by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
What Will Happen By Year’s End on Surprise Medical Billing?
- As I have explained to you, the debate over surprise billing has ebbed-and-flowed for about a year now. As stated, the employer and insurer community were winning the debate early on, notching wins in various Committees of jurisdiction with the establishment of a Federal “benchmark” rate ONLY-approach, which would be used to determine how much an insurer and self-insured plan would pay a provider for out-of-network costs. Even the White House came out in support of a “benchmark” rate ONLY-approach, pouring cold water on an “arbitration process.”
- Analysis: BUT, shortly after these “wins,” the physician-Members of Congress turned up the volume on why a “benchmark” rate is bad, and why an “arbitration process” is good. Then, during the Summer, private equity and other out-of-network provider groups like radiologists and anesthesiologists spent $15 to $25 million on advertising and other lobbying efforts arguing for an “arbitration process.” This turned-the-tide for the provider community, and a good number of Members of Congress started agreeing that an “arbitration process” is the right policy. Another significant factor on “turning-the-tide” was/is the home-State hospitals that are ALSO pushing for “arbitration.” So, if I do the math, you have got (1) the doctors represented by the physician-Members of Congress, (2) private equity and other out-of-network provider groups spending MILLIONS of dollars, and (3) the home-State hospitals (who carry a significant amount of weight with their particular Members of Congress) ALL pushing for “arbitration.” HOWEVER, one of the more significant strikes against “arbitration” are these: It is well-accepted by Congressional staff that “arbitration” adds administrative costs to an already bloated and expensive health care system. Most importantly though, the Congressional Budget Office (CBO) has estimated that an “arbitration process” – similar to what New York State currently has in place – would potentially cost the Federal government up to $15 billion. This is NOT sitting well with both Republican and Democratic Leadership, not to mention conservative Senators, and even moderate and Democratic Members of Congress who want to lower health care costs, NOT increase them. Another strike against “arbitration” is that CBO is telling Members of Congress that a “benchmark” rate only SAVES between $20 and $25 billion. As I have always told you, any type of savings is KING when legislating, and $20 to $25 billion worth of savings does NOT come around very often. More importantly though, savings to the Federal government means lower health care costs. And, the voters out there are dying for Congress to do something that lowers health care costs. What a great campaign message that both Democrats and Republicans can run on: “I protected patients – AND – I lowered health care costs.” It doesn’t get any better than that. Sooooo, what is going to happen? Well, I cannot see a political reality where some form of “arbitration” is NOT a part of a final surprise billing proposal. In other words, I believe that “arbitration” will be included in a final proposal in some way-shape-or-form. Again, do the math. BUT, I also cannot see a political reality where a “benchmark” rate is NOT part of a final surprise billing proposal. You can also do some math by looking at the $25 billion savings under a “benchmark” rate relative to $15 billion in costs under an “arbitration process.” And also, the political juice you get out being able to say, “I lowered health care costs for my constituents.” So to me, the last piece of the puzzle is when does the requirement to pay the “benchmark” rate end, and when does “arbitration” begin? $1,000, $1,250, $5,000?? Arguments are currently being made that $1,000 is the right number, while others argue for $5,000. You can probably guess what the end-result might be. Other questions that remain are: Do you carve out certain stakeholders from the hybrid “benchmark” rate/“arbitration process”? For example, do you say that private equity-backed providers CANNOT get “arbitration” at all? Do you give hospitals a bigger break on the specified dollar threshold for going to “arbitration” in emergency situations? If the proposal generates savings, do you give some of those savings back to hospitals as an incentive to require the hospital’s out-of-network providers to be a part of their in-network facilities? Also, do you develop a list of which medical services can be arbitrated? Do you require providers to identify individual items and services that are part of a “bundle” by the relevant code and cost? Do you put guardrails around the payment amounts providers can first present in arbitration (i.e., the initial charged amount or a different amount after-the-fact)? Do you limit the number of times a provider can go to arbitration? Here are MY questions: Are Members of Congress going to get “granular” and answer some or all of the above stated questions? Or, do Members simply want to get the surprise billing issue off-of-their-plate? If the latter, then I could see Members of Congress striking a deal by Dec. 20th and simply agreeing to a hybrid “benchmark” rate/“arbitration process” with a specified dollar threshold that is higher than $1,250, but lower than $5,000. This proposal would then kick all of the questions asked above to HHS to answer in regulations. If surprise billing is NOT included in the Dec. 20th end-of-year legislative package – or the end-of-year legislative package does NOT happen because the President and Congressional Democrats force a government shut-down – then I could see Members and their staff developing a more granular surprise billing proposal because they will have more time to do so. Importantly, Senate HELP and House Energy & Commerce Committee staff has reportedly come to an agreement on a surprise billing proposal. BUT, we don’t yet know what that agreement looks like. Stay tuned.
What Will Happen By Year’s End on ACA Health Taxes?
- You have heard me try to answer this question before, so I hope to be somewhat brief (but I never am):
- Analysis: In short, I do NOT see full repeal of the Cadillac Tax happening. I actually do NOT see a delay of the Cadillac Tax either. Full repeal costs a lot of money, and Senate Republicans view full repeal of the Cadillac Tax as a Democratic “ask,” which would require the Democrats to give up something, which the Democrats are UNlikely to do. Regarding a delay, currently the Cadillac Tax is delayed until the beginning of 2022. So, Members of Congress and staff feel they have time to deal with delay (so no need to act now). BUT, what about the medical device excise tax and the annual excise tax on insurance companies? My answer: I could see these taxes getting a one-year moratorium for 2021. Why? Because there is a pivotal election coming up in Nov. 2020. Why does that matter? As you know, Democrats continue to bash Republicans over the head – especially the President – with the claim that they are “sabotaging” the ACA’s insurance markets (and no, that was not a reference to the Browns-Steelers incident). And, while premiums in the ACA’s “individual” market have actually gone down for 2020, Democrats continually argue that premiums would have gone down even further if it wasn’t for Congressional Republican efforts to repeal and replace the ACA and the Administration’s policies that have been put into place over the past 2 ½ years. Although there are a number of factors that drive premiums higher, one of those factors is taxes. It is well-accepted that taxes on goods and services are passed-through the consumer. Mostly every economist will tell you that. Way back during the ACA debate (in 2009), my colleagues and I on Senate Finance asked CBO to tell us (1) whether these excise taxes would be passed-through and (2) what impact these taxes would have on premiums. CBO’s response: (1) yes, these excise taxes would be passed-through and (2) in the case of the insurer excise tax, premiums would go up by 2 to 2.5%, and premiums would be marginally higher due to the medical device tax (let’s call it .5%). Nowadays, CBO says that the insurer excise tax increases premiums by to 3 to 3.5%. This makes sense relative to when we first asked the question in 2009 because the excise tax is statutorily required to bring in more revenue to the Federal government in 2020. The medical device excise tax has not changed at a 2.3% tax rate. So again, let’s say this excise tax increases premiums by .5%. Even though 3% to 4% doesn’t sound like much, if you are a Republican running for election – and especially if you are the President running for re-election – you are going to want this 3% to 4% to show up in any potential premium savings that may be announced for the 2021 plan year. Importantly, final premium rates for the 2021 plan year will be announced in October 2020. Proposed 2021 rates will be discussed publicly starting in the Summer. Ummmm, that time-frame is the height of the campaign season. As you know, John Q. and Jane Q. Public don’t start paying attention to the campaigns until 1 to 3 months before the actual election. Sooooo, what great timing for premium rates that would be at least 3% to 4% lower than they otherwise would be if the excise taxes were NOT “turned off” for 2021. Heck, maybe Republicans even try to “turn-off” the taxes for 2020. Although these taxes were already baked into the 2020 premiums (because there currently is NO moratorium on these taxes for 2020), the savings that the insurance carriers would realize in 2020 could be built into the 2021 premiums. Heck, the legislation could even require carriers to plow the savings from 2020 into the 2021 premiums, thus potentially reducing 2021 premiums by 6% to 8%. That would be a nice October surprise for Republicans and their election efforts. BUT, would Democrats be willing to give Republicans this type of “win”…a win that could be used against them in the upcoming elections? Probably NOT. BUT, could Democrats try to get something for their agreeing to a one- or two-year delay of these taxes? Maybe. Could the trade be a Cadillac Tax delay? Maybe. HOWEVER, all of this may be for naught if the Dec. 20th end-of-year legislative package does NOT include a Tax Title, which it might not (50/50 chance). Stay tuned.
Health Policy Update
HHS Requires the Disclosure of Cost-Sharing Amounts, Negotiated In-Network Rates, and “Historical” Payments to Out-of-Network Providers
- Back in June of this year, the White House issued an Executive Order directing the Departments of Health and Human Services (HHS), Treasury, and Labor to issue regulations intended to increase price and quality transparency and to lower costs for health care consumers. On November 15th, the Departments responded by issuing a final regulation requiring hospitals to disclose their negotiated prices for up to 300 “shoppable” medical items and services. The Departments also issued a proposed regulation that would require a self-insured plan – as well as a fully-insured “individual” and “group” market plan – to disclose specific cost-sharing information. In addition, the proposed regulation would require self-insured plan – as well as a fully-insured “individual” and “group” plan – to develop two “machine-readable files” (essentially spreadsheets of information) that list (1) the plan’s negotiated in-network rates and (2) the plan’s “historical” amounts paid to out-of-network providers. Each of these respective files would then be posted on a website that can be accessed by the public.
- Analysis: BTW, I have not taken a deep-dive into the hospital disclosure final regulations. BUT, I have taken a fairly deep-dive into the proposed regulations requiring fully-insured and self-insured plans to disclose information about (1) specific cost-sharing information, (2) negotiated in-network rates, and (3) “historical” payments to out-of-network providers. As result, my posts here are going to focus on the proposed disclosure regulations ONLY. Before I dig into the proposed regulation, let me mention this: The Affordable Care Act (ACA) added Section 2715A to the Public Health Service Act (PHSA), requiring fully-insured and self-insured “group” health plans to disclose, among other things, information on cost-sharing and payments with respect to any out-of-network coverage. PHSA section 2715A also requires fully-insured and self-insured “group” plans to help their participants learn about the amount of cost-sharing the participants would be responsible for through an internet website. In addition, PHSA section 2715A gives HHS the authority to determine “other appropriate information” that could – and should – be disclosed to “group” health plan participants through an internet website. Note that PHSA section 2715A accomplishes all of this by cross-referencing the requirements under ACA section 1311(e)(3), which is a “certification” requirement for “individual” market plans sold through an ACA Exchange (so “individual” market plans are picked up here too). Interestingly, the previous Administration never implemented these requirements. Importantly, the current Administration is now using this statutory language as the basis for requiring self-insured plans, as well as fully-insured “individual” and “group” plans, to disclose to participants – through an on-line “self-service tool” – specific cost-sharing information for medical items and services covered under the plan. In addition, in accordance with HHS’s authority to determine “other appropriate information” that could – and should – be disclosed to participants, the Departments determined that it would be appropriate to require self-insured plans, as well as fully-insured “individual” and “group” plans, to disclose their negotiated in-network rates and their historical payments to out-of-network providers on public websites. I mention this statutory authority up-front because if and when legal challenges are brought against these regulations (which is the “new normal”), the Administration has a clear basis for arguing that they have the authority to impose all of these requirements on self-insured health plans, as well as fully-insured “individual” and “group” plans. And, HHS will argue that it is merely interpreting and implementing a statute (i.e., the ACA) that it has the exclusive authority to interpret and implement. HHS can further argue that (1) HHS’s interpretation of the ACA is reasonable and (2) the Department rationally explained why it developed these requirements, and thus, a court of law MUST defer to Department’s interpretation and uphold the regulations even if outside stakeholders – and even a court of law – disagrees with the policy. HHS will also push-back on any challenge that the Department is somehow abrogating a contract that is negotiated between two private parties by arguing that much of the information that must be disclosed under the regulation is information that must currently be included in an Explanation of Benefits (EOB) and/or a Summary of Benefits and Coverage (SBC). HHS will argue that all they are doing here is merely requiring that this same information be disclosed through a different medium and in different formats. I say all of that NOT to say that I think HHS wins in court. All I am saying is that there are some reasonable arguments that HHS can make that could arguably convince a court of law that their regulation should be upheld. BUT, I am saying this: If you are relying on the notion that this regulation will be tied up in litigation for a number of years – and thus you believe you will NOT need to bother trying to comply with this regulation – you would be WRONG. There are a number of scenarios where this regulation will have the force of law for a period of time BEFORE a court of law ever has the opportunity to ultimately strike it down. And, there are scenarios where this regulation is upheld. Just sayin.’
What Does the Proposed Regulation Require?
- As stated, the proposed regulation would require self-insured plans – as well as fully-insured “individual” and “group” market plans – to disclose (1) specific cost-sharing information, (2) negotiated in-network rates, and (3) “historical” payments to out-of-network providers. I will explain each requirement sequentially below:
Disclosing Cost-Sharing Information
What Cost-Sharing Information Must Be Disclosed? The “types” of cost-sharing information that must be disclosed include all applicable forms of cost-sharing, including deductibles, coinsurance requirements, and copayments. The “types” of medical items or services mean all encounters, procedures, medical tests, supplies, drugs, durable medical equipment, and fees (including facility fees), for which a provider charges a patient in connection with the provision of health care. An insurer and self-insured plan must keep track of a participant’s accumulated amounts (e.g., any expense that counts toward the deductible or out-of-pocket limit). In cases where a covered item or service is subject to a bundled payment arrangement, insurers and plans would be required to disclose a list of each covered item and service included in the bundled payment arrangement and the participant’s cost-sharing liability for those covered items and services as a bundle (but not a cost-sharing estimate separately associated with each covered item or service included in the bundle). Insurers and self-insured plans would also be required to disclose the “negotiated rate,” and in some cases the “allowed out-of-network rate,” because these costs are necessary for determining the participant’s cost-sharing responsibilities. The “negotiated rate” means the amount an insurer, the plan, or a third-party administrator (TPA) on behalf of a plan has contractually agreed to pay an in-network provider for a covered item or service pursuant to the terms of an agreement between the provider and the insurer, plan, or TPA. Some provider contracts express negotiated rates as a formula (for example, 150% of Medicare), and in this case, the proposed regulation would require disclosure of the rate that results from using such a formula, which must be expressed as a dollar amount.With respect to obtaining cost-sharing information for prescription drugs, participants may request this information by billing code (e.g., a CPT code) or by descriptive term (e.g., the name of the prescription drug), thus allowing the participant to learn the estimated cost of a prescription drug obtained directly through a provider, such as a pharmacy or mail order service. Participants would also be allowed to learn about the cost of a set of items or services that include a prescription drug or drugs that is subject to a bundled payment arrangement for a treatment or procedure, although HHS recognizes that there may be some difficulties obtaining accurate cost-sharing information when prescription drugs offered outside of a bundled arrangement are based on undiscounted list prices.
The On-Line Self-Service Tool
An insurer and a self-insured plan must create its own on-line tool that is made available to participants to request the “cost-sharing information” that is described above. Many insurance carriers and self-insured employers already have their own intranet website – or they partner with a third-party that specializes in on-line disclosure tools – but for those carriers and employers that do not currently make these resources available to participants, they must do so if and when the proposed regulation is finalized. The on-line tool would be required to allow participants to search for cost-sharing information for a covered item or service provided by a specific in-network provider, or by all in-network providers. The tool also would be required to allow participants to search for the out-of-network allowed amount for a covered item or service provided by out-of-network providers. And, the tool would be required to provide participants real-time responses that are based on cost-sharing information that is accurate at the time of their request. The on-line tool must allow participants to search for cost-sharing information (1) by billing code (e.g., CPT Code 87804) or (2) by a descriptive term (e.g., “rapid flu test”). The tool also would be required to allow participants to input the name of a specific in-network provider in conjunction with a billing code or descriptive term, to produce cost-sharing information for a covered item or service provided by that in-network provider. With respect to a request for cost-sharing information for all in-network providers, if an insurer or self-insured plan utilizes a multi-tiered network, the tool would be required to produce the relevant cost-sharing information for the covered item or service for each tier. To the extent that cost-sharing information for a covered item or service under a health plan varies based on factors other than the provider, the tool would also be required to allow participants to input sufficient information for the insurer or the self-insured plan to disclose meaningful cost-sharing information. For example, if the cost-sharing estimate for a prescription drug depends on the quantity and dosage of the drug, the tool would be required to allow the participant to input a quantity and dosage for the drug for which he or she is seeking cost-sharing information.
- Disclosing Negotiated In-Network Rates and Historical Amounts Paid to Out-of-Network Providers
As stated above, consistent with the authority under ACA section 1311(e)(3) and PHSA 2715A, the Departments determined that it would be appropriate to require self-insured plans – as well as fully-insured “individual” and “group” plans – to make public their negotiated rates with in-network providers and to also provide information on different amounts the health plan has paid for covered items or services furnished by out-of-network providers. These different “types” of information would be disclosed through two “machine-readable files” (which are essentially spreadsheets of information). The file with the negotiated in-network rates (called the “Negotiated Rate File”) and the file that includes the historical payments to out-of-network providers (called the “Allowed Amount File”) would each be posted on an internet website, thereby allowing the public (e.g., participants, researchers, regulators, and entrepreneurs) to have access to health insurance coverage information.
The Negotiated Rate File
The Negotiated Rate File would include negotiated rates with respect to each covered item or service furnished by in-network providers. Negotiated rates would have to be associated with the provider’s National Provider Identifier (NPI). In cases of tiered networks, the insurer and self-insured plan must provide the negotiated rate for a covered item or service separately for every provider that participates in that tier of the network. If the insurer and self-insured plan reimburses for certain items and services (for example, maternity care and childbirth) through a bundled payment arrangement, the insurer and plan must identify the bundle of items and services by the relevant code. To the extent a self-insured plan, for example, reimburses providers for an item or service based on a formula or reference based-pricing (such as a percentage of a Medicare), the plan would be required to provide the calculated dollar amount of the negotiated rate for each provider.
Allowed Amount File
A self-insured plan, as well as a fully-insured “individual” and “group” plan – would be required to include in the Allowed Amount File each unique out-of-network allowed amount in connection with covered items or services furnished by a particular out-of-network provider during the 90-day time period that begins 180 days prior to the publication date of the Allowed Amount File. An insurer and a self-insured plan would be required to update monthly the information required to be included in the Allowed Amount File. I have found that the following example best illustrates this requirement:
- Example: Group Health Plan A intends to publish its Allowed Amount File on July 1. Group Health Plan A’s Allowed Amount File must detail each discrete out-of-network allowed amount the plan calculated in connection with a covered item or service furnished by an out-of-network provider between January 1 and April 1 (which is the 90-day time period that begins 180 days prior to the publication date of the Allowed Amount File). During this 90-day time period, Group Health Plan A paid 23 claims from Provider Z seeking compensation for rapid flu tests (CPT Code 87804). Group Health Plan A calculated out-of-network allowed amounts of $100 for three claims, $150 for 10 claims, and $200 for the remaining 10 claims. In this case, Group Health Plan A would report in the file published on June 30, that it calculated three different out of-network allowed amounts of $100, $150, and $200 for rapid flu tests (CPT Code 87804) in connection with covered services furnished by Provider Z from January 1 to April 1. On July 30, Group Health Plan A would update the file to show the unique out-of-network allowed amounts for CPT Code 87804 for Provider Z’s services rendered from February through April.
Are There Other Things In These Proposed Regulations?
- Yes. The proposed regulation includes a Request For Information (RFI) requesting comments on how the (1) cost-sharing information, (2) negotiated in-network rates, and (3) historical payments to out-of-network providers can more easily be accessed by various third-parties through an Application Program Interface (API). Providing access through an API could allow patients and their providers to access this information in real-time, instead of having to go to the on-line self-service tool and/or the public websites created by the insurer or the self-insured plan itself. In addition, entrepreneurs could develop a “better mousetrap” for disclosing this information to patients and the public, rather than relying on the tools/websites that the insurer or plan develops. There is also a proposal for how insurance carriers can get credit for any savings that is generated from helping patients find lower costing health care services on the carriers’ Medical Loss Ratio (MLR) calculation.
Analysis: A discussion of these parts of the regs will have to wait for another update that I will send out soon.