Carter's Benefits

eNewsletter Volume 4, Issue 6 June 2011

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Deficit Talks Could Impact
Health Care Spending

The federal debt and deficit also are top of mind for members of Congress as the nation nears its statutory debt limit. Treasury Secretary Timothy Geithner has said that the nation will hit the debt limit by May 16 but that Treasury can take steps to avoid a default until July 8. These talks could have health care implications, as many of the deficit-limiting proposals and spending cuts being discussed involve government-related and PPACA health care spending programs. Republicans are pressing for limits on federal spending in exchange for raising the debt ceiling, and House Majority Leader Eric Cantor (R-VA) has suggested that Republicans might extend debate on the measure well beyond May 16. Read More

Recent News

  1. PPACA Constitutional Challenge Update.
  2. Two Health Care Reform Provisions Repealed.
  3. Healthcare Law Battle Shifts To Appellate Courts.
  4. HHS Data Show Uninsured Typically Leave $49 Billion In Unpaid Health Bills Annually.
  5. Counterfeiters Increasingly Make Copycat Drugs Convincing.
  6. CMS Issues Revised Model Disclosure Notices for Part D Eligible Individuals.
  7. 1,300 Healthcare Waivers Issued So Far.
  8. Obama Administration Unveils New ACO Options.
  9. HHS Issues Final Rules On Health Insurance Rate Reviews.
  10. Cancer Treatment Costs Expected To Continue Escalating.
  11. New Reports Indicate Disturbing Trends for Costs and Employer-Sponsored Coverage.
  12. More Adults Under Age 26 Receiving Health Insurance Coverage.

PPACA Constitutional Challenge Update.
The United States Supreme Court won’t be ruling on the constitutionality of PPACA any time soon. Despite the Commonwealth of Virginia’s request that the high court expedite its case, on April 25, the Supreme Court denied Virginia’s request to bypass the appeals court. Read More

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Two Health Care Reform Provisions Repealed.
Congress acted recently to repeal two provisions of PPACA that had concerned many employers: the expanded 1099 reporting requirement and “free choice” vouchers.

The first provision would have mandated businesses to report annual payments exceeding $600 for gross proceeds and amounts in consideration for property on Form-1099 Misc. beginning in 2012. This expansion of 1099 reporting rules was unrelated to health care but was included in the legislation as an attempt to raise $17 billion over ten years toward the $1 trillion projected cost of health care reform.

“By late last year a crescendo of opposition was loudly heard on Capitol Hill, led by the IRS’s National Taxpayer Advocate, small business representatives and many others,” said Jim O’Connell, Ceridian's executive consultant on health care reform. Opponents complained that the new mandate would impose an impossible compliance burden on U.S. businesses.

Both the House and Senate made it a priority to remove the controversial 1099 provision from PPACA. President Obama agreed and signed the repeal into law on April 14, 2011.

As a result of the last-minute compromise to avoid a government shutdown, Congress eliminated another key PPACA provision.

The “free choice” voucher provision would have taken effect in 2014 and required employers in very limited circumstances to give employees a voucher equal to the value of the employer’s contribution to health coverage premiums. Recipients would then have been able to use these vouchers to help pay premiums for coverage purchased from state Health Insurance Exchanges.

O’Connell said, “Labor unions and some employer groups were concerned that younger and healthier employees might prefer to buy lower-cost, voucher-subsidized insurance from the Exchanges, reducing the size of risk pools and driving up premiums for employer health plans.”

The repeal of these two provisions demonstrates that Congress views health care reform as an ongoing process. “No one knows what might go next — perhaps the prescription requirement to use FSAs for over-the-counter drugs? Stay tuned!” O’Connell said.

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Healthcare Law Battle Shifts To Appellate Courts.
The New York Times (5/9, A14, Sack) reports, "A five-week flurry of federal appellate hearings on the constitutionality of the Obama health care law kicks off Tuesday in Richmond, Va., beginning the second round of a race to the Supreme Court among a multitude of litigants eager to strike down the president's signature domestic achievement."
        CQ Today (5/6, Norman, Subscription Publication) noted that on Tuesday, the US Court of Appeals for the 4th Circuit "will hear two cases that challenge the constitutionality of the law's requirement that all Americans have health insurance." The cases, one brought by Virginia and the other by Liberty University in Lynchburg, VA, "are the first to advance from federal district courts to the appeals level, possibly the last stop before the Supreme Court." Experts predict the high court will "likely accept one or both suits." Meanwhile, other "strong candidates among the 20-plus suits challenging the law are one filed by 26 states, scheduled for oral arguments in June, and another by a conservative law center in Michigan."
        Top Lawyer To Represent Obama Administration At First Health-Reform Challenge Hearing. The Hill (5/9, Pecquet) "Healthwatch" blog reports that the "government's top lawyer will handle the first appeals court arguments on the constitutionality of the healthcare reform law -- a sign of how seriously the Administration takes lower court proceedings in a case with huge ramifications not only for the healthcare system, but for the 2012 election." On Tuesday when the 4th Circuit Court of Appeals takes up the two challenges, "Acting Solicitor General Neal Katyal will defend the law's individual mandate." Court watchers "say it's highly unusual for the government's highest ranking lawyer to be arguing a case before it reaches the Supreme Court."

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HHS Data Show Uninsured Typically Leave $49 Billion In Unpaid Health Bills Annually.
USA Today (5/10, Kennedy) reports, "Uninsured Americans -- including those with incomes well above the poverty line -- leave hospitals with unpaid tabs of up to $49 billion a year," according to a study released by the Department of Health and Human Services. On average, the study found that uninsured families "pay only about 12% of their hospital bills in full." Researchers also found that most "uninsured people have 'virtually no' savings and that about a third have no financial assets."

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Counterfeiters Increasingly Make Copycat Drugs Convincing.
CBS News (5/11) on its website reported that counterfeit drugs have become a global problem as criminals try to "cash in on some of the most popular drugs on the market." FDA counterfeit drug expert Ilisa Bernstein told CBS that "counterfeiters prey on the vulnerability of the consumer, and they don't care if they're harming patients." Some of the drugs counterfeiters most want to mimic are Lipitor, Procrit, and Viagra, and their copies can be very convincing. CBS News added, "When shopping online for drugs, the FDA recommends consumers only shop at state-licensed pharmacies in the US, and look for a seal of approval called VIPPS."

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CMS Issues Revised Model Disclosure Notices for Part D Eligible Individuals
CMS has posted on its website revised model disclosure notices that are to be provided to Medicare Part D eligible individuals on or after April 1, 2011. The revisions reflect the change in the Medicare Part D annual coordinated election period from its prior November 15-December 31 timeframe to the new October 15-December 31 timeframe.

Model Creditable Coverage Disclosure Notices for use on or after April 1, 2011 (May 9, 2011)

Available at

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1,300 Healthcare Waivers Issued So Far
CQ (5/17, Adams, Subscription Publication) reports, "House Budget Chairman Paul D. Ryan defended his Medicare proposal and criticized the health care overhaul Monday, saying that more than 1,300 waivers from requirements for insurers to increase annual coverage limits are 'a devastating indictment' of that law." His "comments about the waivers come shortly after the Centers for Medicare and Medicaid Services (CMS) had released an updated list of companies and other entities that have been exempted from the annual coverage-limit requirements imposed by the health care law."
        Nevada Receives Health Reform Waiver. The Las Vegas Sun (5/17, Demirjian) reports, "Nevada got a partial waiver from the health care law -- a significant development that Democrats are dismissing as par for the course and Republicans are claiming as a political victory." HHS announced Friday that Nevada "had secured a statewide waiver from certain implementation requirements of the Obama administration's health care law, because forcing them through, the department found, 'may lead to the destabilization of the individual market.'" This announcement makes Nevada "one of only three states to have compliance requirements under the health care bill waived."
        Nursing Home Industry Seeking Waiver From Healthcare Law. The National Journal (5/17, Fung, Subscription Publication) reports, "Officials for trade groups representing nursing homes are asking the Health and Human Services Department for a waiver that would allow the facilities not to provide health insurance to their employees." Notably, "the American Health Care Association, a trade group for nursing homes, is lobbying to get an exemption from the measure. AHCA President Mark Parkinson said that nursing homes depend on Medicare and Medicaid

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Obama Administration Unveils New ACO Options.
The Washington Post (5/18, Goldstein) reports, "The Obama administration is trying to hasten the spread of new arrangements to coordinate and pay for the health care of older Americans, even as major groups of hospitals and doctors are skeptical of the government's plans." Notably, Administration health officials "announced a program Tuesday under which medical teams and health systems could begin the arrangements, known as 'accountable care organizations,' for Medicare patients by the fall." Just last week, however, the "American Medical Group Association, an organization of nearly 400 physician groups and health systems" in a letter to CMS Administrator Dr. Donald Berwick noted that a "survey had found that more than 90 percent of its members would not sign up as an ACO," because the "proposed rules, it said, are 'overly prescriptive'" and "operationally burdensome."
        The Hill (5/18, Pecquet) reports in its "Healthwatch" blog that the Administration "announced three new initiatives to encourage physicians and hospitals to" adopt ACOs. These include "a Pioneer ACO Model aimed at organizations that have already started coordinating care for patients," and "an Advanced Payment ACO Initiative that would allow certain participants in the program to get part of their expected savings up front to invest in care coordination." In addition, the Administration is offering "free Accelerated Development Learning Sessions to help providers learn how they can improve care delivery and coordination."
        Kaiser Health News (5/18, Gold) reports that Dr. Berwick "said in a news briefing that the complaints from provider groups were 'nothing we didn't anticipate' and showed they were engaged in the ACO discussions. The Pioneer program, he said, is another 'exciting new option.'" Meanwhile, some "health care experts say the new program is intended to get some of the major health systems," such as the American Hospital Association, "back at the ACO table." CQ (5/18, Reichard, Norman, Subscription Publication) also covers the story.

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HHS Issues Final Rules On Health Insurance Rate Reviews.
The Los Angeles Times (5/20, Helfand) reports that under new rules (pdf) issued Thursday by the Obama Administration, health insurers will be "required to justify annual premium increases of 10% or more to state regulators." Federal officials, "pointing out that the average cost of health insurance has more than doubled over the last decade, said the effort would help states curb unreasonable rate proposals for millions of individual insurance buyers and small businesses."
        According to The Hill (5/20, Baker) "Healthwatch" blog, HHS will "review all rate increases of 10 percent or more. If the department finds an increase to be excessive, the insurer will have to disclose its justification for the hike." The regulation implements a provision of the healthcare reform law that "allows HHS to review insurers' proposed rates, but the new law does not give HHS any power to block increases from taking effect."
        The New York Times (5/20, A16, Pear, Subscription Publication) reports, "Starting in September 2012, the federal government will set a separate threshold for each state, reflecting trends in insurance and healthcare costs." Federal officials "acknowledged that they did not have the authority to block rates that were found to be unjustified," but they noted that many states already have that authority. Moreover, the federal government is "providing $250 million to states to strengthen their capacity," although a few states opposed to the federal healthcare law "have turned down the money."
        Bloomberg News (5/20, Armstrong) reports that the rules were "prompted partly by a proposal from the California subsidiary of Indianapolis-based WellPoint to raise rates as much as 39 percent in 2010." After an investigation by California's insurance commissioner, the "underlying calculations were found to be incorrect and WellPoint cut the increase in half. ... 'Effective rate review protecting consumers from unreasonable rate increases and bringing needed transparency to the marketplace,'" said HHS Secretary Kathleen Sebelius in a statement announcing the rules. The announcement will be a disappointment to health insurance industry. America's Health Insurance Plans had been lobbying for the "government to do away with the 10 percent rate review threshold, calling it flawed."
        Dow Jones Newswire (5/20, Brin, Subscription Publication) quotes AHIP President Karen Ignagni as saying, "'Focusing on health insurance premiums while ignoring underlying medical cost drivers will not make healthcare coverage more affordable for families and employers. The public policy discussion needs to be enlarged to focus on the soaring cost of medical care that threatens our economic competitiveness, our public safety net, and the affordability of healthcare coverage." Kaiser Health News (5/19, Appleby) said consumer groups "were generally supportive" of the announcement.
        Meanwhile, the Hartford Courant (5/19, Sturdevant) "Insurance Capital" blog noted that yesterday's announcement was the "final part of proposed rules issued in December 2010."
        Also covering the release of the new rules were the Wall Street Journal (5/20, Adamy, Subscription Publication), the AP (5/20), CQ HealthBeat (5/20, Norman, Subscription Publication), PBS (5/20, Clune, Bowers), Modern Healthcare (5/19, Zigmond, Blesch, Subscription Publication), and MedPage Today (5/19, Walker).

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Cancer Treatment Costs Expected To Continue Escalating.
The Wall Street Journal (5/20, Hobson, , Subscription Publication) "Health Blog" suggested, as a precursor to the American Society of Clinical Oncology's annual meeting, taking some time to consider how costly life-saving cancer therapies have become. According to NCI estimates, cancer-related medical costs will reach $158 billion by 2020 and could potentially rise to as much as $207 billion if new therapies and diagnostics, which tend to cause cost increases, are launched. Notably, Medco's Drug Trend Report released last week predicted oncology-specialty treatment market will increase roughly 15% annually through 2013; and research slated to be presented at the ASCO meeting in June found that 10% of cancer patients are already unable to fill cancer drugs prescriptions because of cost.

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New Reports Indicate Disturbing Trends for Costs and Employer-Sponsored Coverage.
PriceWaterhouseCoopers (PwC) issued two new reports last week on the cost of health insurance and its resulting impact on employer-sponsored coverage.  The first study shows that on average, employers can expect an 8.5 percent increase in their medical costs next year due in some part to the health care reform law. A separate survey of large employers released by the firm showed that as a result of PPACA and its cost-impact, many employers are being forced to make disturbing choices about their health benefit plans.

The cost report report identified the following drivers as the reasons for the price increase:

  • Consolidation among hospitals and physicians.
  • Increased cost-shifting to private insurers by providers seeking to make up the difference between low Medicare and Medicaid reimbursements; and
  • Stress-induced illnesses following the recession.

"The big question is how much of the medical cost increase will be passed on to employees, as employers recognize the economic burden on their workers given that wages have been stagnant over the past few years," PwC said.

But the firm’s own employer survey, also released last week, answers some of those questions. According to that study, more than four in five (84%) employers are likely to make changes—e.g., raise premiums, deductibles, and co-payments—to offset increased costs. Other key takeaways include:

  • More than five in six (86%) employer respondents are likely to re-evaluate their overall benefits strategy;
  • More than half (51%) of employers did not expect to maintain “grandfathered” health status—meaning employees will forfeit their current health coverage and pay higher premiums as a result of federal mandates introduced on their new coverage;
  • Nearly two in three employers (65%) expect to be affected by the “Cadillac” tax on employer health plans;
  • Almost half (45%) of companies “indicated they were likely to change subsidies for employee medical coverage” as a result of the law—quite possibly “dumping” their employees on to government-run exchanges; and
  • Exactly one-half (50%) are considering “significantly changing or eliminating company subsidies for dependent medical coverage.”

The PWC survey covers primarily large employers—more than three-quarters of firm respondents have more than 500 active employees, and over a third have more than 5,000. 

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More Adults Under Age 26 Receiving Health Insurance Coverage.
The Forbes (5/23, Ungar) "The Policy Page" blog reported, "Recent data provided by the nation's largest health insurance companies reveals that a provision of the Affordable Care bringing big numbers of the uninsured into the healthcare insurance system." WellPoint "reports adding 280,000 new members in the first three months of 2011. Add in the results of some of the other large health insurers including Aetna, who added just short of 100,000 newly insured to their customer base, Kaiser Permanente's additional 90,000, and Highmark's 72,000 new customers, and we begin to sense our health insurance pools are filling up with" adults under the age of 26. The Health & Human Services Department had "estimated that the changes in the law would result in about 1.2 million new enrollees in 2011."

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How does Carter's Benefits help ?
We continue to stay on top of changes in this industry. In a consultative role, Eddie Carter has begun hosting live seminars to update employers and Human Resource Managers on these changes. If you would like to host a meeting with your local community or civic organization, please contact me for details.

Eddie Carter, Consultant Eddie Carter,
Benefit Consultant
If you have questions or would like more information please give us a call or send us an email.  Our email address is Questions@CartersBenefits.Com

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