Health Care Reform Implementation Update October 3, 2014

Congress is in recess and therefore much of the action surrounding the Affordable Care Act (ACA) is at the agency level.  However, Congressman Darrel Issa (R-CA) did subpoena the U.S. Department of Treasury for their records on the Internal Revenue Service (IRS) regulation regarding ACA subsidies.  The Department of Health and Human Services (HHS) reported on hospital savings under the ACA and touted the increase in number of insurance companies that have decided to participate in this year’s exchanges for the upcoming ACA enrollment period; the HHS Office of Inspector General released a report regarding security at and two state exchange websites; and the IRS, HHS and the Department of Labor finalized regulations on health care benefits exempt from certain ACA and Health Insurance Portability and Accountability Act (HIPAA) requirements.


HHS released a report on September 24 that estimated that hospitals will save $5.7 billion in uncompensated care costs in 2014.  Approximately three-fourths of the savings will go to hospitals located in the 26 states that had expanded Medicaid before the ACA’s first open enrollment period.  The hospitals had major decreases in the number of uninsured patients they treated and increases in Medicaid-covered admissions.

On September 23, HHS announced that there will be a 25 percent increase in the number of health insurance issuers offering health coverage through ACA exchanges for 2015, based on preliminary data from 43 states and the District of Columbia.  For 2015, a total of 248 health insurance issuers will be offering coverage through the federally facilitated exchange, and 67 will be offering coverage in the 8 states with state-based exchanges that had available information.

The HHS Office of the Inspector General (OIG) released a report on September 23 on the security of information technology on as well as the exchange websites of Kentucky and New Mexico.  The OIG concluded that while CMS had implemented controls to secure personally identifiable information on, there were still areas where the Centers for Medicare and Medicaid Services (CMS) needed additional oversight and management.  The OIG found that Kentucky had “sufficiently protected” the information but that opportunities still existed for improvement.  It also found that New Mexico’s information technology policies and procedures did not always meet federal requirements regarding securing and processing of sensitive information.  The OIG did not release the specific details of the vulnerabilities it uncovered due to the sensitivity of the information.

According to a report released by CMS on September 29, Medicare recovery audit contractors (RACs) identified and corrected improper payment claims that enabled them to collect $3.65 billion in overpayments in fiscal year 2013.  The RACs also identified and returned  $102.4 million in underpayments during the same time period.

On September 26, the IRS, HHS and the Department of Labor issued final rules regarding health care benefits exempt from certain ACA and Health Insurance Portability and Accountability Act (HIPAA) requirements.  The final rules address limited excepted benefits which include limited scope vision and dental benefits, and long term care benefits.  Overall, the agencies finalized the proposed rules that had been issued last year, with only minor modifications.  Under the final rules, vision, dental and long term care benefits qualify as excepted benefits if employees can decline the benefits or if claims for the benefits are administered under a contract that is separate from other plan benefits.  The agencies postponed addressing limited wraparound coverage, saying that rules for such coverage would be forthcoming after the agencies take into account the extensive comments that were received on the subject.

The ACA’s Sunshine Act section authorizes CMS to make public information on payments physicians and hospital receive from pharmaceutical companies and medical device manufactures. The Open Payments website, through which CMS is doing this, launched on September 30.  The website contains information on payments that physicians and hospitals received from pharmaceutical companies and medical device manufacturers.  Approximately 40 percent of the information on the site is currently de-identified, meaning that the payments are not linked to specific providers.  CMS said that the data was de-identified in situations where there were questions about the payments or when the providers did not have time to review the data before publication.

On September 19, CMS announced that between the end of 2011 and 2013, the use of antipsychotic drugs to sedate nursing home residents had decreased by 15 percent.  CMS and other members of the National Partnership to Improve Dementia Care said they are working so that there will be a 25 percent decrease in antipsychotic use by the end of 2015 and a 30 percent decrease by the end of 2016.  CMS is planning to include data on the use of antipsychotic drugs in its nursing home quality rating system.


Congressman Darrell Issa (R-CA), Chairman of the House Oversight and Government Reform Committee, subpoenaed U.S. Treasury documents regarding IRS regulation on subsidies for health insurance exchanges.  The IRS regulation allows individuals to use their subsidies in all 50 states and the District of Columbia even if the states did not create their own state-run exchanges.  In a letter submitted by Issa on September 23 to the Secretary of Treasury Jack Lew, Issa questions whether the ACA allows subsidies to be used nationwide or only in those states that have created their own exchanges.  This same argument is being used in legal challenges to the ACA such as the Halbig v. Burwell case, which is currently under review by U.S. Circuit Court of Appeals by the District of Columbia.


On September 19, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s dismissal of a suit brought by the Association of American Physicians and Surgeons challenging the IRS’s delay of enforcement of the ACA’s employer mandate.  The Seventh Circuit said that the plaintiffs did not have standing to bring the suit.  The court said that since the plaintiffs were not personally harmed by the delay, the suit had to be dismissed.

On September 30, a federal court in Oklahoma held that the text of the ACA required the court to strike down an IRS rule that provided tax subsidies to federal exchange enrollees.  The case and the ruling are similar to the initial panel decision of the U.S. Court of Appeals for the District of Columbia.  Oklahoma had brought suit earlier this year alleging that the IRS could not impose penalties on employers of residents of states that did not establish their own exchanges.  The federal government is expected to appeal the decision.


The Virginia General Assembly voted against expanding Virginia’s Medicaid program.  Governor McAuliffe (D-VA) had proposed a modified Medicaid expansion plan that would insure a reduced amount of Virginians from previous plans he had proposed.  The primarily Republican General Assembly voted in a special session not to move forward with the modified plan.


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