA’s premium tax
credits are not available in the federal exchange, but the proposal they outlined in a Washington Post editorial is vague
on specifics. Part two of the plan would give federal exchange states flexibility to design more competitive health
insurance markets but keep the ACA’s mandates and subsidies in place for states with their own exchanges, though even
those could veer toward the bill’s flexible insurance model.
Meanwhile, House GOP members plan to propose their own version in a editorial set to be published Tuesday,
continued on next page
IN THIS ISSUE . . .
Angoff: No Talk That Subsidies Unavailable In Fed Exchange When At HHS .......................................... p3
GOP Lawmaker, Upset By Counihan’s Testimony, Suggests Subpoenaing Data ..................................... p9
Top GOP Lawmakers Criticize Union Carve-Outs In Cadillac Tax Guidance .......................................... p12
Hatch: Why Did CMS Give Issuers Termination Option If No King Back-Up Plan? ................................ p14
according to House Ways and Means Chair Paul Ryan (R-WI).
The Senate GOP proposal is “still lacking detail on what the alternative is and whether it undermines the stability of
what is now for the very first time ever a reliable individual market with 18 million people getting ACA-compliant
coverage at stable rates because of broad risk pooling,” says Joel Ario, a former administration official and now managing director at Mannatt Health Solutions.
“First and most important,” wrote Sens. Orrin Hatch (R-UT), John Barrasso (R-WY) and Lamar Alexander (R-TN)
in the op-ed. “we would provide financial assistance to help Americans keep the coverage they picked for a transitional period. “Second,” they add, “we will give states the freedom and flexibility to create better, more competitive
health insurance markets offering more options and different choices.” But they are vague on what such an alternative would be.
“Republicans understand that what works in Utah is different from what works in Tennessee or Wyoming,” the write.
“We want to give states the time and flexibility to design health-care systems that work for them, not for the bureaucrats
in Washington.”
Under their plan, people who live in states that have state exchanges will continue to be subject to Obamacare’s
“costly mandates and rules, along with the subsidies,” the senators write. But they add that those states could also opt for
the alternative solution. “Every state would have the ability to create better markets suited to the needs of their citizens,”
they say.
The proposal does not include a timeline for the transition, but lawmakers have previously indicated that
they’d like any bridge policy to carry over past the next presidential election.
In a recent Wall Street Journal editorial, Nebraska GOP Sen. Ben Sasse suggested an 18-month transition period
during which consumers using the federal exchange can keep their subsidies. In the interim, Sasse said, “Republicans
need to unify around a specific set of constructive, longer-term solutions, and then turn the 2016 presidential election into
a referendum on two competing visions of health care.”
Hatch’s office did not respond by press time for details on his transitional timeline.
The op-ed fails to offer specifics of what the trio meant when suggesting that they would provide states “freedom and
flexibility” over their insurance markets. Nor does it mention that the law itself already has a seemingly similar provision.
Section 1332, a provision championed by current Senate Finance Ranking member Ron Wyden (D-OR), gives states
the ability to opt-out of key ACA requirements and mandates and to use funding that would otherwise flow to
individuals in the form of subsidies to support those alternatives. Under the law, this provision does not go into
effect until 2017. However, some lawmakers — and previously the White House — have previously sought to speed
up the timeline.
In February 2011, the White House issued a proposed rule for the Section 1332 waivers that were at the time
six years away. Six days later, the White House issued a release endorsing the Empowering States to Innovate Act, coauthored by Wyden, Mary Landrieu (D-LA) and Scott Brown (R-MA), that would have moved the implementation date
up to 2014. That will never passed Congress.
The White House stressed at the time that to get a waiver a state must provide coverage at least as comprehensive
and affordable as that that offered through the exchange, and a plan that would cover as many residents. The state’s plan
would also need to be budget neutral. Some waiver ideas that the White House suggested included: A streamlined system
that links tax credits for small businesses with tax credits for low-income families, alternatives to the individual
responsibility provision — such as automatically enrolling individuals in health plans — that achieve similar
outcomes, options to increase competition and provide consumers with additional choices, an increase in the
number of benefit levels to provide more choices for individuals and small businesses, and “immediately allowing
large businesses interested in doing so to purchase health insurance through the new private marketplace, the Statebased health insurance Exchange.”
The waiver rules were finalized in 2012.
Several states have and are still eying the state innovation models. Vermont, for example, had wanted to use the
provision to help transition the state into a single payer system — an idea that has since been dropped. Hawaii, Rhode
Island, New Mexico, Minnesota and North Dakota are also exploring the waivers.
CMS did not say by press time whether any states have sent in official applications for waivers. The agency did say,
however, that the ACA allows the waivers beginning in 2017 and also requires a state to engage in meaningful public
notice in advance of submitting a waiver proposal.
“Because waivers cannot currently be granted until 2017, it will be difficult for a State to submit a strong application
(with relevant and timely data) substantially in advance of that date,” the agency says.
While the model has been discussed as a potential pathway in the event of a King ruling adverse to the administration, it has also been pointed out that such a ruling could also preclude the model from working as a solution. This is
because the funding source for the waivers is the money that would have otherwise have been spent on subsidies — so if
those subsidies cannot go to those exchanges, then they may not be available at all. — Amy Lotven
2
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
Angoff: No Talk That Subsidies Unavailable In Fed Exchange When At HHS
Jay Angoff, who was the administration’s first chief of the ACA implementation office, tells Inside Health Policy that
while during his tenure many HHS officials clearly wanted states to establish their own exchanges, there was never an
indication that subsidies would not be available through the federal exchange. Angoff, who led HHS’ Office of Consumer
Information and Insurance Oversight (OCIIO) until early 2011, also says he thinks there are ways HHS could administratively soften the impact of an adverse King ruling but that the solution should be up to those striving to end the subsidies,
not the administration.
There are very few stakeholders who want the Supreme Court to strike the subsidies, Angoff says, referring to the
high-profile Burwell v. King case heading to oral arguments Wednesday (March 4). Insurers, drug companies, hospitals,
doctors and states benefit from keeping the subsidies intact, he says. He expects the court to uphold the subsidies and to
do so by a wider margin than expected — though not necessarily unanimously.
He notes that the petitioners have a stronger burden than the administration in the case as they need to prove that
there is no other reasonable reading of the law other than what they propose. In this case, that is that Congress wanted the
subsidies to only flow through an exchange established by a state.
But Angoff tells Inside Health Policy that such a concept was never discussed during his tenure at HHS, though
there were all kind of reasons that the department wanted the states to take up their own exchanges. One reason had to do
with funding. While the law had appropriated unlimited funding to help states establish their own exchanges, there was
none for the federal exchange. He points out that in the beginning many conservative states took large amounts of grant
money, but later — once the politics came into play — some states opted to give it back.
Angoff further says that some department officials felt at the time that the law would be seen as more successful if
more states created exchanges. Angoff, however, says he never bought that argument. “I think the federal exchange is
fine,” he says. He repeats that no one ever suggested that the subsidies might not be available in the federal exchange.
There are also many states — even some with GOP governors — who have urged the high court to uphold the
subsidies, he says. As far as Congressional Republicans, Angoff suspects that while they’re having “fun” with the thought
of a chance to revisit the law, a ruling that is ostensibly in their favor could very well turn into a nuisance for the party.
Angoff says there are things HHS might be able to do if it loses the King case. For example, he says there may be
different ways to define a “state-based exchange.” But as far as allowing states to “rent” the Healthcare.gov technology
— one solution that has been proposed — he was unsure if that would be feasible.
But he also says he believes the HHS secretary when she says there is no fall back plan and stresses that he
doesn’t want to minimize the difficulties that a Supreme Court decision against the administration would create. His view
is that it’s not the administration’s job to address a situation brought about by the opponents of the law. It’s the people
who want to strike the subsidies and their allies who should be focused on a fix, he said.
In November, Angoff suggested that mainstream Republicans should not be too celebratory about the case.
Much of the initial reporting on the SCOTUS decision has focused on the administration, but it is the insurance industry
that has the most to lose, and is likely the most concerned, by the high court’s move, Angoff said at the time. He added he
was very interested in seeing how mainstream Republicans, who are often allied with the insurance industry, will react if
the subsidies are shot down. Issuers are reaping the most benefit from the subsidies, so industry must be telling GOP
members that while they’ve “had their fun” with anti-Obamacare rhetoric it’s time to get serious, he added. For the GOP,
he said, the situation may be an example of “be careful what you wish for.”
Another Democratic consultant agreed with Angoff’s assessments at the time. The ACA is a boon to health insurers
and hospitals alike, said the source. Republicans care mostly about insurers, and many are also sympathetic to their local
hospitals. Otherwise, the slowdown in the health spending and insurance rates is hurting the sector, the source said in
November, days after the court agreed to take up the case.
GOP members over the past week have said they are working on and will soon introduce a fix.
Most recently, Nebraska GOP Sen. Ben Sasse penned an editorial in the Wall Street Journal outlining a solution.
“I propose a two-part strategy to avoid snatching defeat from the jaws of victory: First, in the event that the court
strikes down the subsidies as illegal, Congress must be prepared to offer immediate, targeted protection to those hurt by
this administration’s reckless disregard for the rule of law. ObamaCare took these patients hostage. Conservatives have a
duty to save them,” he said.
Sasse adds that within a week he plans to introduce a bill, based on COBRA, that would allow Congress to offer
individuals at risk of losing insure “the ability to keep the coverage they picked, with financial assistance, for 18 transitional months.”
“This would simultaneously avert the full-scale implementation of ObamaCare in these 37 suddenly desperate states.
It would also help protect suffering patients entangled in the court’s decision to strike down illegal subsidy payments,” he said.
“Second,” Sasse writes,” Republicans need to unify around a specific set of constructive, longer-term solutions, and
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
3
then turn the 2016 presidential election into a referendum on two competing visions of health care. Simply opposing
ObamaCare isn’t enough. Republicans must address this country’s health-care crises—cost and uninsurance—both of
which have been exacerbated chiefly by excessive federal meddling,” he adds.
He says he worries that “unless those of us who oppose ObamaCare unite behind an approach that offers Americans a
better alternative, we could lose the whole war,” he said.
But he also says that like most conservatives, he is hopeful about the court’s decision. “The law explicitly
requires states to establish an exchange to unleash entitlement payment,” Sasse writes. “Because ObamaCare’s
central planning is unworkable and unpopular, most states opted not to participate or to establish an exchange. So if
the court affirms the law’s actual language over the administration’s incessant political rewriting, it could be a
mortal blow to ObamaCare.” — Amy Lotven
Exchange Round-Up . . . begins on page one
place in 34 states, pitting the intent of the law’s authors against a literal reading of the ACA’s phrase “established by the
State” when describing what entities can disburse tax credits. The law’s supporters argue that Congress obviously
intended to provide subsidies to all Americans, while the opponents say that despite what Congress may have wanted to
express, the language clearly limits the subsides to the state exchanges.
But Sen. Chris Murphy (D-CT) told Inside Health Policy in a call Tuesday that context shouldn’t matter: “I don’t
think you have to read the statute in whole in order to interpret the line that is at the heart of the plaintiff’s argument.”
Murphy told reporters that a ruling in favor of the plaintiffs would be the “greatest instance of judicial overreach”
that paints congressional authors as liars. It’s not titled the “Unaffordable Care Act,” Sen. Jeff Merkley (D-OR) added,
which he said is exactly what it would be if the government required people to get coverage but did not provide the tax
credits to do so.
“It would be an absurd outcome for the court to strike down these credits,” Merkley said. “It’d be catastrophic.”
Sen. Chuck Schumer (D-NY) said on the call that Congress “never intended for state boundaries to become fences”
and attacked new GOP proposals to replace the ACA.
“An op-ed is not a plan,” he said. “Even if these opponents were able to follow through … they would fall woefully
short.”
Several supporters of the law, including the advocacy group Families USA, plan to hold rallies at the courthouse on Wednesday highlighting the impact of a potential decision adverse to the administration.
The case threatens to pull subsidies from around 9 million Americans who depend on the tax credits to purchase
health plans on the exchange, which experts say would trigger a “death spiral” in the insurance market with skyrocketing
premiums and a sicker risk pool.
Some states in trouble said the case is prompting them to explore options for creating their own exchange,
while others see it as an opportunity to dig in their heels on the individual mandate and end what they believe is federal
infringement of personal rights. Several governors recently made statements on what they may do in the case of a ruling
against the administration, and the consultant Leavitt Partners examined those comments in a new brief out Tuesday.
Top GOP Sens. Orrin Hatch (R-UT), John Barrasso (R-WY) and Lamar Alexander (R-TN) on Monday
(March 2) pitched a transitional health care plan that would provide financial assistance to help Americans keep their
coverage and give states with federal exchanges flexibility to design their own insurance markets. Critics said the plan
lacks detail on first glance, and its backers have not come out with a concrete timeline for how it might unfold. Hatch is
currently seeking input from stakeholders, lawmakers and from governors, his office said.
Republican Reps. Fred Upton (MI), Paul Ryan (WI) and John Kline (MN) also proposed their own ideas in an
editorial Tuesday (March 3). The House plan aims to “make insurance more affordable by ending Washington mandates
and giving choice back to states, individuals and families” and “support Americans in purchasing the coverage of their
choosing,” the trio wrote in The Wall Street Journal. The House proposal outlined in the paper does not include a
transitional period, but a GOP aide says that would be discussed following the court decision.
Meanwhile, lawmakers have long pressed HHS Secretary Sylvia Burwell and other administration officials for their
post-King contingency plans, and recently suggested that a 100-page document is being circulated at the top of HHS
detailing steps that could mitigate the effect of an adverse ruling.
But Burwell told Energy and Commerce health subcommittee chairman Rep. Joe Pitts (R-PA) at a hearing Thursday
that she had no knowledge of such a blueprint, after Pitts informed her that someone within HHS told him about the
paper. If it does exist, it would contradict Burwell’s earlier claim that her department knew of “no administrative actions
that could … undo the massive damage to our health care system” if the plaintiffs win.
Committee staff said they have not seen the document but confirmed that they were told it was being discussed by
senior HHS employees.
4
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
Hatch also questioned why CMS would put an exit clause in its contracts with Healthcare.gov issuers that
would allow them to pull out if federal subsidies are disallowed. “While the Administration assures HealthCare.gov
policyholders that ‘nothing has changed,’ it has been conveying a contradictory message to health insurance companies,”
Hatch wrote to outgoing CMS Administrator Marilyn Tavenner Feb. 25.
Infrastructural and tax-related problems are still fresh on the minds of members in both chambers as well.
Sens. Chuck Grassley (R-IA) and Rob Portman (R-OH) told Burwell to address lingering issues with premium subsidy
calculations that plagued the tax forms given to more than 800,000 Americans — about 5 percent of whom had already
filed their taxes this year. The IRS, meanwhile, said the 50,000 or so people that did file do not need to do so again. CMS
has also said that it will be sending out the corrected forms as early as this week.
Grassley and Portman also joined the House Energy and Commerce Committee in demanding an estimate of when
back-end work on Healthcare.gov will finally be done, after Exchange CEO Kevin Counihan suggested that the site
would not be fully automated for another two years.
More than three dozen Senate Democrats also chimed in this week to ask HHS to add pregnancy as a major
life event that would trigger a special enrollment period under the ACA, after CMS issued a final benefit and payment
parameters rule that declined to make any new exceptions to the standard enrollment process. Consumer advocates said
last week that they are disappointed in HHS’ choice to side with insurers in balking at a pregnancy SEP.
“(I)f a woman becomes pregnant at a time outside of the Open Enrollment period and is uninsured, or enrolled in a
grandfathered plan that does not cover maternity services, then she will not be able to access coverage for maternity
care,” the senators said in a Monday (March 2) letter. “We encourage you to use that authority to create a special enrollment period to maximize women’s access to coverage.”
The myriad of concerns are overshadowing final HHS reports that show 8.8 million people signed up for
coverage in qualified health plans through the federal marketplace by Feb. 22, including nearly 41,000 who sneaked in at
the last minute thanks to a deadline extension that expired Feb. 20. Around 12 million are expected to have enrolled in
state- and federally run exchanges nationwide, exceeding some governmental expectations while staying on par with
expert estimates.
CMS also issued its first snapshot on re-enrollment. These numbers indicate more than half of the 4.17 million
people who re-enrolled in coverage through the FFM did so actively. Of those 2.21 million who actively enrolled, 1.2
million chose a different plan. Another 2.83 million were initially passively enrolled on Dec. 16. However, since then
200,000 people canceled their plans and another 90,000 people were terminated after failing to provide eligibility
documentation. (HHS had originally believed that an additional 200,00 people would be cut from coverage due to the
citizenship or immigration related issues, but the number came in lower than expected). Another 580,000 people returned
to the exchange after being auto-enrolled, making the total number of passive enrollments about 1.96 million, CMS
reported.
In the states:
As fears of losing federal subsidies set in, Ohio Democrats plan to introduce state legislation this week that would
create a state-run exchange. If nothing else, they hope to start a conversation about what that move would entail because,
should the administration lose the Supreme Court case in June, Ohio would say goodbye to more than $500 million in
premium tax credits, the Columbus Dispatch reported Tuesday (March 3). State Republicans aren’t sold on the idea, but
Gov. John Kasich said last month that Ohio would have to “figure something out” if the FFM is crippled.
Texas Lt. Gov. Dan Patrick and Republican state senators on Monday (March 2) hope to exercise their own local
control over health care, writing a letter to President Obama asking for more flexibility with the state’s Medicaid program. The state GOP cited unsustainable, irresponsible cost growth and drained resources, while Democrats said loosening the federal grip on Medicaid would widen a coverage gap already made worse by refusing to expand the program
under the ACA.
At the same time, Oregon’s House voted Feb. 27 to dissolve its abandoned Cover Oregon exchange as a public
corporation and give the state’s Department of Consumer and Business Services control over the exchange. Cover Oregon
faltered from numerous missteps in its first year after spending $300 million with little results, prompting lawmakers to
jump ship in favor of the federal exchange at Healthcare.gov for the second open enrollment period.
“By moving the marketplace under the management of the Department of Business and Consumer Services, Senate
Bill 1 ensures that the state exchange will be subject to financial management statutes, personnel laws, state contracting
laws, restrictions on purchasing, and oversight by the Legislature,” Oregon station KTVZ reported last week. “Not much
would change for consumers, who would still be able to sign up for health insurance using a federal website,
HealthCare.gov.”
But Oregon could find itself scrambling back to a state exchange depending on the result of King v. Burwell this June.
Meanwhile, the director of Rhode Island’s exchange is speaking in favor of keeping the state-based marketplace
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
5
despite talk among state lawmakers of disbanding it. Anya Rader Wallack, director of Health Source RI, and Gov. Gina
Raimondo support the exchange as a way to keep health care cost controls in local hands rather than federal. Republican
lawmakers want to swap their exchange for the federal platform, hoping the change would keep a financially unstable
exchange from imploding.
In D.C., the American Society of Association Executives wrote a letter to the city’s health committee chair Councilwoman Yvette Alexander outlining technology issues, delays, tax hikes and widespread confusion that continue to plague
employers in the local Small Business Health Options Program marketplace. Around 82 percent of the group’s D.C.
member organizations have fewer than 50 employees and are required to use the D.C. Health Link exchange. D.C.
Council held an oversight hearing Feb. 25 on the Health Benefit Exchange Authority, which oversees the locally run
marketplace.
“DC associations are concerned that they will be forced to change their business model if costs rise at an unsustainable rate,” the Feb. 23 letter said. “ASAE members have written to us that they are troubled the SHOP does not currently
have the technological capability needed to ensure its success. We are extremely concerned that when the private marketplace is closed for businesses with 51-100 employees, the SHOP may not be able to handle the increased traffic. ASAE
urges you and your fellow Councilmembers to delay any changes that could overburden DC Health Link before the
technology is ready.”
The D.C. exchange’s board is also expected to vote on whether it will put in place a special enrollment period for
those who claim not to have known about tax penalties for lacking coverage, taking up the issue at its March 9 meeting.
A Florida state law banning the regulation of exchange policy prices also expired on Sunday (March 1), The Palm
Beach Post reported. “State legislators, whose 60-day annual session starts today, could reimpose an order to give
insurers whatever rate hikes they ask for,” the Post reported Tuesday (March 3). “If lawmakers do nothing, though,
Florida’s insurance commissioner can regulate rates. The question then becomes whether he will, and how aggressively.”
And a Maryland state bill would change the point at which stop-loss insurance kicks in from $10,000 to $40,000,
under self-funded insurance plans where businesses pool money to cover their employees’ health costs should they exceed
a certain amount. The Democrat-sponsored proposal will face its first hearing Wednesday (March 4).
“The proposed shift comes as more small companies are opting for self-funded health plans. The federal Affordable
Care Act now requires businesses with 50 or more full-time employees to buy health insurance or pay a penalty and
establishes a host of new rules and regulations tied to what those plans must offer,” the Baltimore Business Journal wrote
March 3. “Self-funded plans — once an option only for large companies that were able to absorb employee’s health costs
— are becoming increasingly popular among small firms looking to insure their employees amid rising premium prices
and mounting regulations on fully funded plans.”
In the latest post-open enrollment sign-up reports, Washington state showed 159,556 enrollees in qualified health
plans in the individual marketplace and only 290 people enrolled through SHOP as of Feb. 15; Oregon showed 113,219
on-exchange and 102,232 off-exchange enrollees for a total 215,451 sign-ups through Feb. 22; Massachusetts totaled
125,402 paid QHPs and 286,255 in Medicaid as of Feb. 26; and Rhode Island had 30,001 paid QHP enrollments as of
Feb. 23 and 3,282 people in paid SHOP coverage as of Feb. 21.
Extended special enrollment periods are still running in Kentucky, Maryland, New York, Washington state, Connecticut, Colorado, D.C. and Hawaii. — Rachel S. Karas
House GOP Unveils KIng Contingency . . . begins on page one
three House committees with jurisdiction over health issues — GOP lawmakers say they believe the administration
overstepped by extending the subsidies to residents in federal exchanges but that something must be done to protect
Americans should the court agree.
None of the editorials address pay-fors; however, the Patient CARE proposal advanced by Senate Finance Chair
Orrin Hatch (R-UT), Sen. Richard Burr (R-NC) and Rep. Fred Upton (R-MI) suggested limiting the employer tax
exclusion as a way to offset the tax credits for individuals envisioned in their plan. Under the Feb. 5 proposal, the current
unlimited tax deduction for employer-sponsored health benefits would be capped at $12,000 for individuals and $30,000
for family plans.
Upton, who chairs Energy and Commerce, also signed onto the House GOP plan, which he unveiled Tuesday (March
3) with Ways and Means Chair Paul Ryan (R-WI) and Education and Workforce Chair John Kline (MN).
In the high-profile King v. Burwell case being heard by the U.S. Supreme Court Wednesday (March 4), the petitioners claim that Congress expressly only allowed the government to provide subsidies to Americans who purchased a plan
through an exchange established by a state, and not by the federal government.
The Wall Street Journal op-ed piece by the three House Republicans lays out a two-part plan, should the court rule in
favor of King.
6
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
First, they write, Congress should make coverage more affordable by letting states opt out of having to
provide the ACA’s essential health benefits, which they argue would lower prices and provide more choices. States
could also opt out of the employer and individual mandates.
They also propose letting people to purchase coverage across state lines, enacting medical malpractice reform,
and letting businesses band together to purchase coverage. “Our committees and nonpartisan analysts alike estimate
that these proposals will cut costs and raise quality across the board,” they write.
The GOP plan also would retain many popular ACA provisions, such as letting children stay on their parents’
coverage until age 26 and prohibiting lifetime benefit limits. They also propose to protect people with pre-existing
conditions and offer guarantee policy renewal for those already enrolled in a plan.
Second, they would provide Americans with refundable tax credits that would be used to offset the cost of
insurance and could be doled out in advance. The credits would be adjusted based on age, so the elderly — who generally
face higher premiums — would get more assistance.
Under current law, anyone earning from 100 percent to 400 percent of the federal poverty level is eligible to receive
advanced premium tax credits (APTCs). The Patient CARE Act would lower the credits to those earning up to 300
percent FPL.
The GOP aide says that lawmakers will be work with the Congressional Budget Office on income thresholds
under their plan.
The liberal Center for American Progress (CAP) recently issued a brief saying that it would be very difficult for
Congress to act should the subsidies be ruled illegal because the CBO would immediately alter its scoring to reflect the
high court’s decision. The Urban Institute has said that elimination of the premium tax credits would save the federal
government about $340 billion, and CAP agreed. Considering legal, practical, and political constraints, CAP’s Topher
Spiro wrote: “CBO would likely assume that not many — if any — additional states would set up their own marketplace
to qualify for tax credits or otherwise be able to access equivalent funding. As a result, the Urban Institute’s estimate of a
$340 billion reduction in federal spending is a reasonable approximation of how CBO would update its baseline.”
When asked how the subsidies could be used as an offset for the proposed tax credits if they are eliminated by
SCOTUS, the aide said, “That’s a baseline issue I’m confident we can address.”
House Ways and Means ranking Democrat Sander Levin (MI) blasted his GOP colleagues’ so-called “off-ramp” as
vacuous dead end. “Republicans are trying to send a false message to the Supreme Court that they could repair the
enormous damage that this case could bring to the health care of Americans when they cannot even address basic funding
for the Department of Homeland Security. This plan is vacuous. The result of an adverse Supreme Court ruling would be
hugely dangerous,” he writes.
Unlike the Senate proposal, penned by Hatch, John Barrasso (R-WY) and health committee Chair Lamar Alexander
(R-TN), the House GOP members do not specifically call for a transitional period in the event of a ruling against subsidies. Instead, the piece leaps directly into a longer-term reform plan.
The House GOP aide says that discussion about any sort of a transition “will have to wait until the Court
rules to see how quickly it puts its orders in place.”
The Senate GOP proposal, which was published in a Washington Post op-ed on Monday (March 2), also fails to
include a time frame for a transition.
A Hatch aide says that discussions on details are still underway as Barrasso is leading a working group on the issue.
“As noted in the piece yesterday, there is consensus among Republicans to want to protect the Americans who will be
harmed by this ill-conceived law while moving away from Obamacare,” the aide said. “We know we need to provide a
transitional period and we know we want to give states flexibility create a better health insurance market. While there is
currently a robust debate of ideas on how to do it best, discussions are ongoing within the working group and the exact
details will be decided upon in consultation with lawmakers in the House and Senate. Our working groups continue to
discuss the best path forward, and as the Op-Ed states, we are working together.” — Amy Lotven
SUBSCRIPTIONS:
703-416-8500 or
800-424-9068
[email protected]
NEWS OFFICE:
703-416-8572
Fax: 703-416-8543
[email protected]
Health Group Publisher:
Senior Editor:
Associate Editor:
Donna Haseley ([email protected])
Amy Lotven ([email protected])
Rachel Karas ([email protected])
Production Manager:
Production Specialists:
Lori Nicholson ([email protected])
Daniel Arrieta, Michelle Moodhe
Health Exchange Alert is published every Wednesday by Inside Washington Publishers, P.O. Box 7167, Ben
Franklin Station, Washington, DC 20044. Subscription rates: $705 per year in U.S. and Canada; $755 per
year elsewhere (air mail). © Inside Washington Publishers, 2015. All rights reserved. Contents of Health
Exchange Alert are protected by U.S. copyright laws. No part of this publication may be reproduced,
transmitted, transcribed, stored in a retrieval system, or translated into any language in any form or by any
means, electronic or mechanical, without written permission of Inside Washington Publishers.
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
7
DEms Urge Pregnancy SEP . . . begins on page one
in a grandfathered plan that does not cover maternity services, then she will not be able to access coverage for maternity
care. … We encourage you to use that authority to create a special enrollment period to maximize women’s access to
coverage.”
Consumer advocates and women’s rights groups had asked HHS to set up special SEPS for women who are pregnant
or are victims of domestic violence in order to better protect women and children, to no avail. CMS did not nix the idea
entirely, though, saying in the rule that while it will not finalize more triggering events at this time, the agency will
continue to exercise its authority to create SEPs “through sub regulatory guidance.”
HHS Secretary Sylvia Burwell told reporters at a Feb. 18 press conference that SEP decisions are based on input
from stakeholders and “how insurance companies made the determinations when they have periods for open enrollment
or not.”
Insurers are wary of the pregnancy SEP because they fear it would encourage women to put off buying
coverage until they need it, and say that a new exception could create uncertainty in the risk pool from unexpected
pregnancies and lead to higher premiums.
But Christina Postolowski, health policy manager at the millennial advocacy group Young Invincibles, said the
decision to deny women any chance to get prenatal care contradicts the administration’s goal of expanding access to
coverage. She says her group is asking HHS to immediately issue new guidance that classifies pregnancy as a SEP trigger.
In partnership with Daily Kos and RH Reality Check, Young Invincibles is circulating a petition to drum up support
for its cause and plans to send the signatures to HHS. Postolowski said the group plans to set up meetings with HHS
officials to discuss the issue.
“We’re certainly disappointed … especially given the widespread support in the comments,” Postolowski said,
adding that she is hopeful that administration officials will change their minds in coming months. She also wants an
explanation as to why HHS has now denied the group’s request twice.
“They don’t want to pay for it,” Postolowski said of insurers. “We think that concerns about any adverse selection are
really mitigated now after the ACA.” The risk-sharing provisions in the ACA are already in place to curb problems that
may arise, she adds.
Young Invincibles last week joined with March of Dimes in a last-minute push for a pregnancy SEP, adding its
voices to around 20 other groups who say the concession would protect mothers from unaffordable costs of care while a
baby develops, as well as ensure better health outcomes once the child is born.
A recent Young Invincibles report estimated that the exception would aid 15 million young adults who are covered
under a parent’s health insurance policy but may not receive maternity care as a dependent, and more than 300,000
students who are covered by self-funded student health plans, which are not required to cover essential health benefits
including maternity care. Postolowski also found that women in grandfathered plans are at risk.
“We do not know how many women are covered on a transitional plan without maternity coverage,” the report added.
“However, experts estimated that six to 10 million consumers got plan cancellation notices in 2013; a proportion of these
consumers could now be covered on a transitional plan, if their canceled plan was continued and they re-enrolled in that
plan.”
The SEP would also protect pregnant women from losing essential health benefits if their income is too high to
qualify for Medicaid or the Children’s Health Insurance Program, which cover maternity care in some states.
The administration is similarly rejecting a permanent SEP for domestic abuse victims. In March 2014, however,
HHS created a one-time, 60-day SEP that allowed anyone who is married and a victim of domestic violence to obtain
coverage for themselves and their dependents through the federal exchange.
State-based exchanges are still encouraged to look at SEP options that would benefit their own residents. But experts
believe it would be harder to get a new SEP through local legislatures than it would be to allow for special enrollment
through the federal marketplace, and only a few states have contemplated the idea.
Those lobbying for the SEP trigger are “certainly hoping for a fix at the federal level” because going state by state
would be less efficient, Postolowski added.
Organizations like Raising Women’s Voices for the Health Care We Need are already joining with state
groups to speak up for the pregnancy SEP trigger. Consumer and reproductive health advocates in Colorado, Maryland,
New Jersey, New Mexico and Oregon signed onto the Raising Women’s Voices comment letter that specifically urged
HHS to make changes for pregnant women in the final NBPP rule.
Leni Preston, chair of the Maryland Women’s Coalition for Health Care Reform, said that though states will definitely look into the possibility of adding pregnancy as a triggering event, Maryland advocates are not actively working
toward that goal.
She said her group first began exploring the idea as a way to safeguard women whose Medicaid coverage was
8
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
in jeopardy due to proposed program cuts in the next state budget. They talked about potentially enacting a SEP to
protect only pregnant women who would be affected by the state’s Medicaid cuts, Preston said. She hopes the idea would
get less push-back from issuers than attempting to create a pregnancy trigger for all. She also believes the Maryland
Health Connection exchange would be open to the concept.
A D.C. Council working group also debated the change in 2013 but decided pregnancy did not warrant a spot on the
“major life events” list. “The group was divided with none of the carriers wanting to extend such a special enrollment
period, and consumers having mixed opinions on it,” according to meeting minutes from May 2013.
In the meantime, Postolowski believes families will start to see fewer plans that don’t offer maternity benefits, which
would let women who are already covered get the care they need and lessen risks to mother and child. — Rachel S. Karas
GOP Lawmaker, Upset By Counihan’s Testimony, Suggests Subpoenaing Data
Several GOP members of the House oversight committee health panel, most prominently North Carolina Rep. Mark
Meadows, allege that Marketplace CEO Kevin Counihan failed to provide requested information and to properly prepare
for a hearing during which he was unable to produce answers to myriad questions. Meadows, who says he has long sought
detailed data on the number of people “passively” re-enrolled by CMS — including the number of those enrolled into a
different plan — suggested at the end of the hearing that the committee consider subpoenaing the information “because it
is obvious that this gentlemen is stonewalling the committee.”
The Feb. 26 oversight hearing came one day after CMS released new enrollment data, but the congressman still
seeks information on the number of passively enrolled individuals who were put into different qualified health plans. At
the hearing, Meadows grilled Counihan as to why after 23 emails and several other communications he did not release the
enrollment information until the night before the hearing and even then it was only partial.
The data released by CMS show that about 8.84 million people had enrolled through Healthcare.gov since Feb. 22.
The data also included figures on active and passive re-enrollment. These numbers indicate more than half of the 4.17
million people who re-enrolled in coverage through the FFM did so actively. Of those 2.21 million who actively enrolled
— meaning that they went to the site and picked a plan — 1.2 million chose a different plan. Another 2.83 million were
initially passively enrolled on Dec. 16. However, since then 200,000 people canceled their plans and another 90,000
people were terminated after failing to provide eligibility documentation. (HHS had originally believed that an additional
200,00 people would be cut from coverage due to the citizenship or immigration related issues, but the number came in
lower than expected). Another 580,000 people returned to the exchange after being auto-enrolled, making the total
number of passive enrollments about 1.96 million, CMS reported.
At the hearing, the North Carolina congressman also pressed Counihan about people who are receiving
subsidies based on their 2014 income. Are there people who are auto-enrolled who are getting the wrong subsidy?
Meadows asked.
Under the auto-enrollment strategy anyone who failed to update their income information would still be placed in a
plan, however subsidies would be based on income for 2014, not 2015.
‘Therefore, Counihan noted, if a person did not return to the marketplace to update their information, it is possible
they are getting the wrong subsidy amount. But Counihan also pointed out that someone who was auto-enrolled could still
return to the marketplace to update their information.
While Meadows contended about 9,000 people in his district were passively re-enrolled and are receiving the
improper amount, Counihan said that number may not be correct. Counihan rejected the lawmaker’s allegation that
CMS is perpetrating fraud on the American people.
People were notified and there was a broad communication campaign on this, Counihan said. He did not provide
estimates on the number of people who were getting the 2014 subsidies for the 2015 plans.
Counihan also explained to committee members that the problem affecting the 800,000 tax forms was likely caused
by two codes that had an “unfavorable” interaction. Counihan said the strategy to address this and other mistakes is to
identify, remediate, communicate and then move on.
He also asserted that the corrected forms would be sent out in early March.
Additionally, Counihan declined to speak about the administration’s potential contingency plans should the
Supreme Court rule that subsidies cannot flow through the federally facilitated marketplace. The HHS secretary has
spoken on this issue and “I have nothing more to say,” he told Rep. Buddy Carter (R-GA).
Rep. Scott Desjarles (R-TN) pressed him later in the hearing. Do you all know something we don’t know? Are you
comfortable with your answer? he asked
“I’m very comfortable with the Secretary’s answer,” Counihan replied.
Counihan also faced questions regarding a transfer $109 million in supplemental funds from the Centers for Disease
Control and Prevention to CMS program management funds for marketplace operations. He reminded the committee that
he did not start his job until last September, and said he was not aware of that funding transfer. — Amy Lotven
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
9
News in Brief
Study: U.S. Could Learn From UK’s Cuts To LowValue Services
A new study examining the United Kingdom’s success in
cutting costs by reducing low-value services suggests the findings “could hold valuable lessons for the U.S. health care system.” The study says health care inefficiencies cost the United
States $750 billion annually.
“Given the significantly higher costs and volumes in the
United States, even modest reductions in such low-value procedures could represent significant absolute savings,” the authors conclude.
NHS launched an initiative to save $30 billion over two
years in part by reducing the number of what it considers lowvalue procedures that are overused. The study looked at five
such procedures that the government is trying to curb. These
procedures include spinal surgery for lower back pain, which
the authors claimed is largely ineffective, primary hip replacement, which the study said is only effective in some circumstances, and hysterectomies that treat problems with menstruation, which should the study said should only be used after trying other options. Those were compared against high-volume
procedures such as gallbladder removal that were not subject to
the restrictions.
The results found that among ineffective procedures, myringotomy ear surgery decreased 6.7 percent, spinal surgery
went down 10.2 percent and hysterectomies decreased 11.9
percent. — Rebecca Beitsch
Burgess Reintroduces Health Savings
Account Bill
Rep. Michael Burgess (R-TX) reintroduced a bill Monday (March 2) to expand the use of health savings accounts.
Burgess said the legislation aims to let individuals set aside
money to help with the increasing cost of deductibles and
out-of-pocket healthcare expenses. Currently, people may
only purchase health savings accounts for certain insurance
plans, and they’re limited by how much they may contribute.
Often, the limit is much lower than their deductible, Burgess
said. The bill would let people use health savings accounts more
broadly. — John Wilkerson
Final HHS Snapshot Shows 8.8M Enrolled
Through FFM By Feb. 22
More than 8.8 million Americans in 37 states signed up for
health coverage through the federal marketplace during the 2015
open enrollment period, including nearly 41,000 who came in
under the wire during a deadline extension that expired Friday,
HHS said Wednesday (Feb. 25) in its weekly snapshot of enrollment figures.
The final count also subtracted around 90,000 customers
who bought coverage in 2014 but whose plans were canceled
because they failed to provide proper citizenship or immigration paperwork. CMS officials originally estimated that number to be more than twice as high, at around 200,000 people
whose coverage was expected to end.
HHS has not yet specified how many enrollees have paid
their first month’s premium to start their coverage People can
still purchase a health plan through the exchange if they have a
major life event, like marriage or a change in residence, that
affects their insurance.
HHS said in last week’s snapshot that around 2.8 million
people had signed up for health insurance in state-based exchanges as well, causing total enrollment nationwide to surpass the White House’s goal of 11.2 million sign-ups by about
200,000. HHS Secretary Sylvia Burwell expects at least 9.1
million people to effectuate and keep their plan through 2015.
Anyone who claims not to have known about the tax penalty incurred for lacking coverage in 2014 until they went to
file their taxes this year can also still enroll in a health plan
under a special enrollment period announced by CMS Feb. 20.
The SEP will run from March 15 to April 30 in FFM states, and
several other states have created their own SEPs for locally run
exchanges. — Rachel S. Karas
Health Care Think Tank: GOP’s ACA Replacement Proposal Would Lower Costs
The American Action Fund-backed Center for Health and Economy issued a report that found a bicameral GOP
repeal-and-replace proposal would lower premiums, reduce the federal deficit by $534 billion between 2016 and 2025,
and increase patient access to health care providers compared to the Affordable Care Act, congressional staff said in a
release Monday (March 2).
The draft Patient Choice, Affordability, Responsibility and Empowerment (CARE) Act, co-authored by Sens. Richard
Burr (R-NC), Orrin Hatch (R-UT) and Rep. Fred Upton (R-MI), would include a premium subsidy for anyone who earns
less than 300 percent of the federal poverty limit, place a cap on tax-exempt income spent on employer-based insurance
and limit allotment funding design for Medicaid.
“While our estimates are associated with some degree of uncertainty,” the report says, the Patient CARE Act is
expected to:
• Decrease the total premium cost of private health insurance coverage, with the largest impact on bronze- and
catastrophic level plans.
• Lead to 4 million fewer insured persons by 2025 relative to ACA expectations. “The decrease in coverage is the net
effect of increased enrollment in the individual market and lower enrollment through employer sponsored insurance and
10
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
Medicaid,” the report says.
• Increase provider access by 5 percent for the insured population by 2025.
• Increase medical productivity by 2 percent by 2025.
• Decrease the federal deficit by $534 billion between 2016 and 2025 compared to current law.
The Center for Health and Economy, a recent start-up led by Republican policy analyst and former Congressional
Budget Office director Douglas Holtz-Eakin, also released an analysis disputing the CBO’s expectation that the ACA will
lower the federal deficit over time.
Billy Wynne, a Democratic lobbyist with Thorn Run Partners who worked for former Senate Finance Chair Max
Baucus (D-MT) when the ACA was written, recently told Inside Health Policy he’d like to see a CBO score or other
independent analysis of the proposal for a sensible view. He added that the ideas are so similar to the ACA itself that
“Congress’ time would be better spent figuring out substantive ways to improve the system rather than repealing and
replacing it with similar policies.”
Tom Miller, a resident fellow at the American Enterprise Institute, wrote in March 2014 that the proposal — then
sponsored by Burr, Hatch and former Sen. Tom Coburn (R-OK) — was not ready for prime time and fell short of the
Obama administration’s budgetary targets and coverage goals.
“The Burr-Coburn-Hatch proposal may suffice for political purposes as mostly an inventory of past health policy
reform components offered by its primary sponsors and other Hill Republicans. However, its tentative moves into newer
areas tend to lack necessary details, structural consistency, and a sustainable destination. Its vision remains tactical rather
than strategic,” Miller wrote. “To replace Obamacare with health policy reform that works, rather than just keeps the
greater dangers of the ACA at a distance, Capitol Hill Republican health care reformers should be advised: ‘You’re going
to need a bigger boat.’”
Hatch’s office said he is currently seeking input from stakeholders and lawmakers, most recently those including
governors, to see if the idea gains traction. — Rachel S. Karas
House E&C Questions Burwell On Exchange Back-End, CSRs
House Energy and Commerce lawmakers on Thursday (Feb. 26) grilled HHS Secretary Sylvia Burwell on a number
of ACA-related issues, and demanded that she submit an estimate of when back-end infrastructure work on
Healthcare.gov will be completed. They also asked her for a detailed assessment on when HHS expects the 800,000
people who received faulty tax forms to have accurate subsidy information so they can file their taxes; and for specific reenrollment data on marketplace plans. Committee members also queried Burwell on HHS’ authority to administer the
ACA’s cost-sharing reduction (CSR) program, in which the department sends money to health plans to compensate for
reductions in out-of pocket costs for certain low-income enrollees.
Regarding the back-end issues, Exchange CEO Kevin Counihan said earlier this week that work would be done in
two years, which lawmakers pointed out meant that Healthcare.gov would not be fully complete until President Obama is no
longer in office. Burwell at a Wednesday appropriations hearing told members that the back-end payment systems are automated and based on the system used by Medicare Advantage and Part D. She did add, however, that the system could be easier.
Kentucky Republican Reps. Brett Guthrie and Ed Whitfield later questioned Burwell on HHS’ authority to
implement the cost-sharing reduction program. There is no new language about cost-sharing authority included in the
budget, and they do believe they have the authority to spend cost-sharing funds, Burwell said.
The lawsuit being brought by House members alleges CSR payments are an “unlawful giveaway” of billions to the
insurance industry because “Congress never appropriated funding for the program.”
But Burwell would not elaborate further because the case is still pending.
Guthrie hit back on her avoidance. “I’m just not aware of any pending litigation exception at oversight hearing
questions,” he said. “Nobody’s ever been able to point to us where that appropriation language comes from and you
previously had requested appropriation.”
Burwell also dodged Whitfield when he asked whether the Justice Department had instructed Burwell not to answer
questions about the cost-sharing reduction program, and reminded her that witnesses at other hearings spoke openly about
matters related to other current Supreme Court cases.
Whitfield then asked the secretary to report back with the total spent on Medicaid expansion under the ACA
within seven days. Burwell wasn’t sure how to break out the amount specific to expansion, but said she could check with staff.
Burwell also told the subcommittee that HHS’ civil rights office is investigating whether California’s state government forces employee health insurance plans to require enrollees to pay for abortions and contraceptives against their
religious beliefs.
“We take the Weldon amendment very seriously,” Burwell said. Though she did not specify when the investigation
might wrap up, she added that she asked the team for “due speed” and HHS is “trying to move through that investigation
as expeditiously as possible.” — Rachel S. Karas
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
11
Grassley, Portman Ask Burwell to Fix Subsidy Calculation, Back-End Problems
Judiciary Committee Chairman Sen. Chuck Grassley (R-IA) and Homeland Security and Government Affairs
Chairman Sen. Rob Portman (R-OH) chimed into the chorus criticizing HHS Secretary Sylvia Burwell for a myriad
of problems with the federally facilitated marketplace, from unfinished back-end work to faulty tax forms distributed to about 800,000 Americans, and asked her in a Feb. 27 letter to address lingering issues with premium subsidy
calculations.
The lawmakers told Burwell to provide answers by March 13 on whether HHS is evaluating its process for estimating subsidies; whether Healthcare.gov is currently completely automated and to list all manual workarounds if not; what
the process is for correcting the flawed 1095-A forms; what actions someone should take if they received an incorrect
form; and whether HHS has considered allowing insurers to update information when they know a customer’s eligibility
has changed.
“The current methods of calculating subsides are clearly not working,” they wrote. “This has immediate negative
impacts on people who now must pay money back to the IRS. It is crucial that HHS take steps to address this problem.”
CMS officials announced Feb. 20 that HHS would reach out to around 800,000 consumers whose 1095-A tax
forms used the wrong benchmark plan to calculate whether they qualified for subsidies toward their premium and how
much that tax credit should be, leading to a total tax obligation that was too high or too low.
About 20 percent of all forms mailed out were wrong, and 5 percent of those who received one had already filed their
taxes with the incorrect data. CMS Principal Deputy Administrator Andy Slavitt said those people would need to wait for
guidance from the Treasury Department while new forms were mailed out.
HHS cited “intermittent issues” in generating the forms and is investigating the cause of the problem.
And last week, exchange CEO Kevin Counihan said at a congressional hearing that back-end infrastructural work is
expected to take around two years to complete. Grassley and Portman wrote that insurers say there is no automated
process to receive subsidies and the Healthcare.gov site is still manually processing the tax credits used by nearly 90
percent of FFM customers.
“This increases the potential for error, and is also not an effective use of taxpayer dollars,” the lawmakers said in
their letter to Burwell. “Additionally, it is a direct contradiction to statements you made before Congress, saying that
‘everything is automated’ on HealthCare.gov.’” — Rachel S. Karas
Top GOP Lawmakers Criticize Union Carve-Outs In Cadillac Tax Guidance
Senate Finance Chairman Orrin Hatch (R-UT) and Senate Judiciary Chairman Chuck Grassley (R-IA) on Wednesday
(Feb. 25) sent a letter to Treasury Secretary Jack Lew saying that an IRS guidance released Monday on the ACA’s
“Cadillac tax” panders too much to organized labor unions.
They take issue with a section of the guidance that asks for feedback on special adjustments given to workers in
“high-risk” professions — including firefighters, law enforcement officers, electrical or telecommunication line
repairmen, emergency medical workers, longshoremen, and those in the construction, mining, agriculture, forestry
and fishing industries — by raising the dollar limits of how much a plan can cover before employers are hit with the
Cadillac tax.
The “Cadillac” tax is a 40 percent tax on plans with costs that exceed a certain threshold. It is slated to start in 2018,
when the threshold is set at $10,200 for self-only coverage and $27,500 for family plans, and applies to costs expended
by the employee and the employer. The law does allow for adjustments for certain plans, including those covering highrisk workers. The threshold will then be increased by CPI plus 1 for the first two years (2018 and 2019) and just CPI
thereafter.
In particular, Treasury wants to know how employers determine whether the majority of employees covered by a plan
are in high-risk jobs, what “plan” means in that context and how employers determine whether retirees on the plan
worked in those professions for at least 20 years. Treasury also asks whether further details on the definition of “employees engaged in a high risk profession” would be beneficial.
The guidance also includes adjustments for qualified retirees who are not eligible for Medicare and certain employers whose employees’ age and gender are not representative of the national workforce.
The guidance is based on part of the law that emerged from a deal negotiated between the White House and
labor unions in 2010 that extended the original implementation of 2013 to 2018 for union plans and also allowed for
higher thresholds for the high-risk professions and certain retiree plans. Stand-alone dental and vision plans were also
exempted from calculations under the deal — which is also reflected in Treasury’s initial guidance.
Those agreements caused unions to get back on board with passing health reform at the time.
However, unions are still strongly opposed to the tax. Spokespersons with the American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO) and Service Employees International Union did not return
12
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
request for comment.
Republicans have long opposed what they see as unfair giveaways to unions in the history of the ACA.
Hatch and Grassley wrote that now is not the time to pit workers against one another with rules that protect some
groups from a flawed law.
“(T)he cure for this mistake is not a carve out for the President’s political supporters but a repeal that benefits
all Americans, including the countless teachers, nurses, and other professionals that will be subject to this tax over time,”
the lawmakers wrote. “The structure of this tax creates a draconian policy that will penalize countless Americans with a
40 percent excise tax, whether they are a shop foreman, a factory manager, or an office secretary … we urge you to work
with Congress to relieve all Americans from the burdens of the health care law.”
The lawmakers also asked Lew how many of the employee categories referenced in the notice are commonly
performed by unionized workers, whether Treasury has considered extending the organized labor protection to all
Americans, and whether the administration is considering delaying the Cadillac tax from taking effect. Lew is told to
respond by March 11. — Rachel S. Karas
Contrary To GOP Plans, MACPAC Wants CHIP Extended Quickly
Contrary to GOP plans, commissioners on the Medicaid and CHIP Payment and Access Commission on Thursday
(Feb. 26) urged Congress to renew the Children’s Health Insurance Program quickly and without fundamental changes to
the program.
CHIP is authorized through 2019, but funding for the program runs out in October. The latest MACPAC analysis
shows states have $6.3 billion to cover the program, yet the cost is expected to be $14.8 billion.
Without an influx of federal dollars, states would run out of money at various points in the year: 11 states would run
out of money in the first quarter, nine in the second, 19 in the third, and 11 in the fourth. Only one state, Indiana, has
enough in reserve to keep CHIP afloat the entire year.
A recent report by the National Academy for State Health Policy shows a majority of states were expecting federal
funding for CHIP this year and have already created budgets relying on the federal match.
Commissioner Sara Rosenbaum was joined by others on the commission in expressing the need to continue the
program and to do so quickly so that states have the information they need to continue the plans.
“States need a very long lead time on the planning part so you can’t view it the way you might view say the SGR
payment where you can keep it just a few months ahead of when it’s supposed to fall back,” she said, referring to the
Sustainable Growth Rate formula that sets Medicare physician pay rates.
Several other commissioners also said states need more certainty about continuation of the program beyond six
months or however long an expected SGR patch might run.
Rep. Tom Price (R-GA) recently said CHIP funding and a permanent SGR fix would likely be linked toward the end
of the fiscal year.
Some commissioners also criticized Republicans’ plan to revise the CHIP program. They said the bicameral
GOP bill’s provisions on waiting periods, which would allow states to implement a 12-month waiting period for families
with private insurance, would contribute to people churning through the program. MACPAC previously recommended
ending waiting periods in favor of 12 months of continuous eligibility.
The GOP plan also would scrap the 23 percentage point increase in federal matching for CHIP, which the Affordable
Care Act slated to start in 2016.
“It’s fundamentally important to keep that commitment,” said Commissioner Patricia Riley. “It’s part of the law,
states planned on it, that was the deal, and as such it needs to stay that way, or we once again have invited the discussion
of, ‘Can you trust the federal government?’”
That funding is part of the reason states will run out of CHIP funding so quickly. States may not have allocated as
much money for CHIP in 2016 because they expected the federal government to raise their matching contribution.
Despite criticisms of the Republican proposal in their discussion, commissioners said they did not want to
formally critique any bills on the topic, which also include proposals from Democrats in both the House and Senate
that would extend the bill for four years. Instead of even recommending to extend CHIP for two or four years, the
commission decided to stress the importance of continuing the program without changes because states need certainty.
Commission Vice Chair Marsha Gold said it is hard to predict what language and changes would develop throughout
the legislative process, so the commission should advocate general principles rather than nitpick current ideas.
House and Senate Republicans jointly released a draft CHIP funding bill this week that includes major program
revisions and also leaves it unclear how long the funding would be extended. The draft was unveiled by Senate Finance
Committee Chair Orrin Hatch (R-UT), House Energy & Commerce Chair Fred Upton (R-MI) and health subcommittee
Chair Joe Pitts (R-PA). — Rebecca Beitsch
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015
13
Burwell Denies Knowledge Of King Contingency Plan
HHS Secretary Sylvia Burwell denied knowledge of an alleged document outlining post-King contingency plans,
after a key GOP lawmaker told her Thursday morning that a department official informed him of a hundred-or-so page
report circulating among top HHS officials that details actions the Obama administration could take if the U.S. Supreme
Court rules against it in King v. Burwell.
An HHS spokesperson echoed the Burwell’s statement. “We know of no such document,” an HHS spokesperson told
Inside Health Policy. “As the Secretary said, we know of no administrative actions that could, and therefore we have no
plans that would, undo the massive damage to our health care system that would be caused by an adverse decision.”
Energy and Commerce health subcommittee chairman Rep. Joe Pitts (R-PA) told Burwell at a hearing Thursday
morning that someone within HHS made him aware of an HHS contingency document around 100 pages long, after
asking the secretary if the White House has instructed HHS to outline potential contingency plans.
Committee staff told IHP they have not seen the document but confirmed that they were told it was being discussed
by senior HHS employees.
“I’m not familiar with the document you’re referring to,” Burwell told Rep. Leonard Lance (R-NJ) at
Thursday’s same hearing. “If there is this document and you know of it, I would certainly like to know.”
Burwell reiterated that HHS knows of no administrative fix that could undo the harm caused if subsidies for health
care premiums are removed from the federal marketplace.
“We do not believe that there is any administrative authority that we have in our power to undo it,” Burwell said to
Rep. Joe Barton (R-TX). Barton responded that while he believed that she hadn’t seen a contingency document, he was
puzzled by the administration’s lack of planning — at least publicly — so far.
Michael Cannon, health policy studies director at the Cato Institute and one of the most vocal opponents of the
Affordable Care Act thus far, believes that Burwell’s decision to say HHS doesn’t “know of” a fix does not mean one
does not exist. “The language they are using leaves open the possibility that they will discover a fix at some point in the
future,” he told Inside Health Policy in an email. “The fact that they are so consistently using such precise language
suggests they have already found that fix, and just don’t want to talk about it.”
Mike Leavitt, former HHS secretary and head of the Leavitt Partners policy consulting firm, said he doesn’t know
anything about the potential document but that “it would be unreasonable for them not to be doing contingency planning.”
Leavitt does not expect the administration would want to talk about such a plan before the court rules. — Rachel Karas
Hatch: Why Did CMS Give Issuers Termination Option If No King Back-Up Plan?
Senate Finance Chair Orrin Hatch (R-UT) on Wednesday asked CMS Administrator Marilyn Tavenner to explain
why the agency put a clause in its contracts with Healthcare.gov issuers last fall giving them an option to pull out if
federal subsidies come to an end, suggesting the move contradicts HHS’ assertion that it has no back-up plan should the
U.S. Supreme Court rule that subsidies can’t flow through federally facilitated exchanges.
HHS Secretary Sylvia Burwell told lawmakers in a letter Tuesday: “We know of no administrative actions that could,
and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by
an adverse decision.”
But Hatch says CMS’ action last year suggests otherwise. “(T)he Administration’s actions behind closed doors tells a
different story. While the Administration assures HealthCare.gov policyholders that ‘nothing has changed,’ it has been
conveying a contradictory message to health insurance companies,” Hatch wrote to Tavenner Wednesday.
The clause CMS inserted in issuers’ contracts says that the agency acknowledges the issuer has developed its
products for the FFM “based on the assumption that (advanced payment tax credits) and (cost-sharing reduction payments) will be available to qualifying (e)nrollees. In the event that this assumption ceases to be valid during the term of
this Agreement, CMS acknowledges that Issuer could have cause to terminate this Agreement subject to applicable state
and federal law,” the contract says.
Last October, CMS told Inside Health Policy that the clause had been included at the request of insurers and
that both parties thought it was critical.
But Hatch says that the administration accommodated insurers with this “critical” change at the same time it was
telling individual Americans that “nothing has changed.” He says this suggests that the administration is “both actively
engaged in contingency planning and is misleading HealthCare.gov enrollees.”
The senator asks CMS to provide an explanation of why it believed the clause was “critical” by March 6. He also
asks the agency to produce all documents or communications regarding that section of the contract, including the need for
such language and any “requests for a new termination clause, or the risks or likelihood of (tax credits) ceasing to be
available, by a Qualified Health Plan subject to the agreement.” — Amy Lotven
14
Health Exchange Alert - www.InsideHealthPolicy.com - March 4, 2015