A weekly compilation from Aetna of health care-related developments in Washington, D.C. and state legislatures across the country Week of June 21, 2010 A PricewaterhouseCoopers study released last Monday shows that employer medical costs are expected to increase 9 percent in 2011, slightly less than the increase experienced in 2010. In an effort to lessen the impact to their bottom line, employers are expanding or adopting wellness programs and shifting more of the cost burden onto employees. PwC also expects minimal impact on the overall increase in medical trend because of the new federal law – reflecting Aetna's concern that the law does not do enough to help control the underlying cost drivers that are reflected in increasing health care coverage premiums. On Saturday, New York Times reporters responded to the June 7 rebuttal of the front page story the Times ran on June 3, which called in to question the validity of the data referenced in The Dartmouth Atlas of Health Care. The Atlas, which is a compendium of research on Medicare spending and frequently referenced by the Obama Administration throughout the health care reform debate, claims that hospitals and geographic regions that spend the most on health care often provide the lowest quality care. However, in follow-up discussions and through the admission of the Dartmouth researchers themselves, the maps and rankings comparing hospitals and regions are not fully adjusted for price or illness. This recent debate underscores the need to find ways to accurately track costs and quality. Federal Late last week, the Senate approved a skinned-down 6-month Medicare "Doc Fix" bill (a) to eliminate a 21 percent physician reimbursement cut until the end of November 2010 and (b) to provide the same physicians with a 2.2 percent increase in payment through the same timeframe. The already-passed House version of this provision calls for a 19-month Doc Fix, so this issue is far from settled and will be resolved only with more discussion, compromise and time. The Senate version is fully paid via non-Medicare offsets while the House version simply adds billions to the deficit. Meanwhile, last Friday, CMS instructed contractors (health plans like Aetna) to start processing Medicare claims held since June 1, 2010, as if there is no fix in place (i.e., reflective of the 21 percent cut). As inefficient as it will be, such payments will have to be retroactively adjusted should Congress actually pass a Doc Fix. Contrary to a strong push from many quarters, this Doc Fix bill does not include a 6-month extension of the enhanced (more federal money) Medicaid funding formula (FMAP) nor does it include an extension of eligibility for the federal subsidy (65%) for COBRA. These two items are expected to be addressed separately in the coming weeks. In a procedural vote late last week, the House comfortably (230 to 187) defeated a Republican effort to repeal the individual mandate provision of PPACA (the Health Care Reform legislation). This is the first of many expected efforts by Republicans to showcase their party's opposition to PPACA. This is all part of the Republican theme for the Fall elections, which in large part is to "repeal and replace" the health care reform legislation with less government intrusion into the lives of Americans and promote more cost containment. States CALIFORNIA: In the closest statewide race in years, Assemblyman Mike Villines has taken the lead over attorney Brian FitzGerald in the Republican race for state insurance commissioner. Villines trailed the little-known FitzGerald on Election Day by more than 11,000 votes. However, as counties continue to count late absentee and provisional ballots, Villines has now pulled ahead, leading FitzGerald by nearly 3,000. If Villines' lead holds, he will take on the Democrats' nominee and single payer advocate, Assemblyman Dave Jones. Jones is also the sponsor of a burdensome and costly rate regulation bill that is likely to be on the Governor's desk in August. Aetna and other health plans continue to meet with legislators in an attempt to defeat or scale back the bill. The rate review measure sailed through committee after errors were discovered in Anthem's individual rate filings in May. Aetna's sponsored legislation on hospital gag clauses will be heard in the Senate Health policy committee on June 23. The CA Medical Association has removed its opposition. The CA Hospital Association remains opposed and Sharp HealthCare is the only hospital to also officially oppose. Recently the organization, 100 Black Men of Los Angeles, joined on in support as we continue to work on building a broad coalition of supporters. The California Department of Insurance (CDI) has announced that any filings for proposed rate increases from the state's four top health insurers will undergo an additional level of actuarial analysis as part of CDI's rate review process. Insurance Commissioner Poizner noted that the top insurers in California will be subjected to additional analysis by outside actuaries in a manner similar to that used by CDI earlier this year with Anthem Blue Cross. While the release indicates that health insurance rates do not require prior approval from CDI, state law includes a seventy percent medical loss ratio requirement for individual market products, which will receive additional scrutiny in the new process to ensure that insurers comply with the requirement. CONNECTICUT: This week the Supreme Court overturned part of Arizona's system of using taxpayer dollars to help pay for political campaigns. The Supreme Court order issued Tuesday effectively blocks Arizona from giving participating candidates extra taxpayer money when they are running against big-spending opponents relying on self-financing or private contributions. In a letter filed Thursday with the U.S. 2nd Circuit Court of Appeals, a lawyer for Connecticut's Green Party asked the appellate judges to take notice of the Supreme Court order, arguing it should also be applied to a constitutional challenge to Connecticut's very similar program. The voluntary CT Citizens' Election Program provides gubernatorial candidates grants of $1.25 million for a primary and $3 million for a general election, with the possibility of matching funds that could double the grants. Participating candidates for state office are given a base amount of public funding if they agree to spending limits. If their privately financed rivals outspend them, participants are given matching funds to keep them competitive. The 2nd Circuit Court is now considering legal actions to declare Connecticut's law unconstitutional because it allegedly discriminates against minor party candidates and unfairly bans lobbyists and state contractors from contributing to state election campaigns. If Connecticut's law is overturned by the courts, the legislature would have 30 days to make revisions in the public financing system to make it constitutional. If lawmakers fail to act, the old system of paying for campaigns using private contributions would resume. DELAWARE: Last week the House took action on bills concerning post-claims underwriting and chiropractor reimbursement. Aetna worked with AHIP to successfully amend HB 420 which prohibits post claims underwriting practices by health plans, with the amended version being passed by the full House. The House Economic Development Banking Insurance Commerce Committee favorably released legislation from committee designed to prevent unreasonable deductibles, copayments, or coinsurance for chiropractic care. Aetna continues to closely monitor legislative activity on this bill. INDIANA: Governor Mitch Daniels announced that Indiana may not create a state-run exchange where people with modest incomes would get government subsidies to help pay the premiums. He stated that considerable time would be spent considering whether to create an exchange, in part, because of the cost of the subsidies the state would have to bear. The Governor expressed his concern that far more people will switch to the exchanges than the law's supporters have predicted and that at least one in eight smaller businesses will drop insurance coverage for their employees. He also noted that Indiana's budget this year is $13 billion and Milliman recently costed out that the PPACA requirements will cost the state $2.9 to $3.6 billion over 10 years.   NEW JERSEY: The Senate Health Human Services and Senior Citizens committee held a hearing on the executive compensation at Horizon Blue Cross Blue Shield of New Jersey. In her opening comments Committee Chair, Sen. Weinberg, noted Aetna Chairman and CEO Ron Williams earned less in 2009 than the Horizon CEO but carried greater responsibility given Aetna's international presence. The sometimes contentious hearing concluded without any clear sense of what the Senate may do next; however, the committee publicly contemplated the implementation of caps in executive compensation for companies holding state contracts. NEW YORK: In his latest - and he claims last - one-week budget extender, Gov. Paterson eliminated the remaining allocation ($50 million) to cover the cost of subsidies to small employers for the state's mental health parity law (Timothy's Law). In his 2009-2010 deficit reduction package, the Governor already cut $40 million, for a total savings of approximately $90 million for 2010-2011. The Timothy's Law subsidy is valued at approximately $30 per person annually for 1.6 million individuals. This subsidy for small employers will still be required by law, but the cost would now be shifted to insurance companies and private payers. If the legislature does not pass this one week extender, all government operations would cease until they do. The Governor has also threatened to jam his entire budget package into another one-week extender bill on June 28th, if the legislature does not make significant progress toward passing a final budget this week. PENNSYLVANIA: Governor Ed Rendell announced the Insurance Department was investigating the Commonwealth's nine largest health insurers with respect to “a pattern of controversial rate increases.” The Governor appeared to endorse contention of Insurance Commissioner Joel Ario that non-Blues insurers are trying to “clean their books” and raise premiums prior to the federal health reforms taking effect in 2014. His press release reiterated Pennsylvania's allegedly weak health rate increase protection. The Governor's release tied the effort to securing U. S. Department of Health and Human Services demonstration grant funds for improving rate review and noted Pennsylvania would apply before the July 7 deadline. He further cited market surveillance carried out in a February, 2010 Department survey as grounds for the investigation. An Any Willing Pharmacist bill amends the Company Law to now require health insurers and even government plans to contract with independent pharmacists on the same advantageous terms as mail order pharmacies. Even as amended the bill is extremely broad and is opposed by the Rendell Administration. OKLAHOMA: On June 10, Governor Brad Henry vetoed two bills of interest to Aetna. SB 2046 would have allowed the cross-border sale of insurance once an interstate compact had been reached. In discussing the reasons for his veto, the Governor noted "legitimate concerns" raised by consumer advocates that it would be easier for companies to cherry-pick low-risk customers that are more profitable while denying or pricing out of coverage higher risk groups. Other objections were that firms could establish their headquarters in states with the fewest regulations and mandated treatments, resulting in fewer consumer protections and less effective coverage. Also vetoed was SB 2052 which would have impacted the state employee plan by requiring a web-based, doctor-patient mutual accountability incentive program, consolidating two oversight boards into one that would be required to select only one HMO to provide coverage to state employees (multiple HMO and PPO choices are currently available). In vetoing the bill, the Governor focused on the fact that the final draft of the 289-page bill was not revealed to state legislators or other stakeholders until the final hours of the legislative session. He stated that such a sweeping policy change must be thoroughly researched and debated throughout the four-month session with all stakeholders at the table. 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