Individual Health Insurance Reform Weekly EasyToInsureME

Week of October 19, 2009

Inside-the-Beltway politics were in
full swing last week as the insurance industry came under heavy fire
from some members of Congress and the media for releasing a
PricewaterhouseCoopers report prior to the Senate Finance Committee's
scheduled vote on its health care reform proposal. The report found
that the Committee's reform package would drive up the cost of private
insurance coverage for individuals, families and businesses. As a
result, the industry was openly accused of trying to scuttle health
care reform, even though America's Health Insurance Plans (AHIP) stated
clearly in a press release and a letter to key Senate leaders that the
industry was simply fulfilling its responsibility to bring to light
serious flaws in the bill. The industry still intends to work toward
bipartisan reform. By the time the furor died down, no one had
seriously refuted the substance of the report. In fact, just a day
later a new report from Oliver Wyman arrived at very similar
conclusions. Regardless of these reports, Aetna has consistently warned
that meaningful health care reform must address rising costs and that
insurance market reforms must be linked with a strong individual
coverage requirement to work effectively. Aetna will continue to
deliver this message and help others understand how the market works.

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Federal

While
there was some drama, the actual outcome of the Senate Finance
Committee's vote to approve its health care reform bill was never
really in doubt. By a vote of 14 to 9, the Committee approved the bill
with all Democrats and one Republican, Olympia Snowe of Maine, saying
yes. The drama was two-fold: a) would Snowe agree or hold her powder
dry until the floor debate to improve her ability to bargain for
changes; and b) would Ron Wyden (D-OR) and/or Jay Rockefeller (D-WV)
vote no or hold their vote to protest the absence of the public plan.
Neither possibility materialized, but the "drama" could merely have
shifted from the Committee to the Senate floor. The Finance Committee
approval of health reform set in motion the next step in the process,
as the Senate Democratic leadership began the process of melding the
Finance and HELP Committee bills. Majority Leader Harry Reid is working
with Finance Chairman Max Baucus, HELP Vice-Chairman Christopher Dodd
and Chairman Harkin to hammer out a single bill, and three issues
appear the most contentious: the Finance Committee's weak individual
mandate vs. HELP's stronger one; a HELP public plan vs. the co-op
approach from Finance; and the HELP employer mandate vs. no mandate
from Finance.There are hundreds of subordinate issues as well, all of
which translates into a contentious merging process that will likely
delay debate on the floor to late October/early November.

Senate
Democrats, led by Senator Stabenow (D-MI), will likely vote this week
on a stand-alone bill to eliminate a scheduled 21 percent cut in
physician Medicare reimbursement on a permanent basis. The one-year
cost of this doctor "fix" in the current Senate Finance Committee bill
is $10.9 billion; the permanent fix (buried in the House reform bill)
would cost upwards of $250 billion. The idea behind this maneuver is to
pull out a costly item from the health reform bill, which is supposed
to be deficit-neutral, in order to free up more money to spend on other
items or to reduce the total cost of health reform, e.g., the House
Democrats want to get their bill under $1 trillion. While most agree
that the payment level for physicians should be much more aligned to
quality and performance, the debate will likely turn on whether
Democrats can shift to the deficit another $250 billion in money for
doctors without stirring up the American public.

States

COLORADO:
The Colorado Division of Insurance adopted amendments revising the
state's early intervention services (EIS) benefit mandate in accordance
with newly adopted legislation. Individual and group policies or
contracts that include dependent coverage are required to cover EIS
delivered by qualified providers to eligible children through age 3.
The new law modifies this mandate by requiring, among other things, an
increase in the reimbursement rate for EIS by carriers, if the base
rate for state-funded EIS increases by more than the cost-of-living
adjustment. The amended rule was effective October 1. The DOI also
adopted amendments establishing standards for the sale of limited
benefit plans by HMOs. This legislation allows HMOs to offer access to
basic health care services through limited benefit plans to employer
groups that have not offered health coverage to their employees for the
previous 12 months and to individuals who have been uninsured for the
previous 12 months. HMOs are prohibited from offering limited health
benefit plans in Colorado counties with a population of more than
25,000 people.

ILLINOIS: The Department of Insurance (DOI) has
taken the position that carriers cannot require, in their contracts,
that claims for proceeds on a life insurance policy be made “in
writing.” The insurance industry has requested that the DOI reconsider
its position. The DOI maintains that the only required documents for a
life insurance claim are the insured’s death certificate and a copy of
the claim check. The insurance industry believes that this
interpretation of the law runs contrary to generally accepted claim
procedures that were put in place to confirm that coverage was in
force, that a covered loss occurred, and that there are no exclusions
or limitations that affect the claim payment. Illinois statute directs
a life insurer to settle a death claim within two months of the receipt
of due proof of the insured’s death and places no limit on what an
insurer may reasonably require during the statutory period to assure
proper verification of the insured’s death, as well as verification
that claim proceeds are being correctly paid to the proper claimant.

KENTUCKY:
Last week the Department of Insurance held a public meeting at which it
briefly discussed its proposed 2010 legislative package, approved by
the Governor's office, for the upcoming session. The proposals include
updating state laws to incorporate federal changes with respect to
mental health parity, Michelle's law, HIPAA clarifications; updates to
the limits under the life and health guaranty model; and uniformity
changes to the producer licensing law. Also discussed was the possible
elimination of the requirement that insurers offer a standard benefit
plan under the Kentucky Access law.

MASSACHUSETTS: The
Commonwealth Health Insurance Connector Authority is proposing
amendments to the Minimum Credible Coverage (MCC) regulations, with a
public hearing on the matter scheduled for Nov. 17. The MCC regulations
set the standard for minimum benefits Massachusetts residents must
carry in order to be considered insured and avoid penalties. The
proposed regulation changes were approved by the Connector Board and
filed with the Secretary of State. They would: make prescription drugs
one of the categories of services/benefits that are considered “core
services” under minimum creditable coverage, thus prohibiting the
imposition of dollar caps on its prescription drug benefit; require a
health benefit plan covering dependents to provide coverage to all
“broad range of medical benefits” as provided to subscribers in order
to ensure that maternity benefits are extended to pregnant dependents;
and allow employer groups to pair a high-deductible health plan with a
Health Reimbursement Arrangement (HRA), as an alternative to a Health
Savings Account (HSA). There likely will be some push back on the
additions to the MCC standard. However, some version of the amendments
is expected to pass. If enacted, the prescription and dependent
benefits amendments would be effective in 2011; the HDHP/HRA amendment
would take effect on 1/1/2010.

NEW JERSEY: The state has
launched a database designed to track autism cases and direct affected
families to health care and other services. The New Jersey Autism
Registry requires psychiatrists, psychologists, neurologists and
medical professionals to register children diagnosed with autism and
birth defects such as Down's Syndrome, cleft palate, and heart or
muscular defects. The registry is confidential and will be used to
enable officials to better assist New Jersey's families with autism and
other special needs. Access to the database is restricted to medical
professionals.

NEW YORK: Governor David Paterson last week
proposed a new two-year, $5 billion deficit-reduction package (DRP)
that will fill the $3 billion (and growing) gap in the 2009-2010
spending plan and have a recurring impact of $2 billion in 2010-11. The
new proposal does not include new taxes or assessments, a reflection of
the extraordinarily high taxes already imposed on health plans in the
main '09-'10 budget. The Governor's new DRP focuses on across-the-board
Medicaid cuts, a $14.7 million cut in the managed long-term care
program, a $14 million reduction in the Child Health Plus program, and
a $7 million reduction in section 332 assessment sub-allocation, which
includes both the Healthy New York and Timothy's Law programs. The
budget announcement was sharply criticized by the hospital industry and
hospital workers' union SEIU/1199. Assembly Democrats have already
scheduled two hearings on the Governor's proposed DRP for Wednesday,
October 21st, in Albany and Friday, October 23rd in Syracuse.

OREGON:
The state Insurance Department has issued a second bulletin regarding
legislation that established a premium assessment on health insurers.
The primary purpose of the new bulletin is to provide information about
the approved manner of calculating premium increases to offset the cost
of the new assessment. The bulletin states that the law limits the
amount carriers are allowed to increase premiums, as a result of the
assessment, to one percent. The amount derived from dividing premiums
by .99 is greater than one percent and is therefore illegal. Any
insurers that calculated the increase in the .99 manner and have
already collected premiums are required to issue refunds.

TEXAS:
The Department of Insurance held a stakeholder meeting last week to
discuss implementation of the new "Healthy Texas" program, legislation
that passed in May. The program is modeled after Healthy New York and
will offer state re-insurance for up to 80 percent of the claims
corridor of $5,000-$75,000 for an insurance product, which can be sold
only to small groups that have been uninsured for at least a year and
have at least 30 percent of their employees' salaries at a maximum of
300 percent of the federal poverty level. The employer must agree to
pay at least 50 percent of the premiums, and at least 60 percent of the
employees must enroll. The legislature provided $17.5 million dollars
annually to fund the program for the next 2 years. TDI and the Texas
HHSC have been awarded almost $5 million a year for the next five years
in HRSA grant money to assist with costs of actuarial contracts,
marketing contracts and additional staff to help fully implement the
program. They have posted informal rules to implement the program and
plan to adopt a formal rule by the end of 2009. They would like to see
members enrolled in qualifying plans by June 1, 2010, at the latest.
Aetna has been involved with the drafting of legislation for this
program from the beginning and will continue to be involved throughout
the rulemaking process.

WASHINGTON: The state Office of the
Insurance Commissioner has released its legislative agenda for 2010.
The OIC proposals include; 1) new and extended grace periods for
individuals to take up conversion coverage -- 31 days after a person
has received notice of termination of coverage; 2) a revised definition
of emergency services and the elimination of a requirement that the
covered health care services are provided in a hospital emergency
department; and 3) a health care reform proposal that would cover
catastrophic medical costs over $10,000 per year and limited preventive
care for all state residents. The catastrophic health plan was also
proposed in 2009 but failed to gather much attention in the
legislature.