The Medliminal Washington Report 3.19.18

Congress begins this week with only five days to finalize a $1.3 trillion spending bill, or risk the third government shutdown since January or a sixth stopgap spending bill in this fiscal year alone. Standing in the way is a number of contentious issues, most notably health insurance market stabilization. Looming over the budget debates are November’s mid-term elections, as well as a special House election in Pennsylvania that a Democrat is poised to flip in a district President Trump won by 20 points. We cover this and more in our weekly health care review.


Market Stabilization Bills Face Uncertain Future in Last Minute Spending Debate

As Congress hurtles towards Friday’s deadline to avert another federal government shutdown, discussions continue about whether and how to help stabilize Affordable Care Act (ACA) insurance markets. Although there appears to be bipartisan support to include some kind of health care market stabilization funding in the upcoming omnibus, there are a number of issues still left to be resolved.

Senators Lamar Alexander (R-TN) and Susan Collins (R-ME) have developed a new market stabilization package, which combines elements of two bipartisan proposals developed last fall by Senators Alexander and Patty Murray (D-WA) and Senators Collins and Bill Nelson (D-FL). This revised package would include funding for cost-sharing reduction (CSR) payments for three years, $10 billion in annual reinsurance funding for three years, additional Section 1332 waiver flexibility, and expanded eligibility for catastrophic plans. The bill also includes an additional requirement that federal funds could not be used for plans that cover abortion services.

A preliminary analysis by the Congressional Budget Office (CBO) estimates that the Alexander/Collins proposal would reduce premiums by 10 percent in 2019 and by 20 percent in 2020 and 2021 for states that receive reinsurance funding. A recently published report by the consulting firm Oliver Wyman found that passing the stabilization bills would lower monthly premiums by 20 to 40 percent and prompt an additional 3.2 million people to get covered.

Despite support for the underlying reinsurance and cost-sharing reduction payments, the restrictions for abortion funding, an effort to shore up Republican votes in the House, is a sticking point for Democrats. Given this debate, and a split within the GOP on reinsurance itself, there is growing skepticism that they will be included in omnibus bill. Legislative text is expected to be released Monday night, and the House is aiming to vote on the bill Wednesday, leaving the Senate just two days to pass the bill and avoid a government shutdown at midnight on Friday.

Ranking E&C Committee Democrat Calls for a Hearing on Cigna, Express Scripts Merger

In a March 14 letter to House Energy and Commerce Committee chair Greg Walden (R-OR), the committee’s ranking member, Representative Frank Pallone (D-NJ) requested that he schedule a hearing on Cigna’s recently proposed plan to acquire Express Scripts for $67 billion and CVS’s proposed $69 billion merger with Aetna.

In the letter, Pallone notes that the combination would combine the nation’s largest PBM with one of the nation’s largest health insurers, and that the deal would be “just one of many recent mergers and acquisitions in American health care delivery.” The proposed Cigna/Express Scripts transaction is only the latest in a recent string of significant proposed “vertical mergers” that would combine a health insurer with a PBM; other recently announced transactions include the pending CVS/Aetna and Centene/RxAdvance deals.

“The Committee has an ongoing responsibility to evaluate and consider these changes to our health care system, so as to better understand the impact of these changes on consumers, patients, and providers,” Pallone wrote.  “Due to the scale of the proposed Cigna-Express Scripts and CVS-Aetna deals, these changes should be thoroughly scrutinized and understood by the members of this Committee. To best understand the matter, it would be in this Committee’s best interest to hear directly from representatives of the companies involved, in addition to other perspectives.”

Pallone’s request for a hearing on the Cigna/Express Scripts merger comes only a month after the February 14 House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on the impact of health care consolidation generally, and a House Judiciary subcommittee hearing specifically on the CVS/Aetna deal on February 27th. While congressional hearings on proposed mergers can be informative, ultimately Congress has no formal role in the process. Regulators in the Justice Department’s Antitrust Division and/or Federal Trade Commission will ultimately decide if the mergers violate antitrust laws.

Senators Introduce Legislation to Remove ‘Gag Clauses’ Prohibiting Pharmacists from Revealing Lower Prescription Drug Prices

A group of bipartisan senators introduced two pieces of prescription drug legislation, including a ban on “gag clauses” that can lead to consumers paying higher prices at the pharmacy.

The group — led by Susan Collins (R-ME), Claire McCaskil (D-MO), and Debbie Stabenow (D-MI) — introduced the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act on March 15. Under the two bills, health insurers and pharmacy benefit managers (PBMs) would not be able to use gag clauses that prohibit pharmacists from telling consumers if they would pay less out of pocket for prescription drugs than they would going through insurance.

“Insurance is intended to save consumers money.  Gag clauses in contracts that prohibit pharmacists from telling patients about the best prescription drug prices do the opposite,” said Senator Collins in a press statement.  “Multiple reports have exposed how this egregious practice has harmed consumers, such as one customer who used his insurance to pay $129 for a drug when he could have paid $18 out of pocket.  Americans have the right to know which payment method – insurance or cash – would provide the most savings when purchasing prescription drugs. By prohibiting gag clauses, our legislation would take concrete action to lower the cost of prescription drugs, saving consumers money.”  

The Patient Right to Know Drug Prices Act applies to plans offered through exchanges and private employers. Sponsors include Senators Collins (R-ME), McCaskill (D-MO), Stabenow (D-MI), John Barrasso (R-WY) and Bill Cassidy (R-LA).

The Know the Lowest Price Act applies to Medicare Advantage and Medicare Part D. Senator Ron Wyden (D-OR) joined with Collins, McCaskill, Stabenow, Barrasso and Cassidy to sponsor this bill.

In 2016, Americans spent nearly $330 billion on retail prescription drugs, including $45 billion out-of-pocket. A recent study published in the Journal of the American Medical Association that reviewed 9.5 million insurance claims found that 23 percent of prescriptions filled through insurance ended up costing more for customers than if they would have paid out of pocket. The overpayments totaled $135 million for 2013, or $10.51 per covered member on average.

Democrat Leads in Pennsylvania House Election, Recount Possible

Pennsylvania’s contentious House special election still doesn’t have an official winner nearly a week later  Democrat Conor Lamb has a lead of roughly 600 votes over Republican state Representative Rick Saccone in the March 13 special election in Pennsylvania’s 18th Congressional District. Lamb’s margin exceeds the number of outstanding provisional and military votes. However, the result has not yet been certified and some Republicans have floated the possibility of a recount or lawsuit challenging the outcome.

This is all political posturing. After the Pennsylvania Supreme Court struck down state Republicans’ redistricting map in February, the 18th district in its current form will cease to exist. Per the Court’s ruling, the 18th and 14th districts will swap names and have their boundaries adjusted for the 2018 elections and thereafter. However, it is a district that President Trump won in 2016 by 20 points, and where Democrats failed to even field a candidate to face Tim Murphy (who resigned last fall following a personal scandal) in 2014 and 2016.

The significance of the race is not that it will impact governing in 2018 as Republicans will still enjoy a significant House majority for the remainder of the year. Instead, it is being seen as a wakeup call for congressional Republicans and a potential harbinger of a Democratic wave in November. Democrats need to flip only 24 seats to re-take the House, and there have already been 33 Republicans that have announced their retirements (many still in likely safe Republican districts).

Even with the outcome of the election still unresolved, both candidates appear to be looking ahead. Lamb is expected to run in the new 17th Congressional District, while Saccone is expected to run in the new 14th district.

House Expected to Vote Again on ‘Right to Try’ Bill for Terminally Ill Patients

On March 13, the House failed to pass a so-called ‘Right to Try’ bill that would give terminally ill patients the right to seek drugs in clinical trials, but not approved by the Food and Drug Administration (FDA). The House voted 259-140, which fell seven votes short of the two-thirds majority needed for passage under suspension of the rules. House Majority Leader Kevin McCarthy (R-CA), promised to bring the bill back to the floor under regular order, which would require a simple majority to pass.  The House Rules committee will take up the bill on Monday, and it could be voted on this week. The Senate passed a similar bill by unanimous consent in 2017, though it differs enough from the bill under consideration that the House and Senate would have to reconcile the two bills if the House passes its bill.

Both bills would allow terminally patients to access drugs that have completed a Phase 1 clinical trial, and remove FDA from the process of signing off on certain patients accessing experimental treatments and instead allow institutional review boards to essentially make such decisions. However, neither bill would mandate or encourage companies to provide such treatments to those with terminal illnesses, which is usually the rate-limiting step as FDA typically signs off on 99 percent of all expanded access requests.

Health Policy

New Research Finds that US Health Spending Twice that of Other Developed Nations, Largely Because of Administrative Costs

A new Harvard School of Public Health and the London School of Economics study published in the Journal of the American Medical Association found that the U.S. spends about twice as much on medical care despite similar utilization rates compared to other nations without markedly better health outcomes.

The study compared potential spending drivers, including structural capacity and utilization, in the U.S. and 10 high-income countries (the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark). The findings confirm that the U.S. has substantially higher spending, worse population health outcomes, and worse access to care than the other countries studied. For example, in 2016, the U.S. spent 17.8 percent of its gross domestic product on health care, while other countries ranged from 9.6 percent (Australia) to 12.4 percent (Switzerland). Life expectancy in the U.S. was the lowest of all 11 countries in the study, at 78.8 years; the range for other countries was 80.7 to 83.9 years. The proportion of the U.S. population with health insurance was 90 percent, lower than all the other countries, which ranged from 99 to 100 percent coverage. However, the U.S. also had the highest percentage of private health insurance (55.3 percent).

Overall, quality of care in the U.S. isn’t markedly different from that of other countries, and in fact excels in many areas. For example, the U.S. appears to have the best outcomes for those who have heart attacks or strokes, but is below average for avoidable hospitalizations for patients with diabetes and asthma.

What explains the substantially higher spending in the U.S. is administrative complexity and high prices across a wide range of health care services. For example, the findings showed that:

  • Administrative costs of care accounted for 8 percent of total health care costs, compared with a range of 1 to 3 percent for other countries.
  • Per capita spending for pharmaceuticals was $1,443 in the U.S., compared with a range of $466 to $939 in other nations. For several commonly used brand-name pharmaceuticals, the U.S. had substantially higher prices than other countries, often double the next-highest price.
  • The average salary for a general practice physician in the U.S. was $218,173, while in other countries the salary range was $86,607 to $154,126.

Given the similarities in overall patterns of healthcare use between the U.S. and other countries, the authors conclude that targeting healthcare use likely won’t be enough to control spending and that the answer is more likely to come from reducing process and administrative costs.

Industry News

CVS Health, Aetna Shareholders Vote to Approve Merger

Shareholders for both CVS Health and Aetna voted on March 13 to approve the $69 billion merger between the pharmacy chain and the insurer. According to press statements from the two companies, more than 98 percent of CVS Health shares voted in favor of the merger, while about 97 percent of Aetna shareholders voted to approve the plan. Both CVS and Aetna stated that they still expect the merger to be completed in the second half of this year, subject to the required regulatory approvals.

The combined company, if approved by federal regulators, would create a firm with annual revenues of about $245 billion. In early February, the Justice Department requested additional information from CVS, but the company did not specify what information the Department is seeking. It is a routine request, and not unexpected considering the deal is valued at about $70 billion. In a filing with the Securities and Exchange Commission, CVS said it is cooperating and still expects the deal to close by the end of this year.

In The States

Oregon Governor Signs Bill Increasing Drug Price Transparency

On March 13, Oregon Governor Kate Brown (D) signed a bill to provide more transparency around drug pricing. HB 4005 requires drug manufacturers to compile a report on a prescription drug if the price was $100 or more for a 1-month supply (or course of treatment lasting less than 1 month) and if the net price increased by 10 percent or more.

For drugs that fit into these criteria, manufacturers would need to provide information to explain the factors that contributed to the price increase, such as:

  • Research and development costs
  • Direct costs incurred to the manufacturer, marketer, and distributor of the drug
  • The 10 highest prices paid for the drug in the previous calendar year in any country outside of the United States

Under the law, pharmaceutical companies must provide these reports by July 2019. The bill also requires that insurers report the 25 most frequently prescribed drugs, the 25 most costly drugs as a portion of total annual spending, the 25 drugs that have caused the greatest increase in total plan spending from one year to the next, and the impact of the costs of prescription drugs on premium rates

According to the National Academy for State Health Policy, state legislatures are currently considering 48 bills to increase drug pricing transparency. Many of new state laws are facing legal challenges questioning their constitutionality. Due to the amount of information that manufacturers are required to report under the new Oregon law, and the fact that this information will be made available to the public, it’s likely that similar legal challenges may be raised before the new Oregon law goes into effect.

Bill to Ban Sale of Short-Term Health Insurance Plans Advances in California State Senate

On March 14, California’s Senate Health Committee approved a bill (SB-910) that would prohibit the sale of short term limited duration health insurance in California. Authored by Senator Ed Hernandez, (D) and approved by a vote of 7-0, SB 910 was introduced in response to the Trump Administration’s recent proposed regulations to expand short term limited duration coverage up to 12 months. The bill now heads to the Senate Appropriations Committee

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of March 19-26.

March 20: The House Education and Workforce Committee’s Subcommittee on Health, Employment, Labor, and Pensions will hold a hearing titled “Expanding Affordable Health Care Options: Examining the Department of Labor’s Proposed Rule on Association Health Plans.

March 21-22: The House Energy and Commerce Committee’s Subcommittee on Health will hold a two-day hearing titled “Combating the Opioid Crisis: Prevention and Public Health Solutions.”

March 23: Expiration of temporary funding for the federal government.

The Medliminal Washington Report 3.12.18

This week, Congress returns to Washington with 11 days to finalize a government spending bill. Standing in the way are a number of contentious health care issues, most notably insurance market stabilization. Meanwhile, the administration weighed in on Idaho’s plan to skirt some of ACA requirements, and announced plans to overhaul electronic health record incentives. Also on our radar screen is the ongoing health insurance industry consolidation and new pharmacy rebates. We cover this and more in our weekly health care review.


White House Issues Demands on ACA Stabilization Bills

The White House has indicated that it would support a bipartisan push to restore cost-sharing reductions (CSRs) to stabilize the exchanges, but only if any legislation includes conservative policies that are almost universally opposed by Democrats. In a memo provided to reporters, the White House called for the stabilization measures (Alexander-Murray and Collins-Nelson bills) to include provisions that codify into law a recent Trump administration action to expand short-term health plans, and increase age rating bands from 3:1 to 5:1.

“Although congressional efforts to provide taxpayer money to prop up the exchanges is understandable, any such efforts must also provide relief to middle-class families harmed by the law and protect life,” the memo states. “In order to support such efforts, the administration believes these three policies to provide greater choice and control for middle-class families must be included.”

Stabilization bills, aimed at bringing down premiums, could be included in an omnibus budget bill that must be passed by March 23 to prevent a third government shutdown. However, House and Senate Republicans are divided on the issue and continue negotiating.

A recently published report by the actuarial consulting firm Oliver Wyman found that passing the stabilization bills would lower monthly premiums by 20 to 40 percent and prompt an additional 3.2 million people to get covered.

House to Vote on ‘Right to Try’ Bill for Terminally Ill Patients

On March 13, the House will vote on a bill that would give terminally ill patients the right to seek drugs in clinical trials, but not approved by the Food and Drug Administration (FDA). The Senate passed a similar bill by unanimous consent in 2017, though it differs enough from the bill under consideration that the House and Senate would have to reconcile the two bills if the House passes its bill.

Both bills would allow terminally patients to access drugs that have completed a Phase 1 clinical trial, and remove FDA from the process of signing off on certain patients accessing experimental treatments and instead allow institutional review boards to essentially make such decisions. However, neither bill would mandate or encourage companies to provide such treatments to those with terminal illnesses, which is usually the rate-limiting step as FDA typically signs off on 99 percent of all expanded access requests.

The president brought renewed attention to the effort in January when he mentioned the proposal in his State of the Union address, saying “patients with terminal conditions should have access to experimental treatments that could potentially save their lives.” These so-called “right to try” laws already exist in 38 states, and advocates argue that a federal law is needed to ensure greater continuity across state lines.

While the 2017 Senate bill passed without objection, it faces stronger opposition in the House. Energy and Commerce Committee ranking member, Rep. Frank Pallone (D-NJ), blasted the bill as needless legislation that undermines the FDA’s approval process and gives patients false hope, since it doesn’t require manufactures to actually provide the drugs to the patient. Critics also fear the legislation could carry broader implications and lead to a slippery slope of bypassing FDA regulations for less urgent cases, such as those with chronic illnesses.

The Administration

CMS Rejects Idaho Plan to Allow Sale of ACA Noncompliant Plans

The Trump administration rejected Idaho’s plan to allow the sale of limited benefit, low-cost health plans that do not comply with the Affordable Care Act (ACA). Centers for Medicare and Medicaid Services Administrator Seema Verma, in a March 8 letter to Idaho Gov. C. L. “Butch” Otter and Insurance Commissioner Dean Cameron, said the federal government has a duty to enforce the law, even though the administration opposes the ACA.

Although the letter commended Idaho’s effort to “address the damage” caused by the ACA, it said the proposed state-based plans would violate at least eight of its provisions, including bans on setting annual or lifetime caps, charging sick people more than those considered healthy or excluding coverage for preexisting conditions. The letter also noted that if such plans were sold in Idaho, insurance carriers might face significant financial penalties.

The letter outlines for Idaho options “within the law to meaningfully implement many of the policy proposals contained in the Bulletin.” The letter essentially says that Gov. Otter’s ACA-violating policies “with certain modifications” could be implemented as long as they were offered as part of short-term plans (the ACA does not impose essential health benefit requirements on short-term insurance plans). Last month, the Trump Administration issued proposed rules expanding short-term plans to year-long, renewable plans. The result would be that Idaho health insurers could still sell the limited benefit plans envisioned as long as they label the plans “short-term.”

Earlier this year, Governor Otter signed an executive order that allowed some Idaho health insurance plans to drop certain ACA requirements. For example, plans would not need to cover maternity care, mental illness, or other essential health benefits; insurers could charge higher premiums to those with preexisting conditions; and insurers could deny people coverage if they had failed to maintain continuous coverage. Blue Cross of Idaho was the first insurer in the state to announce it would offer such plans, filing five new individual market plans that skirt the ACA’s essential health benefits.

In response, the governor and insurance commissioner said in a joint statement that CMS’ ruling was “not a rejection” of the state’s plans. “Her letter made it clear that Idaho’s efforts to pursue innovative alternatives hold great promise, and we believe that Idaho’s plan aligns with the state’s responsibility for ‘substantially enforcing’ Obamacare. In fact, we consider the letter an invitation from CMS to continue discussing the specifics of what can and cannot be included in state-based plans.”

“We will consider all possible options and then continue discussions with CMS and HHS on how best to achieve our shared goals of reducing the costs of coverage and stabilizing our health insurance market,” they added.

CMS Announces Plans to Overhaul Electronic Health Record Incentive Programs

CMS Administrator Seema Verma announced on March 6 that the agency is planning to overhaul the meaningful use requirements of the electronic health record (EHR) incentive programs. Verma did not offer specific changes, but said the goals of the overhaul are to refocus the EHR programs on interoperability and to reduce the time and compliance cost required for providers to comply with meaningful use requirements.

The announcement follows the passage of legislation in February that no longer requires the Department of Health & Human Services (HHS) to create increasingly stringent EHR incentive program reporting requirements. The Meaningful Use program was created with passage of the HITECH Act in 2009, and offers financial incentives to providers to adopt EHR systems. Despite the wide adoption in the wake of the program, many providers have been flustered over systems’ usability and administrative burden.

In addition to the overhaul of the EHR incentive programs, CMS announced two new initiatives designed to improve patient access to health records. The first initiative, MyHealthEData, focuses on breaking down barriers that prevent patients from having electronic access to their health records on an application or device of their choice. The initiative will seek to ensure that patients have access to their entire health record, so patients can actively seek out health care service providers that meet their health needs.

The second initiative, Medicare Blue Button 2.0, is a new tool that will allow patients to access and share their health care information in a secure and universal digital format. The tool will enable Medicare patients to connect their claims data to secure applications and providers they trust and will allow patients to access and share their information with new health care providers. CMS hopes that the new tool will lead to less duplication in testing and will promote increased competition among technology innovators who serve the Medicare population.

According to a CMS press statement, more than 100 organizations, including some of the most notable names in technological innovation, have signed on to use Medicare’s Blue Button 2.0 to develop applications that will provide innovative new tools to help these patients manage their health.

“CMS serves more than 130 million beneficiaries through our programs, which means we are uniquely positioned to transform how important healthcare data is shared between patients and their doctors,” said Administrator Verma. “Today, we are calling on private health plans to join us in sharing their data with patients because enabling patients to control their Medicare data so that they can quickly obtain and share it is critical to creating more patient empowerment.”

IRS Reduces Family HSA Contribution Limit For 2018

On March 5, the IRS released Revenue Bulletin No. 2018-10, in which it reduced the maximum amount an individual with family coverage may contribute to a Health Savings Account (HSA) for the 2018 calendar year – from $6,900 to $6,850. The $50 reduction is effective immediately. The annual tax-deductible contribution limit for tax year 2018 will stay at $3,450 for HSA account holders with self-only coverage through a high-deductible health plan (HDHPs).

The IRS had previously announced that the maximum HSA contribution limits for the 2018 calendar year were $3,450 for individuals with self-only coverage and $6,900 for individuals with family coverage. However, the IRS recalculated its previously released limits to take into account a new inflation measure as required by the tax legislation enacted in December 22.

Industry News

UnitedHealthcare to Pass Drug Rebates to Some Employee Customers

UnitedHealthcare announced on Tuesday, March 6, that starting January 1, 2019, it will pass along drug rebates to customers when they fill prescriptions through retail pharmacies or home delivery.

The move will apply to over 7 million people enrolled in UnitedHealthcare fully insured commercial group benefit plans, lowering out-of-pocket costs by directly providing consumers with savings from pharmacy manufacturer rebates at the time of purchase. Discounts can range from a few dollars to more than $1,000, depending on the medication. Rebates are currently used to keep premiums lower for the benefit of all members and customers, rather than distributed to individual consumers.

“People use their pharmacy benefit more frequently than any other type of benefit, which means pharmacy provides the greatest opportunity for us to understand and meet their needs,” said Dan Schumacher, president and chief operating officer of UnitedHealthcare in a statement. “We believe our efforts to enhance value for our customers will not only benefit our members, but the health care system as a whole.”

The decision was applauded by Health and Human Services Secretary Alex Azar, who in a press statement, said “today’s announcement by is a prime example of the type of movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing. Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy at the Department of Health and Human Services to bring down the price of drugs and make healthcare more affordable. We are already seeing clear momentum toward the type of innovation in the private sector that will be an important part of the value-based transformation that is coming to America’s healthcare system.”

Cigna to Acquire Express Scripts in $67 Billion

On March 8, Cigna revealed plans to acquire Express Scripts, the nation’s largest pharmacy benefit manager (PBM) in a $67 billion deal in a deal aimed at “making healthcare simpler” for its members, and at creating “an expanded portfolio of health services with greater choice.” The deal, which is expected to close later this year pending shareholder approval, continues a pattern of consolidation in the pharmacy and insurance industries.

Last fall, the health insurer Anthem announced plans to launch its own in-house PBM in partnership with CVS Health, and in December, CVS announced plans to acquire Aetna for $69 billion. The deal also comes on the heels of speculation that Amazon could buy an existing PBM, or launch its own service to administer drug plans.

In a speech last week, FDA Commissioner Scott Gottlieb expressed some concerns with the current drug reimbursement model, saying “too often, we see situations where consolidated firms—the PBMs, the distributors, and the drug stores—team up with payors. They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers.”

The deal faces a drawn-out merger review by the Justice Department, which is examining the proposed CVS-Aetna deal, and blocked the Anthem-Cigna deal last year.

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of March 5-9.

Congressional Hearings:

March 15: HHS Secretary Alex Azar testifies before the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies.

March 15: The Senate Health, Education, Labor and Pensions Committee holds a hearing on the 340B Drug Discount Program

The Medliminal Washington Report 3.5.18

Congress reconvened last week after the President’s Day recess, and the House and Senate began a series of hearings focusing on bipartisan efforts to combat the opioid epidemic. Meanwhile, a coalition of six senators launched a price transparency initiative and the House Judiciary Committee held a hearing to consider the impacts of the proposed CVS-Aetna merger. The Administration proposed rules to expand short term insurance plans and finalized rules on the ACA’s health insurance tax, while providing new data on health costs and the uninsured. Finally, state policymakers filed suit to repeal the ACA, while in some cases also strengthening the law in their own states.


Bipartisan Group of Senators Launch Healthcare Price Transparency Initiative

On March 1, a bipartisan group of six senators launched a healthcare price transparency initiative, seeking feedback from provider groups, insurers and patient communities as they develop legislation to empower patients, improve the quality of healthcare, and lower health care costs. The effort is being spearheaded by Senator Bill Cassidy, MD (R-LA), and includes senators Michael Bennet (D-CO), Chuck Grassley (R-IA), Tom Carper (D-DE), Todd Young (R-IN), and Claire McCaskill (D-MO).

As a first step, the senators sent letters to more than a dozen healthcare organizations that include the American Hospital Association, America’s Health Insurance Plans, Blue Cross Blue Shield, American Medical Association and the National Governors Association specifically seeking responses to questions ranging from regulatory barriers to big data to cash prices that contribute to the opaqueness of the health care delivery system and financing.

“Real world experience and evidence-based policies from health care stakeholders and experts will be important to craft a policy that most positively affects consumers and involves best practices from providers and states,” the bipartisan group wrote to stakeholders. “We all agree that health care costs are too high and now is time to move towards a system that is more open, efficient, and accountable to the needs of the modern patient.”

While there is no legislative proposal at this point, the senators have indicated that they will host roundtable discussions with a variety of policy experts and engage federal and state policymakers to develop a comprehensive approach. Senator Cassidy has said publicly that he would like to pursue healthcare transparency legislation this year, and House Energy and Commerce Committee Chair Greg Walden (R-OR) has recently expressed interest in taking up the issue as well.

House Judiciary Committee Holds Hearing on Proposed CVS-Aetna Merger

On February 27, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing to examine the potential competitive impacts of the proposed $69 billion CVS-Aetna merger on consumers, health insurers and PBMs.

Executives from both CVS and Aetna testified separately, vowing that the merger plans would not lead to increased costs or to restrictions on service offerings. Thomas Moriarty, executive vice president, and general counsel, told committee members that CVS will not restrict members’ use of services outside of CVS as a result of the merger, nor would the company end or restrict its PBM relationships with other insurers, as Aetna members make up only about 11 percent of CVS’ pharmacy business. Thomas Sabatino Jr., Aetna’s general counsel, said that cost savings and value realized through the merger would be passed on to consumers through lowered premiums and increased benefits, as well as lower pharmacy prices.

Consumer advocates testified in opposition to the merger, arguing that a lack of transparency on cost savings could keep consumers from seeing any the benefits as increased consolidation in healthcare has not always paid off for patients. The American Medical Association raised similar concerns in written testimony submitted prior to the hearing, saying the deal poses anticompetitive concerns. While the AMA called for close scrutiny to determine if the merger would threaten competition, lower prices and higher quality care for patients, but stopped short of calling on Congress to block the deal.

There were few tough questions from committee members, and not a single lawmaker took the opportunity to urge anti-trust regulators to outright block the deal. CVS even drew praise from Subcommittee Chair Tom Marino for their efforts to help combat the opioid epidemic by adding drug disposal units to CVS stores and limiting initial painkiller prescriptions for some customers to seven days.

In February, the Department of Justice (DOJ) requested additional information to review the potential deal. The companies have not publicly commented on what additional information the DOJ is seeking, but CVS said during its most recent earnings call that the request was not unexpected, and that the merger was still expected to close in the second half of this year. Shareholders are set to vote on the deal March 20.

The Administration

Trump Administration Proposes Rules to Expand Short-Term, Limited Duration Insurance Plans

On February 20, the U.S Departments of Health and Human Services (HHS), Labor and Treasury released a proposed rule that would expand the availability of Short-Term, Limited Duration Insurance (STLDI) by allowing the purchase of plans providing coverage for up to 12 months. The proposed rule follows an executive order the president signed in October, which instructed federal agencies to explore more access to association health plans, expanding short-term limited duration plans and changes to health reimbursement arrangements.

The proposed rule amends the definition of STLDI to allow insurers to offer plans up to a maximum duration of one year. In October 2016, the Obama Administration limited the duration of coverage under STLDI to a maximum duration of three months. Short-term plans would not be subject to several Affordable Care Act (ACA) mandates including the inclusion of essential health benefits, guaranteed issue and community rating. The proposed rule would require insurers to “prominently display” language in the contract and application that the policy is not required to comply with federal health insurance requirements. Insurers would also not be required to guarantee the renewal of short-term plans, although CMS is requesting public comments about what how to best incorporate renewability options.

An associated HHS fact sheet projects that approximately 100,000 – 200,000 individuals would shift from an ACA-compliant individual market plan to STLDI in 2019 based on projections of enrollment trends prior to the Obama Administration’s October 2016 final rule. HHS predicts that most of these individuals switching to short-term plans would be young or healthy, and only about 10 percent would have been subsidy-eligible if they maintained their insurance exchange coverage. The fact sheet also projects that the premiums for these ACA non-compliant plans would likely be lower than those for ACA-compliant plans, citing one report showing a difference of $124 per month vs. $393 per month in average monthly premiums.  

HHS will accept public comments on the proposed rule through April 23, 2018.

IRS Releases Rules on ACA’s Health Insurance Tax

On February 22, the IRS issued final rules to define which entities are required to pay the ACA’s health insurance tax (HIT). Section 9010 of the ACA imposes an annual fee that applies to insurers that offer fully insured health insurance in the exchanges, group market, or public programs. The tax was in effect from 2014 through 2016. Congress approved a one-year moratorium for 2017 but the tax went back into effect for 2018. In the recently-enacted tax legislation, Congress suspended the tax once again for 2019, but it will go into effect again beginning in 2020 without further congressional action.

Section 9010(c) of the ACA includes an exclusion from the tax for self-insured employers, government entities, and certain nonprofit health providers, among others. Under the rule, entities qualify for an exclusion based on an entire data year ending on the prior December 31st or for the entire fee year beginning on January 1st. The rule also includes a consistency requirement, a special rule for an entity that uses the fee year as its test year, and controlled group requirements. IRS and Treasury received only a few comments on the proposed rule and are finalizing the rule without changes.

The IRS initially published temporary and proposed regulations on February 26, 2015; the final regulations adopt the proposed version without any changes. The rules will continue to allow certain entities, such as nonprofits or employers with self-insured plans, to be exempt from the tax.

Critics of the HIT continue lobbying for permanent repeal. With the bipartisan opposition the tax enjoys, it may be a prime candidate for further postponement or repeal.

CDC Finds No Change in Percentage of Uninsured, but Continued Growth in High Deductible Plans

The Center for Disease Control’s (CDC) National Center for Health Statistics’ issued its latest report on health insurance in February, finding that28.9 million (9 percent) of Americans were uninsured in the first nine months of 2017. That’s “not significantly” different from 2016, but 19.7 million fewer persons than in 2010.

Drilling down into those numbers, among adults aged 18 to 64, 12.7 percent were uninsured; 19.5 percent had public insurance; and 69.3 percent had private health plans in the first nine months of 2017. Of the 69.3 percent covered by private health plans, 4.4 percent (8.6 million) had insurance through the federal or or state-based exchanges.

One of the most significant trends identified in the report involve high-deductible health plans (HDHPs). In the first 9 months of 2017, 43.2 percent of those under age 65 with private health insurance were enrolled in an HDHP, including 17.9 percent who were enrolled in a CDHP – an HDHP with a health savings account (HSA) – and 25.3 percent who were enrolled in an HDHP without an HSA. Enrollment in HDHPs has increased dramatically since 2010. The percentage of people enrolled in an HDHP increased 17.9 percentage points – from 25.3 percent in 2010 to 43.2 percent – in the first 9 months of 2017. More recently, the percentage of those enrolled in an HDHP increased, from 39.4 percent in 2016 to 43.2 percent in the first 9 months of 2017. The percentage of people enrolled in a CDHP more than doubled, from 7.7 percent in 2010 to 17.9 percent in 2017.

In the States

Twenty State Attorneys General File Federal Suit to Invalidate the ACA

On February 26, a coalition of 20 state attorneys general brought a lawsuit against the federal government challenging the constitutionality of the ACA after the individual mandate was gutted by last year’s tax reform bill.

In a suit filed in U.S. District Court in the Northern District of Texas, the attorneys general allege that “following the enactment of the Tax Cuts and Jobs Act of 2017, the country is left with an individual mandate to buy health insurance that lacks any constitutional basis. Once the heart of the ACA – the individual mandate – is declared unconstitutional, the remainder of the ACA must also fall.”

Of the 20 state attorneys general in the complaint, only two – Maine and Mississippi– are Democrats. Their argument centers on the 2012 ruling in National Federation of Independent Business v. Sebelius, in which the Supreme Court ruled the individual mandate was allowed because the penalty acted like a tax, but rejected the Obama administration’s position that the requirement fell under Congress’s power to regulate interstate commerce.

“With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all,” Texas Attorney General Ken Paxton said in a press release.

Besides Texas, the states involved are: Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Utah, West Virginia and Wisconsin.

It’s far from certain this case will ever get to the Supreme Court, which has already heard four challenges to the law, However, the state officials behind the suit strategically chose a potentially friendly venue. Judge Reed C. O’Connor, who was assigned the case, ruled in 2016 against ACA regulations prohibiting insurers, doctors and hospitals from discriminating against transgender patients or women who have had an abortion.

The Justice Department will also have to decide whether to defend the law, which the president has already declared “dead.”  The Department has not officially commented on the suit. The attorneys general reportedly informed the Trump administration shortly before they filed the case, but did not collaborate with administration officials.

Texas AG Ken Paxton made clear that the stated goal of the suit is to strike down the ACA so it can be replaced by Republicans in Congress. Several legislative efforts to do just that failed in 2017, and the party’s congressional leaders have expressed little interest in taking up significant healthcare reforms ahead of the midterm elections in November.

Idaho Governor Meets with HHS Secretary to Discuss Noncompliant Health Plans

On February 24, Governor Butch Otter and Insurance Commissioner Dean Cameron met with HHS Secretary Alex Azar, CMS Administrator Seema Verma, and other federal health officials regarding the future of Idaho’s controversial insurance plans that skirt ACA consumer protection requirements. Nothing definite emerged from the meeting, but according to an HHS spokesperson, Secretary Azar “expressed empathy with the challenges that states such as Idaho face with ObamaCare and highlighted the importance of the recently announced HHS proposed regulation that seeks to provide more choice and competition through short-term, limited duration plans.”

Earlier this month, Blue Cross of Idaho filed five new individual market plans that will not comply with ACA. These new so-called “Freedom Blue” plans were filed in response to an executive order signed by Governor Otter and implementing guidance issued by the Idaho Department of Insurance (DOI) in January. Under the DOI guidance, insurers would be able to: use a person’s health status for underwriting purposes, deny coverage for pre-existing conditions, and set annual limits on coverage. Because the plans do not comply with the ACA, insurers that offer them are opening themselves up to significant legal risk and generating additional uncertainty for the market. To avoid this (and attempts by other states that to replicate this approach), HHS could step in to enforce the ACA’s consumer protections, as the agency is required to do so under the Public Health Service Act and federal regulations.

So far, however, HHS has been largely silent. When asked about Idaho’s new guidance during testimony before the House Ways and Means Committee on February 14, 2018, Secretary Azar did not take a definitive position on Idaho. He pledged to enforce federal law, noting that “there is a rule of law that we need to enforce,” but offered nothing more specific.

Wisconsin Governor Scott Walker Signs $200 Million Health Reinsurance Bill

On February 27, Wisconsin Governor Scott Walker signed into law SB 770, a bill that provides $200 million to stabilize the state exchange market. The Republican governor and one-time presidential candidate — a longtime critic of the ACA — signed the bill a day after authorizing state Attorney General Brad Schimel to join the group of 20 states are suing to overturn the law entirely.

The bill creates the Wisconsin Healthcare Stability Plan (WIHSP), a state-based reinsurance program for health carriers, contingent on approval of a federal Section 1332 State Innovation Waiver. If approved by CMS, the government would provide money to insurers to pay for between 50 percent and 80 percent of medical claims costing between $50,000 and $200,000. Wisconsin would join Alaska, Minnesota, and Oregon with state reinsurance programs, following the sunset of the ACA’s federal reinsurance in 2016.

The governor estimates the plan will cost $200 million, with the state picking up between $50 million and $80 million and the federal government paying the rest.

Governors Meet in DC with Healthcare Major Topic of Discussion

The National Governors Association (NGA) held its annual Winter Meeting in Washington February 23-26, and health care was a major topic of discussion, particularly the evolving

Medicaid program and state-level reforms. As many as 10 states have submitted waivers to CMS that included work requirements for Medicaid recipients, and how the Administration responds and works with states on these proposals will be closely watched by other states considering similar proposals.

A bipartisan group of governors also unveiled an ambitious 7-page “blueprint” to reform the nation’s health care system. The plan, drafted by governors John Kasich (R-OH), John Hickenlooper (D-CO), Bill Walker (I-AK), Brian Sandoval (R-NV), and Tom Wolf (D-PA), aims to lower the costs of health care, stabilize insurance markets and give states more flexibility to make changes.

The plan includes some of the typical policy goals that have often been repeated during previous health care debates: improve affordability, restore stability to insurance markets, provide state flexibility to encourage innovation, and improve the regulatory environment. However, the plan does not include any legislative language, or specificity on costs.

Instead, it urges Congress and the administration to work with states and commit to value-based reimbursement, in which providers are paid based on the quality, instead of the quantity, of services they provide; ensure Americans have access to care while creating incentives that encourage patients to live healthier lives and contributing toward their health care costs; combat “anti-competitive behavior,” particularly consolidation between local hospital systems and pharmaceutical companies; and reform the insurance markets by reinstituting the ACA’s reinsurance and risk corridors to maximize insurer participation.

The idea has bipartisan support in Congress, but the outlook is uncertain given the struggles to make any significant strides toward health reform and the fact that bipartisan legislation to stabilize the insurance markets has languished for months.

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of March 5-9.

Congressional Hearings:

March 8: The Senate Health Committee will continue a series of hearings examining the opioid crisis, specifically focused on leadership and innovation in the states

March 8: The House Energy and Commerce’s Subcommittee on Oversight and Investigations will hold a hearing examining public health response efforts to the influence outbreak