Health Care Reform Implementation Update December 9, 2014

We are now more than two weeks into the Affordable Care Act (ACA’s) second open enrollment period, and 765,000 individuals have obtained coverage through On Capitol Hill, House lawmakers filed a lawsuit against the Obama administration concerning aspects of ACA implementation, and the House Oversight Committee found discrepancies in the enrollment numbers for ACA exchanges that the Department of Health and Human Services (HHS) reported for last year’s enrollment period. The Centers for Medicare and Medicaid Services (CMS) finalized rules regarding disproportionate share hospitals and proposed rules on requirements for Medicare Shared Savings Program (MSSP) accountable care organizations (ACOs); and the Food and Drug Administration released rules implementing the ACA’s menu-labeling requirements.


On December 3, HHS reported that 765,000 individuals have chosen ACA exchange plans through during this current enrollment period so far. This number is made up of roughly half new enrollees and half ACA exchange customers that are renewing their plans for the second year. HHS’s Office of the Assistant Secretary released a report on December 4 that encourages both new enrollees and current enrollees to shop the ACA exchanges for potential savings (instead of allowing themselves to automatically be renewed into plans whose prices may have increased). According to the report, if current enrollees would shop and switch to lower cost plans it could potentially save $2 billion in premium costs.

On November 24, CMS announced that it will give hospitals until December 31 to attest to Medicare meaningful use program requirements for 2014 — extending the deadline by one month. Under the program, hospitals that meet program requirements regarding electronic health record utilization will receive incentive payments, and those that do not will have their Medicare reimbursement cut by 1 percent.

On December 3, CMS issued a final rule that will prevent providers and suppliers with unpaid Medicare debt from re-entering the Medicare program and will revoke the billing privileges of providers and suppliers with histories of abusive billing.

On November 24, the Office of Personnel Management released a proposed rule that makes changes to the ACA’s Multi-State Plan (MSP) program. The proposed rule provides information on the approach used to enforce requirements of the program and modifies coverage area, benefits and contracting provisions of the MSP program.

On November 21, CMS published its 2016 Notice of Benefit and Payment Parameters Proposed Rule. The proposed rule proposes, among other things, payment parameters and new standards related to essential health benefits, prescription drug coverage, default re-enrollment, the medical loss ratio, the Small Business Health Options Program, risk adjustment, reinsurance, risk corridors, user fees for the federally facilitated exchange, network adequacy and minimum essential coverage. Comments must be submitted by December 26, 2013.

On November 21, the Internal Revenue Service (IRS) issued a final rule that finalizes and clarifies the ACA’s minimum essential coverage requirements. The rule addresses coverage for the medically needy, Section 1116 (of the Social Security Act) demonstration projects and certain exemptions for individuals who cannot afford coverage.

On the same date, the IRS also released a Revenue Procedure that updates the 2016 applicable percentage table that is used to calculate premium tax credits and also updated the percentage of income used to determine eligibility for “affordable employer-sponsored minimum essential coverage.”

CMS released a final rule on November 28 regarding Medicaid disproportionate share hospital (DSH) payments. The final rule clarifies the definition of “uninsured,” which is used to calculate hospital-specific DSH limits. The rule states that the DSH limits cannot be greater than the uncompensated costs of providing hospital services to those who are Medicaid eligible or have no health insurance or other source of third-party coverage for the services provided.

On December 1, CMS released its long-awaited Medicare Shared Savings Program (MSSP) proposed rule. The rule proposes to allow MSSP ACOs to choose to remain in the one-sided risk ACO model for an additional three years (however with a maximum shared savings rate of 40 percent instead of 50 percent), creating a new shared savings model with upside and downside risks and higher savings rates as well as prospective beneficiary attribution, proposes a streamlined process for ACOs to access beneficiary information, and requests comments on alternative methodologies for establishing and updating the benchmarks used to determine ACOs’ success.

On December 2, a report released by the Agency for Healthcare Research and Quality found that the rate of hospital-acquired conditions between 2010 and 2013 fell by 17 percent, resulting in savings of approximately $12 billion and 50,000 fewer patient deaths.

According to HHS’s Fiscal Year 2014 Agency Financial Report, the Medicare fee-for-service improper payment rate increased to 12.7 percent in fiscal year 2014. The Medicaid improper payment rate also increased to 6.7 percent.

On November 25, the Food and Drug Administration (FDA) released rules for posting caloric information on menus in an effort to better inform consumers about their food choices. These rules were expected to be released months ago. The new rules apply to food establishments that have 20 or more locations nationwide. Before the rule’s release it was unclear whether convenience stores and movie theatres would also be subject to the new menu labeling requirements, but the final rules clearly include these businesses under the new requirements. The new rules also include calorie counts for vending machines and alcoholic beverages.


On November 21, Republicans in the House filed a lawsuit against President Obama, the Department of Health and Human Services, and the Department of the Treasury. The lawsuit has been months in the making with two law firms announcing in recent months that they would not represent the House in this lawsuit. Jonathan Turley, a George Washington University law professor, is now the outside counsel on this case for the House. The lawsuit alleges that the president, HHS, and Treasury overstepped their constitutional authority by delaying the employer mandate provision under the ACA without permission from Congress. The lawsuit also alleges that the federal government has not properly appropriated funds to offset the cost of discounts and deductibles to insurance companies as was outlined in the ACA.

On November 20, HHS Secretary Burwell publically admitted that CMS had mistakenly inflated the final enrollment numbers for individuals enrolled in ACA plans by 400,000. The mistake was due to inclusion of dental plan enrollment. Secretary Burwell stated that the mistake was “unacceptable” and agreed that dental plan enrollment should not have been included in the 7.1 million tally touted by HHS throughout the year. The House Oversight and Government Reform Committee was the first to indicate the discrepancy after the committee received and reviewed additional information from HHS upon request. Secretary Burwell has requested ideas for improving transparency from her senior officials within HHS. CMS Administrator Marilyn Tavenner is scheduled to testify in front of the House Oversight Committee on December 9 to address the inflated enrollment number issue.


On December 2, the panel for the 11th Circuit Court of Appeals rejected a challenge to the postponement of the employer mandate under the ACA. In the case, Kawa Orthodontics argued that they were “injured” when they adopted ACA compliance standards before President Obama’s administration made the decision to delay the mandate until 2016. Kawa claims that it would have used the resources for compliance differently had they known the mandate would be delayed. The 11th Circuit panel found that Kawa was not injured by the delay and therefore Kawa lacked legal standing to move forward with the case.


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