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Week of January 19, 2010
From this week's Health Reform Weekly roundup of state news, it is clear that the wide-ranging effects of the recession will continue well into 2010. In state after state, budget shortfalls are challenging legislators' ability to find adequate revenues and many have been forced into some very tough decisions that will continue to have a big impact on health care. New health care taxes or increased health care taxes are in the offing in a number of states, while deep cuts in existing health care services have become commonplace. Budget concerns will not necessarily derail legislative agendas, but they certainly threaten to limit the scope or slow the progress of much legislation.
Federal
The race is on. Can Democrats push health care reform through the Senate now that their filibuster-proof majority of 60 to 40 is set to expire when the new Republican Senator from Massachusetts takes his seat? Or, will cooler heads prevail? Massachusetts voters provided extra drama this week when the election to fill the rest of Ted Kennedy's term resulted in an upset win for Republican Scott Brown. Trying to pass health reform before the State of Union address (now set for January 27) was always the President's goal. Because of the Massachusetts election, it became a Democratic imperative in the minds of some leadership to pass health reform as soon as possible. But it is very unclear if this can be accomplished. Massachusetts election officials (all Democrats) could take all of the allowed time (roughly 15 days) to certify the election, but under Senate rules Senate Democrats could seat Senator-elect Brown right now and not wait for certification. While there is some talk about speeding health reform through in advance of the swearing-in via a very tortured legislative process, it is more likely that the vote in Massachusetts has made the rank and file Democrats in Congress even more nervous about voting for a bill supported by just 37 percent of the country, according to a Gallup Poll.
In the last week, the President took White House involvement in health reform up several notches both by more publicly stating his preferences on key issues and, more importantly, by hosting and participating in private talks with a handful of Democratic House and Senate leaders to find compromise on the handful of major differences between the House and Senate bills. One such item, the “Cadillac tax,” seemed to come off the table when union leaders and the White House agreed to a compromise. While the tax threshold was modestly increased (by $1,000 for family coverage; $400 for individuals) the big news from the deal is that collectively bargained union plans would get a five-year bye (until 2018) from the tax, which would be a big boon to the status of unions and to membership recruiting. If this deal holds, it would reduce the revenue from the tax from $150 billion to $90 billion, and that means Democrats would have to find the $60 billion elsewhere.
There are numerous other items still requiring compromise, and some appear to be shaping up. For one, the Senate’s state-based insurance exchanges, which Aetna prefers, appear to be winning out over the House’s national exchange with some added "federal wrinkles,” e.g., HHS gets to set up an exchange if a state fails. For another, if the insurer tax in the Senate bill survives, a compromise seems to be developing around delaying the imposition of the tax (now set for 2011) to coincide better with the beginning of the core components of the bill (2013-2014). Finally, while both bills give the bio-pharmaceutical industry 12 years of marketplace exclusivity (before less-costly generics can come to market), it appears that there is a strong movement, led by the President, to cut that number down, which would add needed revenue to the package. Overshadowing all of the individual policy items to be settled is the issue of money -- what will CBO conclude about the cost of the deal that's being cobbled together by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi. If it comes in costing appreciably more than the $848 billion Senate bill, the Democratic leadership may have to go back to the proverbial drawing board again.
States
ARIZONA:
After convening the 2010 legislative session on January 11, Governor Jan Brewer highlighted the state's priorities in her State of the State address. Without mentioning the word "tax," the governor focused on the need to find ways to increase revenue as the state is facing a projected $4.5 billion budget deficit. The Medicaid program, which covers all Arizonans who are at or below the federal poverty level, accounts for $1 billion of the deficit. Two ideas discussed to supplement funding are a hospital bed tax and a 1 percent increase in the premium tax across all lines. The bed tax has significant support among the Governor’s office, legislative leadership and hospitals, with the exception of the Mayo Clinics. No formal proposals have been circulated as yet, but Aetna is supporting the broad-based provider tax. Other anticipated legislation includes preventive screening mandates, parity for mental health and oral chemotherapy, medical benefit ratios in the individual and small group markets, limits on the use of pregnancy status as a pre-existing condition and PBM regulation. Access proposals may include an increase in dependent age coverage to 25 and permitting insurers licensed in states other than Arizona to sell policies in the group and individual markets.
CALIFORNIA:
The nonpartisan Legislative Analyst Office (LAO) last week deemed California to have an "almost nonexistent" chance of receiving $6.9 billion from the federal government to solve the state budget crisis. Governor Arnold Schwarzenegger's budget plan relies on federal funds to bridge more than a third of the state's projected $19.9 billion budget gap. The LAO estimates that California will receive only $3 billion in new aid for 2010-11, less than half of what the governor assumes. California’s credit rating was also downgraded from an A to an A- last week.
COLORADO:
Bill introductions began in earnest last week and included a prohibition on the use of gender in rating; a mandate for individual policies to include maternity coverage equal to group benefits and contraceptive coverage; and a requirement that the commissioner adopt rules establishing standard formats for policy forms and explanations of benefits. The commissioner is required to seek input from all stakeholders prior to promulgating the rules that would become effective July 1, 2011.
INDIANA:
The legislature convened on January 5, and ethics reforms, taxes and state revenues are the main issues. On the insurance side, a large number of resolutions have been filed, including one to establish a committee to study the impact of national health insurance legislation on Indiana. Others call for constitutional amendments on federal reform issues, including one on the right of an individual to opt out of the health care system and not be subject to fines, as well as another to declare state sovereignty with respect to health care choice and specify requirements for health care providers and the attorney general to ensure sovereignty. In addition to the resolutions, a number of legislative proposals have been filed on benefit and contracting issues. Those include a requirement on insurers to make benefit payments directly to noncontracted providers; a prohibition on dental insurers from imposing fee schedules on non-covered services; and an expansion of a providers' ability to decide the insurer networks or plans in which they will participate. Also, a bare bones insurance proposal has been introduced to allow the sale of individual insurance plans across state lines from out-of-state insurers that do not meet Indiana premium caps or benefit requirements.
IOWA:
The General Assembly began its 83rd legislative session on January 11, and the state’s economy will be a top priority for lawmakers throughout the 80-day session. But health insurance issues, including several anticipated benefit mandate bills, will also garner attention. Also, the Iowa Legislative Health Care Coverage Commission, charged with developing an Iowa health care reform strategic plan by July 2011, has filed its Progress Report. It recommends that the legislature: pursue early opt-in opportunities presented by federal health care reform; develop a more seamless system for Iowans moving from public health care to private health care coverage, and moving from one public health insurance program to another; and begin the process of designing an Iowa exchange that will provide quality data on providers and plans, and data to consumers and funders on the cost of medical care. Going forward, the Commission will focus on fulfilling its statutory charge and monitoring progress on its recommendations to the legislature. The Commission will also monitor anticipated federal health care reform legislation to identify possible opportunities to increase coverage for low-income adults.
MARYLAND:
The legislature convened on January 13 and is looking at a nearly $2 billion deficit for fiscal year 2011. Governor Martin O’Malley has ordered over $1 billion in spending reductions since the start of fiscal year 2010, including deep cuts to Medicaid provider and managed care organization reimbursement rates. With a "rainy day" reserve fund of only $615 million, further reductions to state programs are expected. The state’s weak economy will stall enactment of comprehensive reforms but will not stop the ongoing reform debate. Health care proposals that may be considered in 2010 include restrictions on the use of gender as a rating factor, an autism mandate, an oral chemotherapy parity requirement, and guidelines for the reimbursement of out-of-network providers based on health plan determinations of “usual, reasonable and customary” amounts. Also, Governor O’Malley has announced the appointment of Elizabeth Sammis as Interim Commissioner of the Maryland Insurance Administration. Last month, Commissioner Ralph S. Tyler announced his resignation to take a job in the Obama administration.
MISSOURI:
The 2010 legislative session kicked off in Jefferson City on January 6 for five months of debate scheduled to end on May 14. Several bills of interest to the health insurance industry were pre-filed, including prompt-pay and any-willing-provider bills, but the show-stopper is predicted to be Missouri’s downward-spiraling budget. As revenues continue to decline, difficult decisions will have to be made by Missouri’s elected officials, including Governor Jay Nixon who will roll out his legislative agenda during the State of the State address scheduled for January 20. Other bills of note include: creation of a health information exchange, expansion of Medicaid eligibility, creation of a universal health insurance act and universal health assurance program, medical loss ratios for insurers covering 50,000 people or more and any-willing-provider legislation.
NEBRASKA:
State senators returned to Lincoln on January 6 to begin the second session of the 101st Nebraska Legislature. While some new bills of interest have been introduced and several have been carried over from 2009, the state’s struggling economy is expected to dominate this year’s session,despite a budget-cutting special session in November when lawmakers closed a $336 million projected shortfall in the state’s two-year budget. Governor Dave Heineman discussed the state’s economy and his hopes for the legislative session during his January 14 State of the State address. The 2010 session will last 60 legislative days and is tentatively scheduled to adjourn April 14. New bills of note so far would allow the sale of insurance policies from foreign insurers and would eliminate some premium taxes.
NEW JERSEY:
Governor Jon Corzine delivered his final State of the State Address prior to the expiration of his term this week. In his address, he highlighted the fact that the state has decreased spending during his tenure but will be forced to grapple with an $8 billion-dollar structural deficit going forward. The legislature has sent bills to the governor's desk to expand the scope of practice for chiropractors, mandate the direct payment to out-of-network providers, and authorize the use of marijuana for medicinal purposes. The outgoing governor has until Tuesday at noon to take action on these pieces of legislation. Aetna, along with other health plans, is urging vetoes of the non-par provider payment legislation and the chiropractor legislation, which would impose a same-state chiropractic licensure requirement for purposes of utilization management.
OHIO:
A bill concerning material amendments to health care contracts, which previously passed the House by an 85-14 vote, was heard last week by the Senate Insurance, Commerce and Labor Committee. After hearing testimony on the bill, Committee members agreed that the legislature should allow the current law to be in effect longer before making proposed changes. Under current health care contract law, a "material amendment" to a health care contract can occur only if the "contracting entity" provides to the "participating provider" the material amendment in writing and notice of the material amendment not later than 90 days prior to the effective date of the material amendment. If within 15 days after receiving that material amendment and notice, the participating provider objects in writing to the material amendment, and there is no resolution of the objection, either party may terminate the health care contract upon written notice of termination not later than 60 days prior to the effective date of the material amendment. If the participating provider does not object, the material amendment is effective. Under the new bill, the amendment would not become effective if the parties did reach a resolution.
TEXAS:
Last week, Speaker Joe Straus (R-San Antonio) announced the formation of the House Select Committee on Federal Legislation. The committee will closely monitor significant federal legislation with specific emphasis on health care reform efforts. The committee also will work to improve the exchange of information between Texas and Washington, D.C., by communicating the impact of pending federal legislation to the state economy and citizens. Speaker Straus stated that he has serious concerns regarding the impact of federal legislation on the state and hopes the committee will help the House respond in a fiscally appropriate manner.
VIRGINIA:
The 2010 legislature convened January 13 and will consider various health insurance-related bills in the weeks ahead. Governor-elect McDonnell’s health care proposal includes promoting health savings accounts (HSAs) by publishing a list of all insurers who offer HSAs and making available a toll-free telephone number from the Bureau of Insurance to access HSA information; increasing the refundable tax credit for the purchase of long-term care insurance; launching a health information technology initiative; and convening a Virginia Medicaid Payment Advisory Commission to identify provider payment rate changes that eliminate cost-shifting from Medicaid to private payers. However, the enactment of comprehensive reforms will be stalled by a state budget shortfall estimated at over $2 billion for the biennium.
WASHINGTON:
The legislature reconvened its 2009-2010 session on January 11 and must deal with significant fiscal issues before recessing on March 15. Governor Chris Gregoire gave her State of the State address last week, highlighting the continuing state budget crisis. She outlined proposals on job creation, public safety, education, and government reform. In her proposals, she outlined the elimination of 78 state boards, closure or partial closure of 10 state institutions, and restructuring within the Department of Commerce.
Resources
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