Government News of the Week: Medicare Compliance, Medicare Advantage and Part D, and Other Federal and State Developments

3. HHS on July 28 issued interim final regulations regarding pre-existing condition exclusions for children under 19 years old that state insurance commissioners say will reduce concerns they have about a new trend of insurers dropping child-only coverage. The rules authorize insurers to establish open-enrollment periods, if allowed under state law, to cut the risk of adverse selection.

Under the reform law, new group health plans and health insurers are prohibited from imposing exclusions on pre-existing conditions for the first plan year beginning on or after Sept. 23. While the provisions also apply to “grandfathered” group plans and coverage, they do not apply to individual policies in place on March 23, the day President Obama signed into law the Patient Protection and Affordable Care Act.

The law has prompted some insurers, fearful that sick children would enroll for immediate access after a medical event while healthy children would not enroll, to stop writing new coverage for children.

HHS on July 28 posted the following on its website: “To address concerns over adverse selection, issuers in the individual market may restrict enrollment of children under 19… to specific open-enrollment periods” if permitted by state law, according to HHS. Issuers in the individual market can establish the frequency and length of open-enrollment periods, assuming state law does not provide for specific enrollment periods. HHS and states will monitor the implementation of the regulations, and, if necessary, HHS said, the Obama administration will issue further guidance on open-enrollment periods.

The regulations will not affect Medicaid and the Children’s Health Insurance Program, as federal law prohibits those programs from denying children coverage based on their health status.

In a prepared statement, Blue Cross and Blue Shield Association CEO Scott Serota said he is “extremely pleased” by the regulations and “gratified that the administration responded to the concerns we raised about adverse selection that could occur if plans are required to cover children with pre-existing conditions without an open-enrollment period.”

In the aftermath of the reform law’s enactment, some insurers have opted to drop their child-only plans.

During the National Association of Insurance Commissioners interim meeting in Washington, D.C., July 22-23, state officials said some parents opt to purchase child-only coverage when the cost of dependent coverage through their employer health care is too high. Oklahoma Insurance Commissioner Kim Holland (D) said that this is especially common among federal employees.

“I appreciate the grandfather clause,” Holland told AIS. However, “Our concern is still whether insurance companies will write coverage….This clarification does not address that issue.”

In Florida, three of the four insurers that had offered child-only coverage have decided to drop their plans, state Insurance Commissioner Kevin M. McCarty said at the NAIC meeting. The three insurers are Blue Cross and Blue Shield of Florida, Aetna Inc. and a UnitedHealth Group subsidiary. However, BCBSF said July 28 that in light of the administration’s announcement, it will establish an annual-enrollment period for child-only policies and will establish a process to resume sale of the policies.

Aetna and UnitedHealthcare subsidiary Golden Rule Insurance Co. did not return requests for comment on whether they will resume issuing child-only policies.

Kansas Insurance Commissioner Sandy Praeger (R) told AIS that she is “very pleased” with the new regulations, adding that “it alleviates the [insurers’] concerns” that people will wait until their children get sick to purchase coverage.

“This, I think, recognizes the importance of having this work,” Praeger says. “They certainly didn’t want to shrink the market availability, and that was already happening.” Although she is unsure of exactly the number of insurers that offer child-only plans in Kansas, Praeger says she knows “several” of the major insurers have such plans. While she could not confirm whether any insurers in Kansas had dropped their child-only plans, Praeger notes that her office “definitely had companies inquiring about the process” to drop child-only coverage. Those asking included Blue Cross and Blue Shield of Kansas.

Holland said at least two insurers in Oklahoma offer child-only policies. However, one local carrier that she didn’t identify has already suspended writing new child-only plans. “I haven’t spoken with them [following the new HHS regulations], but I’m hopeful they will reconsider the suspensions,” she said July 28.

While Holland isn’t sure that the regulations will have a lasting effect, she said she is encouraged by their possible temporary impact. “I’m hopeful [the new regulations] will help insurers to reconsider” plans to stop issuing or writing child-only plans, Holland says.

Reprinted from the Aug. 2, 2010, issue of AIS's HEALTH REFORM WEEK

4. On July 19, Fox Insurance Co. agreed to send $13.6 million in outstanding Medicare Part D payments to its plan administrator, ProCare Pharmacy Benefit Management. ProCare is closing Fox claims and is beginning to process payments for claims submitted between Feb. 16 and March 1, 2010. As of July 27, Fox still owes several million dollars in unpaid claims for March, but will pay them as soon as it clarifies a few lingering claim issues with ProCare, said attorney Thomas Barker, who is with Foley Hoag LLP in Washington, D.C., and is representing Fox in dealing with CMS. On March 9, Fox became the first stand-alone Prescription Drug Plan to be kicked out of the Part D program after CMS ended its contract. In a June 30 letter, Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking minority member Charles Grassley (R-Iowa) asked that Fox pay any and all outstanding claims. In the letter, the committee requested that by July 9 Fox provide information on how much of the $63.5 million in outstanding claims was being held as of June 1, how many claims for services provided before March 9 have been received but remained unpaid, and whether Fox intends to pay any and all filed outstanding claims.

Reprinted from the July 29, 2010, issue of MEDICARE ADVANTAGE NEWS

5. Rite Aid Corp. has agreed to pay $1 million to settle “potential violations” of the HIPAA privacy rule for disposing of pill bottle labels with customer information on them, HHS said July 27. The retail-pharmacy chain also agreed to take corrective action to improve policies and procedures that safeguard customer privacy, HHS says. The settlement follows a joint investigation by the HHS Office for Civil Rights and the Federal Trade Commission into reports that pharmacies were throwing prescriptions and pill bottles containing individuals’ identifying information into unsecured dumpsters. CVS Caremark Corp. paid $2.5 million in February 2009 in a similar settlement. HHS’s three-year corrective action plan says Rite Aid must revise policies on disposal of protected health information and sanction employees who do not follow them; train staff on these new requirements; conduct internal monitoring; and hire an independent third-party assessor to conduct compliance reviews and report to HHS. The company also entered into a 20-year consent order with the FTC to settle potential violations of the FTC Act. To read more, visit www.hhs.gov/ocr/privacy and click on “Enforcement Activity and Results.”

Reprinted from the Aug. 2, 2010, issue of REPORT ON MEDICARE COMPLIANCE

6. On July 26, CMS released a final rule for the end-stage renal disease (ESRD) prospective payment system that includes payment adjustments for home dialysis training when clinically appropriate. The change will “help ensure that ESRD patients are learning the skills and techniques they need to properly receive their dialysis treatment at home,” CMS says in a statement. CMS also issued a proposed rule that would set up a quality incentive program (QIP) to promote high-quality services in dialysis facilities. CMS has adopted three quality measures that it will use in the QIP: two that will reflect whether patients are receiving treatment for anemia, and one that captures their urea reduction ratio. If a facility fails to meet performance scores for each measure, CMS will reduce payment rates to the facility by up to 2%. The reduced payments will start for services provided on or after Jan. 1, 2012. The comment period is open until Sept. 24. Read the rules at www.ofr.gov/inspection.aspx.

Reprinted from the Aug. 2, 2010, issue of REPORT ON MEDICARE COMPLIANCE

7. President Obama signed The Improper Payments Elimination and Recovery Act (S. 1508) on July 22. The new law requires federal agencies to find and recover overpayments and sets up ways for them to do so. For example, agencies must produce audits and corrective action plans targeting overpayments. If they spend more than $1 million on overpayments, the agencies must perform recovery audits on their programs and recoup any overpayments. The law used recommendations from reports by the Government Accountability Office and OIG, according to a statement by the bill’s sponsor, Sen. Tom Carper.

Reprinted from the Aug. 2, 2010, issue of REPORT ON MEDICARE COMPLIANCE

8. Kaiser Permanente and Anthem Blue Cross will not participate in California’s temporary federal high-risk pool (FHRP), according to the state’s Managed Risk Medical Insurance Board. Although the two insurers account for nearly all of the people enrolled in the state’s existing high-risk pool, the insurers opted not to participate in the FHRP, possibly due to future cost concerns, says Jeanie Esajian, deputy director of legislative and external affairs at MRMIB. As of June 1, Kaiser covered 4,073 participants under the state’s high-risk pool while Anthem covered 2,816 — more than 99% of the 6,923 residents in the program, California Healthline reports. The other plan in the pool is Contra Costa Health Plan, which is available only in Contra Costa County. Esajian would not say how many applications were received or which insurers applied to participate in the FHRP.

Reprinted from the Aug. 2, 2010, issue of AIS's HEALTH REFORM WEEK

9. California Insurance Commissioner Steve Poizner (R) on July 23 unveiled an online tool that allows residents to be notified by e-mail when new health insurance rate filings for the individual market are made. Poizner said he hopes the tool will increase transparency and allow people to review the filings “to ensure they are mistake-free.” By state law insurers must spend at least 70% of premiums on medical benefits. Poizner said he hopes the additional scrutiny of the filings will ensure that companies are in compliance with the law.

Reprinted from the Aug. 2, 2010, issue of AIS's HEALTH REFORM WEEK

10. Priority Health of Grand Rapids and Physicians Health Plan of Mid-Michigan were awarded Michigan’s temporary high-risk insurance pool contract. The winning bids, which were awarded July 26 by the Department of Management and Budget, are for chronically ill uninsured adults. Priority was selected to provide coverage for 61 of the state’s 83 counties, while Physicians will run the pool in the remaining 22 counties. Open enrollment in this program will begin Sept. 15 with coverage effective Oct. 1. The pool will operate until Dec. 31, 2013, or until federal funds are exhausted. Beginning in 2014, the insurance exchanges and expansion of Medicaid programs will offer more options for this underserved population.

Reprinted from the Aug. 2, 2010, issue of HEALTH PLAN WEEK