9/04/09 – Weekly compilation of health care reform developments in Washington, D.C. and state legislatures 9/4/09


The Senate Finance Committee pledged bipartisan compromise on health care reform, but it appears no new agreements have been reached. Senator Edward Kennedy’s passing last week caused some on Capitol Hill to be more concerned about lack of compromise in the legislative process to achieve health care reform.

In the House, work remains to be done as the three committees that passed health care reform bills in July need to merge these bills into one. The Energy and Commerce Committee first is planning to consider several dozen amendments not addressed during the committee’s mark-up. As a result, the timing of real progress on health care reform legislation this fall is very hard to predict.


At the state level in Pennsylvania, the Highmark/IBC merger has opposition from non-Blue health plans including Aetna who are asking for a review of geographic restrictions and anti-competitive practices.

PENNSYLVANIA: The Department of Insurance has been relatively silent since its July 17 press release announcing separate examinations of the Blues plans on possible anti-competitive and unfair trade practices. The Department has retained the same law firm and economist that coordinated the review of the Highmark/IBC merger. It is set on concluding the examination in early 2010, if only to give it time to implement any recommendations in the last months of this administration. Other non-Blue insurance firms have raised recommendations for improving competition: Review the geographic restrictions in the Blues’ licensing agreements as well as any agreements among the Blues that impede competition; the Blues’ use of market power in provider contracting and product tying; and any practices that impede transparency.

CALIFORNIA: Two health care taxes are under consideration in the legislature. The first would impose a tax on all acute care hospitals, but the hospitals would receive new funds to supplement reimbursement under the state’s Medi-Cal program. The amount of the tax has not been determined.

The second tax would impose the state’s gross premium tax on all Medi-Cal managed care plans. The legislature expects the tax to raise $150 million annually. Medi-Cal managed care plans have been assessed a Quality Assurance Fee by the state. Federal law prohibits this fee from being collected after Oct. 1, 2009, though there is a bill in Congress to extend the fee for another year. Both tax proposals have broad support and neither is expected to impact most major insurer’s current lines of business.

KENTUCKY: The legislature held hearings last week on an autism mandate that broadly defines the condition without coverage limits, except co-payments and deductibles. In addition, the bill would allow an “autism services provider”, meaning any person or entity that provides treatment of autism spectrum disorders, to treat. Insurance companies and the Kentucky Association of Health Plans are working with the bill sponsor to include age limits and licensure of providers provisions, particularly for applied behavioral analysis.

GEORGIA: A hearing has been set for September 9th to finalize regulations allowing health plans to include health status as a factor in the rating of small groups on renewal dates. Previously, this was permitted for new business. The Georgia Association of Health Plans and America’s Health Insurance Plans (AHIP) have been working on this issue for some time with the Georgia Department of Insurance.

ILLINOIS: Senate President Cullerton expects an external review bill to pass during the fall veto session. Agreed to by the insurance industry, provider, and consumer groups, the bill creates external review requirements for all commercial insurance products, rather than just HMOs, effective July 1, 2010. The bill also establishes committees to create a uniform small employer group health status questionnaire and an individual health statement for use on January 1, 2011. Lastly, the bill would require insurers to semi-annually prepare and provide the Department of Insurance a statement on aggregate administrative expense and other information. This last point was agreed to as an alternative to a medical loss ratio requirement.

MARYLAND: The Maryland Health Care Commission (MHCC) has invited insurance companies to participate in a workgroup consisting of payer representatives and other health care stakeholders, which will draft proposed regulations for the monetary incentives/disincentives in response to Electronic Health Records – Regulation and Reimbursement. This legislation lists many essential activities; one of the requirements calls for state-regulated private payers to provide monetary incentives to health care providers to promote the adoption and meaningful use of electronic health records (EHRs). Included in the statute is a requirement for establishing disincentives after 2015 for providers seeking payment from a state-regulated payer who uses an EHR that is neither certified nor capable of connecting to a health information exchange.

MICHIGAN: House leadership and an appointed committee continue to move forward with fleshing out Speaker Andy Dillon’s health insurance pooling proposal. The Dillon proposal would consolidate public sector active and retiree health care benefits for up to 400,000 individuals in order to help the state address its budget deficit. Several large unions have come out in opposition to the pooling option, saying it strips collective bargaining rights. On Friday, the Speaker released draft legislation on the proposal.

OHIO: The legislature is considering a joint resolution calling for a constitutional amendment to exempt Ohio from a potential mandate requiring individuals to have insurance. It is similar to an issue that was taken up in Arizona in 2008. Arizona’s legislature passed a resolution this year that will put the question on the ballot for 2010. If federal reform passes with an individual mandate, such a constitutional amendment would likely be challenged in court. In other business, Representative Boyd indicated that her legislation regarding regulation of “physician designation programs” will be moving forward in the House. Physician designation programs are those programs that provide a grade or any other rating to characterize an insurer’s assessment or measurement of a physician’s cost efficiency, quality of care or clinical performance. The medical society wants state standards for physician designation programs operating in the state. Several insurance companies have actively been reviewing this bill and how it would affect them, and are providing comment.

OKLAHOMA: The “Insure Oklahoma” program has grown at such a significant rate it is expected to reach funding capacity before year’s end, potentially leading to a freeze in enrollment and a loss of momentum in providing health insurance coverage for all Oklahomans. The program subsidizes health insurance premiums for small businesses and individuals who qualify. Under the program, employers contribute 25 percent of premiums, employees 15 percent, and the state pays the remainder. Its current funding stream has capacity for up to 35,000 people. With a projected growth rate of 9.8 percent, enrollment could top 40,000 by January 2010. To avoid freezing enrollment in the program, the authority is looking for additional funding streams. It has embraced a recommendation by the State Coverage Initiative that would assess a fee on all insurance companies that are part of the program. Those fees would be placed in a dedicated account and would generate federal matching dollars to fund Insure Oklahoma. The problem is the fee assessment would need to be approved by the state legislature, which will not reconvene until February, 2010. A special session would be needed to consider the fee assessment. A half-percent fee would double Insure Oklahoma’s capacity to 80,000 lives and reduce cost shifting by $39 million.

VIRGINIA: An escalating conflict of interest issues involving delegate Phillip Hamilton (R), vice chairman of the House Appropriations Committee, could have significant impact on the governance of the state over the next four years, particularly if front runner Republican Robert McDonnell wins in November. Currently, the House has a Republican majority and the Senate a Democratic majority; resulting in divided control of the General Assembly for the first time in modern history. This split has hampered Democratic Governor Timothy Kaine’s ability to move much of his agenda since coming to office. Delegate Hamilton’s situation and his refusal to step down have invigorated Democrats who only need to win six seats in the House to gain control of the legislature. Such a result would present increased challenges for the business community, including health plans.

Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See https://www.noworldborders.com/news/ and https://www.noworldborders.com/clients/ for more about the company.

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