POLICY BRIEFINGS


Medical Loss Ratio Regulations


CMS issued regulations relating to the PPACA medical loss ratio (MLR) which clarify earlier proposals.  An interim final rule describes the required distribution of rebates by insurers to beneficiaries when insurers to not meet the MLR requirements.  Of note, under the earlier rule, rebates in the group market would have been subject to tax; however, under the revised rule insurers must provide rebates to the group policyholder (e.g. employer) through lower premiums or other non-taxable ways.  A second final regulation makes changes of a technical nature as to MLR calculation and reporting.  The regulations are effective January 1, 2012.  The NAIC and health agents continue to press for legislation to exempt agent commissions from the definition of “administrative expense” for purposes of the MLR.  Also, so-called mini-med plans will likely cease to exist when they become fully subject to the MLR in 2014.


EHR Easing


HHS announced that hospitals and providers that attest to Stage 1 of the “meaningful use” incentive program in 2011 will not have to meet Stage 2 criteria until 2014 (rather than 2013), thus giving more time for provider adoption of electronic health records.


More Grants for State Health Insurance Exchanges


HHS awarded almost $220 million to thirteen states to create insurance exchanges under the PPACA.  HHS also said that states which create their own internet-based exchange markets will have more options in determining eligibility for Medicaid coverage and exchange tax credits.  In states that do not operate exchanges, the federally established state exchange will still use state Medicaid and SCHIP eligibility rules.  Senator Orrin Hatch continues to maintain that the wording of the PPACA does not allow for HHS established exchanges to provide tax credits as IRS regulations propose.


CBO Estimates Cost of SGR Fix


In addition to the cost of freezing Medicare physician payment rates for another year or two as previously described, CBO has released additional estimates which would base future updates after a freeze on the physician cost-related Medicare Economic Index (MEI). Under this measure the total cost of basing physician updates on the MEI would be $352.7 billion through 2021.  Under a so-called funding “cliff” option, the 27.4% cut in 2012 would be set aside and reimbursement rates would return to the rates that would have been calculated in the year immediately following the override.  The cliff option with a freeze in 2012-2014 would cost as much as $11 billion in 2012, $18.3 billion in 2013 and $21.4 billion in 2014.


Congressional Oversight on Drug Shortages


The House Oversight and Government Reform Committee held hearings on the shortage of various drugs which the FDA says exceeds 200 in 2011.  Witnesses said that the shortages, mainly injectable generic drugs used to treat cancer, are caused by many factors, including the Medicare reimbursement system for drugs.  They said that the ASP plus 6% reimbursement formula is inadequate due to manufacturer-to-distributor prompt payment discounts included in the ASP calculation.  It was also stated that the FDA current good manufacturing practice (cGMP) regulations should be made as efficient as possible, given that drug manufacturers have complained that these policies are outdated and inflexible.


Medicare Coverage for Obesity


CMS announced that coverage for screening and counseling services, performed by primary care providers, to reduce obesity will be covered under Medicare given that more than 30% of men and women in the Medicare population are estimated to be obese.



December 5, 2011: | Page 1 Page 2 Page 3

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