9/28/09 – Weekly Health Care Reform Update at the Federal and State Level

Week of September 28, 2009

The Senate Finance Committee wasted no time last week in wading through a seemingly endless number of amendments to its proposed health care reform legislation (see below). The committee turned aside a number of amendments, including attempts to avert cuts to the Medicare Advantage program to help pay for expanded coverage for the uninsured. But the sparring that occurred over the issue is a good indication that emotions are running high, and the dispute is bound to reappear when the bill makes it to the Senate floor. Democrats and the Obama administration last week sought to reassure seniors that health care reform would not cost them their current levels of Medicare benefits, but the head of the Congressional Budget Office, Douglas Elmendorf, recently told Senators that seniors in Medicare Advantage could very well see reduced benefits. The bill’s momentum continues, but some Democrats are now struggling to figure out how to vigorously support health care reform without alienating many elderly voters.

At the state level, California’s governor has opted to begin taxing medicaid.


The Senate Finance Committee began its long-awaited mark-up of a health care reform bill and by the end of last week had slogged its way through about two dozen amendments, both in open session and as part of after-hours talks dealing with Medicare, taxes, insurance and delivery items.

1. Of note are the proposed increase in the insurer tax and the defeat of several Republican amendments to soften the burden on seniors in Medicare Advantage. The individual coverage requirement is still intact, but the dollar penalty for noncompliance has been lowered. And the age rating limit of 5:1 has been reduced to 4:1, which would increase the eventual rate shock for younger insureds.

2. Additionally, the Committee approved an amendment to dramatically increase transparency by forcing PBMs, (aka Pharmacy Benefit Managers – The PBM market is dominated by 3 large players – Medco, Caremark, and Express Scripts) to disclose certain pricing information to government and plan sponsors. It seems likely that some member will offer an amendment to add an employer mandate to the bill as well as an amendment to replace the current co-op provision with a full-fledged government plan. This mark-up process is expected to continue through this week. It is likely that the Committee will finish by the end of the week but probably not in time to meld its product with the HELP Committee bill before the Columbus Day break.
The House Energy & Commerce Committee held a mark-up last week to take up a handful of amendments left over from its mark-up of reform legislation in July.

Two major items include:

  1. Passage of a provision to provide grants to large employers (not covered in the original bill) for establishing wellness programs; and
  2. The defeat of a provision that would have prohibited Insurers / payors from recovering insurance payments through subrogation.

Insurers / payors and employers worked together to help defeat this latter item. On a related House matter, it is becoming increasingly clear that the compromise between the House leadership and the Blue Dogs seems to be more tenuous than ever, which may well give the Speaker the political “room” to beef up the existing public plan provision in the House bill by adding back the government rate-setting provision she favors.


CALIFORNIA: Governor Arnold Schwarzenegger signed legislation that subjects Medicaid (Medi-Cal) managed care plans to a tax to fund Medi-Cal and the state’s Children’s Health Insurance Program (Healthy Families). The tax, which is assessed on the plan’s total operating revenue, is effective for Medi-Cal managed care plans through January 1, 2011.

Approval of the measure will prevent more than 600,000 children from losing access to Healthy Families coverage. In addition, this bill has allowed the state to reopen Healthy Families enrollment and begin processing the more than 80,000 applications that were placed on a wait list.

In other news, the California Privacy and Security Advisory Board (CalPSAB) approved a “hybrid approach” to patient consent guidelines for participation in a health insurance exchange. The approach, outlined by CalPSAB, appears to be inconsistent with federal privacy and security standards. CalPSAB is developing new privacy and security standards to enable the adoption and application of health information exchange in California.

CONNECTICUT: Gov. M. Jodi Rell is threatening to veto a bill being debated during a special legislative budget session because it represents a back-door maneuver around her veto of a controversial health care pooling bill. In a detailed letter to top legislators, Rell said flatly that she would veto the bill because it did not meet certain requirements.
One of the troubling provisions, Rell said, is that Section 15 of the general government bill would allow the state comptroller, Democrat Nancy Wyman, to merge various insurance plans into the state’s self-insured plan. Rell stated that this effectively would allow the comptroller to implement the pooling concept that she previously vetoed, which would likely result in a significant cost increase to the state at a time when the state is making cuts to virtually every program.

IOWA: The Iowa Health Care Coverage Commission has begun meeting to develop a plan to ensure that all Iowans have access to health care coverage that meets minimum standards of quality and affordability. The Commission, which has representation from a wide spectrum of stakeholders including the health insurance industry, has broken into three work groups addressing (1) coverage of uninsured and underinsured adults; (2) the use and creation of a group insurance plan to provide coverage to non-state public employees, employees of not-for-profit groups, and small employers; and (3) administration of health care reform. The Commission is required to issue its first quarterly progress report to the Iowa Legislative Council by January 1, 2010.

NEW YORK: The State Insurance Department (DOI) is conducting public hearings in Rochester, Newburgh and New York City to gather information about limited benefits health insurance plans. The goal is to ascertain how these policies are marketed by Insurers / payors and producers, assess what disclosures are made regarding the services they cover, evaluate what advantages these policies provide, and determine whether additional oversight and regulation are needed. The DOI investigations have revealed that some policies are sold through telemarketing firms using unlicensed agents, which runs afoul of the New York Insurance Law and that some Insurers / payors issue limited benefits health plan policies as group coverage through invalid associations. Consumers must join the association for an additional fee in order to be eligible to purchase the coverage. The NYS Health Plan Association will be submitting written testimony on behalf of its members who offer limited benefits plans, to distinguish these legitimate products from the fraudulent types of associations being investigated by the DOI.

OKLAHOMA: Senate President Pro Tem Republican Glenn Coffee recently announced the approval of 34 interim studies and the committees that will conduct them. With nearly one-third of the studies having implications for health insurance, the list yields insights into a number of issues, especially autism, that could be the subjects of key legislation in 2010. The following studies are the most relevant to the health insurance industry, and Insurers / payors will be watching them closely: Review of health insurance mandates; health insurance policy rescissions; high-risk pool coverage of autism spectrum disorder diagnosis and treatment; autism insurance mandates and the state’s economy; issues relating to interstate purchasing of health insurance policies; and possible funding for PPO coverage of persons in rural Oklahoma.

TENNESSEE: Preliminary meetings are being scheduled to discuss Silent PPO legislation related to workers’ compensation, which was defeated earlier this year. This is expected to be a significant issue for the 2010 legislative session. In addition, Insurers / payors are is participating in a workgroup at the Tennessee Department of Commerce and Insurance regarding implementation of claims data legislation passed earlier this year.

WISCONSIN: The Office of the Commissioner of Insurance (OCI) intends to publish emergency rules to comply with the federal American Recovery and Reinvestment Act (ARRA) and provisions related to continuation of employer-discounted group coverage. The draft rules contain a new COBRA eligibility category for group coverage discontinuation retroactive to May 2009. In addition, the Autism Workgroup, created under the auspices of the OCI, has developed an administrative rule to implement recently enacted legislation requiring health insurance coverage for autism spectrum disorders. The rule will be promulgated on an emergency basis and takes effect for insurance products that are issued or renewed on or after November 1, 2009.

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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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