From comprehensive risk management to leveraging rising interest rates, Mercer offers seven investment strategies that not-for-profit healthcare organizations should consider to ensure financial stability in 2019.
Not-for-profit healthcare organizations facing tighter margins and demographic and regulatory pressures should undertake an "enterprise-level" review of their investment strategies and risk management for the new year, according to a new whitepaper commissioned by Mercer.
"Healthcare systems are facing significant financial pressure. Americans are getting older, increasing the demand for healthcare, while reimbursements aren't going up in kind," the paper said. "Uncertainty regarding national healthcare policy, as well as the constant challenge of recruiting and retaining high-quality nurses and doctors, are adding to these formidable challenges."
With that in mind, Mercer offered seven investment strategies that not-for-profit healthcare organizations should consider to ensure financial stability. They include:
Consider the "healthcare foundation" – With anticipated lower-returns from traditional investments, health systems should re-assess liquidity needs and should consider adopting asset allocations that are similar to those of healthcare foundations.
Conduct comprehensive enterprise planning and risk management – Health systems may be holding back on aggressive investment allocations because of increased capital spending plans. Health systems should integrate their investment strategy with their long-term financial plan to gain a holistic financial picture of their organization.
Recognize that governance may need to evolve – Transitioning to an enterprise-wide approach might require adjustments from health system oversight committees, which ideally, would see a roll-up of risk and how it impacts the system as a whole.
Leverage rising interest rates – As interest rates rise, most health system debt service costs won't increase much, but yields on fixed income and cash may rise significantly. Systems should assess how much interest rate risk they carry and consider repositioning so that the next rate-cutting cycle won't hurt profitability.
Consider how you are integrating environmental, social and governance, impact, community and innovation investing – Organizations should think about trending topics around governance. impact and community and how to integrate these programs into their investment portfolio.
Pay attention to retirement plans – Recent lawsuits against higher educational institutions regarding governance of 403(b) plans have sent a warning to all plan sponsors that they have a fiduciary duty to obtain competitive services for their plans. The Retirement Enhancement and Savings Act is a bipartisan bill in Congress that may permit commingled investment trusts in a 403(b) plan structure, which could significantly lower plan costs. Fiduciaries must monitor this issue.
Have a plan for corralling pension risk – Untimed contributions and the rising costs of overall pension plan management pose financial risks for some healthcare organizations, many of which have eliminated pension risk by terminating their plans, using lump-sum buyouts and limited annuity purchases.
NAACOS says its members need an additional month to examine the complex 267-page final rule, which was issued on December 21, before making critical decisions affecting participation.
Accountable care organizations are asking the federal government to push back by at least one month the application deadline for the new Pathways to Success program.
The Centers for Medicare & Medicaid Services released the bulky, 267-page final rule for Pathways to Success on December 21, and this week announced that applications to participate in the program would be due February 19.
The National Association of ACOs said that's not enough time, and they're asking CMS to give ACOs until later in March to understand the complex changes and participation options with physicians and other providers.
“There are too many difficult decisions to rush," NAACOS President and CEO Clif Gaus said in a media release. "ACOs barely have time to understand the new rules, and organizing an application is very complicated and for some it is now a high-risk decision."
The February 19 deadline applies to new ACOs, ACOs whose agreements expired at the end of 2018, and ACOs who want to end their current agreements and start under the new Pathways structure.
ACOs with three-year agreements that expire at the end of 2019 or 2020 are allowed to finish those contracts before starting in the new structure.
NAACOS said that CMS's final rule "dramatically" shortens the time ACOs have before being put at risk for repaying losses for not hitting pre-set spending targets.
The changes also lowered the financial incentive to participate in no-risk models by cutting the shared savings rate to 40%. CMS also established a distinction between so-called "high revenue" and "low revenue" ACOs, forcing high revenue ACOs into risk-bearing models faster," NAACOS said.
NAACOS had already raised concerns that some changes in the final rule would limit interest in the voluntary program and compel participating ACOs to drop out and harm Medicare’s largest value-based care program. MSSP accounts for 561 ACOs with 10.5 million Medicare patients, roughly 20% of Medicare.
"Setting an application deadline two months after publishing the final rule does not give ACOs that have expiring agreements the necessary time to vet the decision internally or the time to process the many elements of the application," said NAACOS board member Jennifer Moore, COO at MaineHealth ACO in Portland, Maine.
"Given the significant changes, ACOs need to engage actuaries to understand how we would fare in downside risk. Such an analysis takes time. Without that time, we would have to enter an upside track out of the gate," Moore said.
Those new challenges include critical decisions on which physician and provider groups to include in the ACO, choosing risk levels and track participation, selecting waiver applications, and repayment options, Moore said.
Complicating matters further, Moore said, is the March 1 deadline to apply for CMS's Bundled Payments for Care Improvement Advanced Model. Quality reporting for various Medicare programs is also done in January and February.
"Our ACO has more than 125 tax IDs that need to sign new agreements. On top of that, we must secure a letter of credit (banks indicate that is a six-to-eight-week process), evaluate the new waivers, and vet provider and supplier lists," Moore said. "I am hopeful that CMS will reconsider this aggressive timeline and balance the need to get started with the understanding that the application process takes planning time."
In its initial commentsto the August proposed rule, NAACOS recommended that CMS allow ACOs with agreements expiring in 2018 to extend through December 31, 2019. NAACOS last June urged CMS to provide information regarding the expected timeline for 2019 applications so that ACOs could begin preparing for the condensed deadline.
Patients will continue to see their same physicians and providers at their current locations and all operations and appointments for outpatient services will proceed as scheduled.
Cleveland Clinic on Wednesday completed its acquisition of two South Florida health systems.
The two health systems are now Cleveland Clinic Indian River Hospital, located in Vero Beach, and Cleveland Clinic Martin Health.
The three hospitals in Martin Health are now Cleveland Clinic Martin North Hospital, in Stuart; Cleveland Clinic Martin South, also in Stuart; and Cleveland Clinic Tradition Hospital, in Tradition.
Cleveland Clinic Indian River Hospital and Cleveland Clinic Martin Health join as the first regional hospitals in the Cleveland Clinic Florida region. Patients will continue to see their same physicians and providers at their current locations and all operations and appointments for outpatient services will proceed as scheduled. All insurance plans accepted at the hospitals will continue to be accepted.
"These are well-respected hospitals that have a long history of taking great care of their communities. We are very proud they are now part of Cleveland Clinic's health system," Cleveland Clinic CEO Tom Mihaljevic, MD, said in a media release.
"As healthcare continues to evolve, this integration will strengthen our ability to deliver on our mission and provide the best care to our patients together," he said.
Under the deal reached last fall with Martin Health, Cleveland Clinic agreed to invest $500 million in the health system, and to maintain its charity care services.
The deal to secure Indian River Medical Center was finalized last fall, and it comes with a $250 million investment commitment on the part of Cleveland Clinic. In addition, Cleveland Clinic agreed to maintain maternity care, in-patient well baby care/pediatrics and gynecology services, behavioral health/mental health services, inpatient and outpatient cardiovascular services, inpatient and outpatient cancer care services and gastroenterology services at IRMC for at least 10 years.
Also as part of the agreements, the Indian River Hospital District's support for indigent care at IRMC will phase out over three years, while Cleveland Clinic's charity care policy will go into effect on the first day. After the three years, Cleveland Clinic/ IRMC will assume responsibility for indigent care in general at the hospital.
Cleveland Clinic said its integration of both health systems will focus initially on learning more about each hospital, the needs of patients, caregivers and the communities. Integration teams will focus on understanding the needs and establishing priorities. These teams will also share best practices, learn from one another and help to guide the integration together.
A robust job market bolstering employer-sponsored plans, Baby Boomers transitioning to Medicare Advantage, and ACA exchanges attracting new payers are good signs for health plans in the coming year.
Despite the uncertainty over the future of the Affordable Care Act, the U.S. health insurance sector remains stable heading into 2019, according to a new analysis by S&P Global Ratings.
"A combination of still-favorable business conditions, financial factors, and diminished near-term legislative uncertainty balances our concerns relating to merger and acquisition activity, elevated policy risk, and re-emergent legal overhang," said S&P analyst Joseph Marinucci.
Strong job growth is bolstering commercial markets, aging Baby Boomers are driving Medicare Advantage growth, states are shifting their high acuity populations into managed Medicaid, and the ACA exchanges are stabilizing and attracting new competitors, S&P said.
"We assess capital and liquidity as strong or better for most of our rated U.S. health insurers, which supports balance-sheet strength," Marinucci said. "U.S. health insurers' operating performance reflects sustained earnings strength and improved earnings quality."
However, Marinucci said that profitability could moderate somewhat this year.
M&As remain a key rating factor, especially with larger transaction sizes, raising concerns about financial leverage, integration, and cultural compatibility. Consolidations, joint ventures, and partnering among larger insurers are defragmenting the sector, allowing the big insurers to build scale, "and create more touch points as the trend toward consumerism gains traction."
"This is making it harder for newer and smaller players to enter the market or sustain their presence," S&P said. "As a result, we continue to see larger health insurers taking a bigger share of the marketplace, and smaller players being displaced or struggling to achieve profitable growth as the competitive gap widens."
"Although the mid-term elections removed a good deal of legislative uncertainty for the industry, policy risk remains elevated given the administration's preference for ACA alternatives," S&P said.
In addition, S&P says that payment and delivery reforms mandated in the ACA around value-based care will continue to drive greater cross-sector collaboration among payers and providers.
The president and CEO of the American Hospital Association shares a bit about the challenges facing the nation's hospitals in 2019, and where he believes political headway can be made in a divided Washington.
The next 12 months will provide plenty of challenges for the nation's hospitals.
On the business side, hospitals are reconfiguring to meet the changing demands of their patients, as they contend with competition from nontraditional players who are edging into the provider space with the potential to upend care delivery.
On the regulatory side, meanwhile, the federal government has a to-do list with a number of consequential issues, including drug pricing and Stark Law reforms, as the future of the Affordable Care Act is being argued in federal courts. All of this comes amid a partial government shutdown, the second-longest shutdown in the past four decades.
American Hospital Association President and CEO Rick Pollack spoke with HealthLeaders about the challenges and opportunities facing hospitals in 2019. The following transcript has been edited for length and clarity.
HLM: What are the big issues for hospitals in 2019?
Pollack: There are going to be some distractions and controversies that play out in the political environment. Depending upon where we end up with government funding, that could be the first order of business in one form or another, and that could take up time at the beginning.
Politically, it's the future of the Affordable Care Act. There are a couple of issues that we still want to pursue, but they could be difficult to pursue, given the uncertainty that's out there. For instance, we think that we ought to move forward on the bipartisan efforts to bring some marketplace stabilization to the exchanges. We think that some of the states that have expanded Medicaid, where they not only had referenda to expand but now have a different political dynamic, that we ought to see the Medicaid expansion move forward.
That has implications for dealing with opioid abuse. Medicaid expansions are effective in dealing with people suffering from opioid problems.
HLM: Are there bipartisan issues where we could see progress?
Pollack: First is on drug costs. We thank the president for providing leadership on that issue. We have some concerns with his proposal, but we think that there are opportunities there both legislatively and through the president's leadership to deal with drug costs.
The second area of potential is around infrastructure. People talk about an infrastructure bill, but there could be health aspects to an infrastructure bill as well.
Third, perhaps the flagship of regulatory modernization is the issue of the Stark Law, which creates a real obstacle for us to move from fee-for-service to value-based payments, because it prevents organizations from rewarding the kinds of behaviors that are necessary to make value-based payments work.
The fourth area is delivery system reform. One of the ideas that we are very supportive of addresses new delivery system options for rural communities. There's the Rural Emergency Medical Center Act that enjoys bipartisan support. It gives rural communities the opportunity to reconfigure the best access points in their community.
One other issue we're dealing with next year is the Medicaid DSH cuts. They would kick in on October 1, and of course we're against seeing those cuts kick in.
The second thing that we have real heartburn with that needs to be stopped is the 340B cuts. We're also in litigation onsite-neutral payments.
The other regulatory action that we have a real concern over is the public charge rule that would result in over 13 million people potentially losing coverage.
HLM: What would you like to see in an infrastructure bill?
Pollack: We all want to be really focused on making sure that the availability of broad band in rural areas to make sure that they have access to the digital world. It also as implications for bringing telehealth to rural areas.
Another thing that ought to be part of an infrastructure bill is strengthening our capacity and capability to respond to emergency readiness. While we fortunately have not had any incidents in a while, recall what happened when we all had to gear up for Ebola. There are enormous resources that are associated with caring for those types of situations.
And we need assistance for hospitals in right sizing and reconfiguring themselves for the future. A lot of them are in rural areas, but also in urban areas, where a lot of care as it can be done outside the building.
Eighty-six percent of all healthcare spending is on people that have multiple chronic conditions, and a lot of those multiple chronic conditions can be cared for in sites that are outside our traditional buildings, some of it even at home. The notion of having hospitals at home to take care of certain people, all of that involves right sizing.
And for hospitals that are in vulnerable communities, particularly in rural areas, they just simply don't have the resources to reconfigure themselves for these changing dynamics.
HLM: Who is responsible for rising medical costs?
Pollack: Everybody's responsible for that. There's no question that we all have a role in dealing with reducing costs, and we think that delivery system changes that provide the right incentives to reduce costs and improve quality is the way to go.
But, I wouldn't be honest if I didn't say that drug costs are the biggest part of the of our budgets that are growing at the fastest rate.
HLM: Is hospital consolidation driving costs?
Pollack: We've tried to demonstrate in our research that consolidation achieves efficiencies that reduce revenue per admission. The AMA did a great study on this that shows there's so many areas where it's not provide consolidation, it's insurance consolidation that's overwhelming in some communities.
The real reason that we're doing mergers and consolidations is to increase scale, because you need to increase scale to take on risk. To do value-based payment you need to scale to undertake quality initiatives that are standardized clinical processes and that eliminate variation.
We find that consolidation provides more access to care to more service sites. We find that consolidation creates an ability for hospitals to get capital, because they're part of larger organizations that they would never be able to access to modernize and reconfigure the ability to do purchasing outside of GPOs, important reason for merger and consolidation.
A lot of the mergers and consolidations are rescue operations for hospitals that would go bankrupt if they weren't a part of a larger system. They're watchdogs out there that are pretty aggressive, particularly the FTC, and it's not as if people can do anything they want when they do it. There's an accountability there.
HLM: What are your expectations for price transparency in 2019?
Pollack: There's been a lot of moves on this past year around price transparency, and the administration is put forth its final rule that will require hospitals to disclose their prices, beginning January in a machine-readable format.
Another area that they might take aim at is surprise billing. We definitely want to work with Congress to protect patients from surprise bills, particularly those emergency situations when they go to an in-network hospital and receive care from doctors who out-of-network. We've got to protect the patient in those situations, and the insurers needs to do a better job of making sure that their networks are adequate.
On transparency, what we really need to focus on making sure patients know what their out of pocket exposure is. Over half of the revenue stream for hospitals and health systems are rate set, Medicare, and Medicaid and accounts on a sliding scale for on the commercial side. There's a need for transparency.
What people really want to know is their out-of-pocket exposure. Working with insurers, we need to do a better job of making sure that they know what that is.
HLM: Are these vertical mergers, such as the CVS-Aetna deal, a threat to hospitals?
Pollack: I can see how some people might view them as threats, but I prefer to see that there could be opportunities.
A lot of hospitals are working with these entities in various joint ventures. A lot of systems are in agreements or in arrangements and running clinics in CVS, and in Walmart, and in Walgreens so that there are potential opportunities there.
We aren't going to see babies delivered in the drugstore, and we aren't going to see people run to the CVS for an emergency, and we're not going to see sophisticated diagnostics and therapeutics and surgeries being done in strip malls. Everybody has their role in the delivery system.
Moody's says that reimbursements for non-profit hospitals will immediately revert to levels before the cuts were imposed in 2018, improving operating performance.
A federal judge's ruling late last month blocking the Department of Health and Human Services' 22% cut in 340B reimbursements is a credit positive for non-profit hospitals, according to Moody's Investors Service.
"Reimbursements will immediately revert to levels before the cuts, improving operating performance," Moody's said in a credit brief this week.
"About 45% of acute care hospitals participate in the 340B program. Although the savings and effect on each hospital's margins are not publicly disclosed, the income gained from this program can account for as much as 25% of not-for-profit hospital's operating cash flow," Moody's said, citing its own surveys.
The 340B drug pricing program requires drug makers to provide Medicare discounts to safety-net providers. The program covers pharmacy drugs and provider-administered drugs covered under Medicare Part B.
The ruling issued December 27 by U.S. District Judge Rudolph Contreras sided with the American Hospital Association and other hospital stakeholders who asked that he vacate the 22% cut in 340B payments that Azar had announced late last year.
"While in certain circumstances the Secretary could implement the rate reduction at issue here, he did not have statutory authority to do so under the circumstances presented," Contreras said in his 36-page ruling.
In the past year, Medicare Part B reimbursed hospitals for Medicare patients at the drug's average selling price minus 22.5%. Reimbursement for those same drugs will revert to average selling price plus 6%, as it was before 2018.
Contreras also ordered the hospitals and HHS to jointly determine if hospitals can recoup some or all of the money lost. HHS estimates Medicare saved $1.6 billion from the cuts in 2018.
Moody's said the ruling will have "a negligible effect" on for-profit hospitals because they do not participate in the 340B program.
"However, in 2018, for-profit hospitals did benefit slightly from the 340B cuts because Medicare redistributed savings from the 340B program to all hospitals, including the for-profits, which contributed to their strong outpatient pricing in 2018," Moody's said.
"In addition, it is not yet clear if or how the 2018 money distributed among all hospitals, including the for-profits, will be recouped," Moody's said. "If Medicare is successful in recouping those funds, it would be modestly credit negative for for-profit hospitals and other non-340B hospitals that received redistributed funds in 2018."
The effect for drug makers "will be negligible because the purchase of eligible drugs at a discount remains unchanged," Moody's said.
Hospitals were paid 87 cents for every dollar they spent on care for Medicare and Medicaid patients. In addition, hospitals provided $38.4 billion in uncompensated care in 2017.
Medicare and Medicaid underpaid the nation's hospitals by $76.8 billion in 2017, according to new datafrom the American Hospital Association's annual hospital survey.
Medicare underpayments in 2017 totaled $53.9 billion and Medicaid underpayments totaled $22.9 billion. In addition, hospitals provided $38.4 billion in uncompensated care in 2017, AHA reported.
Medicare and Medicaid are voluntary programs. Hospitals are not required to participate in either program, but they must if they want to maintain their not-for-profit, tax-exempt status.
In addition, Medicare and Medicaid programs account for more than 60% of all care provided by hospitals, so few hospitals can choose not to participate.
Among the findings in the new AHA survey:
In the aggregate, both Medicare and Medicaid payments fell below costs in 2017.
Combined underpayments were $76.8 billion in 2017. This includes a shortfall of $53.9 billion for Medicare and $22.9 billion for Medicaid.
For Medicare and Medicaid, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicare patients in 2017.
In 2017, 66% of hospitals received Medicare payments less than cost, while 62% of hospitals received Medicaid payments less than cost.
The uncompensated care losses do not account for other services and programs that hospitals provide to meet community needs, such as population health initiatives.
A 2017 study commissioned by AHA estimated that not-for-profit hospitals secured $6 billion in federal tax breaks in 2013 due to their tax-exempt status. However, those not-for-profit hospitals also provided $67.4 billion in community benefits, which is 11 times greater than the value of the tax breaks.
Healthcare created 346,000 new jobs in 2018, up from 284,000 jobs in 2017. The 2018 figures include 219,000 jobs in ambulatory services and 107,000 hospital jobs.
The healthcare sector created one in seven new jobs in the United States in 2018, according to new preliminary data released Friday by the Bureau of Labor Statistics.
For 2018, healthcare created a total of 346,000 jobs—nearly 29,000 new jobs each month—up from 284,000 jobs created in 2017. The 2018 figures include 219,000 new jobs in ambulatory services and 107,000 new hospital jobs.
In the overall economy, total nonfarm employment increased by 2.6 million in 2018, compared with 2.2 million in 2017, and the unemployment rate ticked up 0.2 percentage point to 3.9% in December
A further breakdown of employment in healthcare shows that the sector ended the year with 50,000 new jobs in December, including 38,000 jobs in ambulatory services and 7,000 jobs in healthcare.
At the end of 2018, more than 16.2 million people worked in the healthcare sector, which accounts for nearly 11% of all jobs in the overall economy, including 7.6 million in ambulatory services, and 5.2 million in hospitals.
Healthcare job growth outpaced nearly every other major sector of the economy in 2018, including food services (261,000), construction (280,000), manufacturing (284,000), retail sales (92,000).
The new data is in line with BLS projections that healthcare sector employment will grow 18% from 2016 to 2026, "much faster than the average for all occupations, adding about 2.4 million new jobs."
"This projected growth is mainly due to an aging population, leading to greater demand for healthcare services," BLS said.
On the downside, hospital spending will grow about 5.5% each year, from $1.3 trillion in 2018 to $1.8 trillion in 2026, driven largely by those same demographics.
Only professional and business services outstripped healthcare job growth, creating 583,000 new jobs in the sector, BLS data show.
The deal, announced in mid-2018, creates one of the largest not-for-profit health systems in the nation, with more than 50,000 employees and a presence in 26 states.
Financial terms were not disclosed for the deal, which was made public in June, shortly after the membership at Good Samaritan voted their approval.
"With the affiliation complete, leaders can begin the exciting work of exchanging knowledge and developing ideas to better serve our patients and residents," Sanford Health CEO and President Kelby Krabbenhoft said in a media release.
"The shared heritage of Sanford and the Society will guide the transformation of both organizations as a leader in providing care through the life span," he said.
The Good Samaritan Society acquisition makes Sanford Health one of the largest health systems in the United States. The combined system generates more than $5 billion in annual revenue, and includes 44 medical centers, 482 clinics, more than 200 senior living facilities, 190,000 Sanford Health Plan members, and more than 12,000 clinicians.
David Horazdovsky remains CEO of the Society and has joined Sanford Health's corporate leadership team. Randy Bury has transitioned to president of the Society from his previous role as Sanford Health's CAO.
Sanford said it will continue to use the Good Samaritan Society name because it "has enormous value in post-acute and senior care."
The Society's membership voted in favor of the affiliation in June 2018, which cleared regulatory review before the deal closed.
Mid Dakota Acquisition on Appeal
On other fronts, Sanford's attempts to acquire Bismarck, North Dakota-area rival Mid Dakota Clinicremains bogged down amid objections raised by state and federal regulators.
The suit was brought by the North Dakota Attorney General's Office and the Federal Trade Commission, which contend that the acquisition would adversely affect competition in the Bismarck service area and increase the cost of healthcare for consumers.
Mid Dakota Clinic employs 61 physicians and 19 advanced practice practitioners and operates six clinics in Bismarck, a women's health center, and an ambulatory surgery center. The proposed merger was announced in June 2017 and immediately drew the attention of state and federal regulators.
The FTC and state officials contend that the acquisition would create a physician group controlling at least 75% to 85% of market for adult primary care, pediatrics, and obstetrics and gynecology services. The merged clinic also would be the only physician group offering general surgery services in the area, and could stifle efforts by other providers to enter or expand in the service area, the complaint states.
Sanford and Mid Dakota said the complaint fails to consider the leveraging power of Blue Cross Blue Shield of North Dakota, the region's largest commercial payer, which would preclude anticompetitive effects that might result from the acquisition.
AHIP wants the effective date of the final rule to be pushed back by 18 months or more, claiming the one-year timetable proposed by the Trump administration "is insufficient to allow Integrated HRAs to be properly designed, offered and administered."
Commercial payers are urging the federal government to delay by at least a year-and-a-half proposed rules to expand the use of Health Reimbursement Arrangements.
"As with any change of this size and complexity, adequate planning time is required," Keith Fontenot, executive vice president, Policy and Strategy, at America's Health Insurance Plans said in his letter to the secretaries of Treasury, Labor, and Health and Human Services.
"We recommend the effective date be no earlier than January 1, 2021, or 18 months following publication of the final rule, whichever is later," Fontenot said.
The call for a delay was one of six points stressed by Fontenot in his letter, which generally was in support of HRAs "if properly regulated and implemented."
"Access to new HRA options will give employers and consumers more choices on where to get their health insurance," he said. "With proper safeguards and careful planning, HRAs will create new opportunities for businesses of all sizes to offer new coverage options to their employees while strengthening the individual market with new potential enrollees."
"However, enforceable safeguards and non-discrimination protections are essential for these options to work for Americans. Clear rules on when an HRA can be offered, what types of plans can be purchased using these funds and on what terms will be key," Fontenot said.
The Trump administration's HRA proposed expansion has received relatively good reviews for its protections against adverse selection since it was unveiled in late October.
"What leapt off the page for me after reading the proposal was how much they cared about protecting the individual market from adverse selection," John Barkett, who served in the Obama administration's Office of Health Reform, told HealthLeaders.
"They were very concerned about putting this rule out in a way that wouldn't let employers send their sickest workers into the individual marketplace," he says.
In addition to the 18-month delay, AHIP called for:
Strong non-discrimination provisions to protect consumers with pre-existing conditions and to promote access to affordable coverage. While the proposed rule "recognizes these goals," Fontenot urged the federal government to strengthen protections in the final rule. "Any weakening of these protections risks significant harms for both the individual and employer provided coverage markets and the members they serve," he said.
Prohibiting the use of Integrated HRAs to purchase short-term, limited duration insurance. "We strongly believe that an Integrated HRA as a benefit offering should reimburse only major medical coverage," Fontenot said. "Such coverage will protect consumers from financial harm upon an illness or injury and ensure a balanced risk pool."
Protecting employer provided coverage and supplemental benefit offerings. "We ask the agencies to consider the impact of these new arrangements on employer-provided coverage and how to best advance innovations across market segments," Fontenot said.
Ensuring coverage is affordable for employees. "We are concerned about scenarios where some employees would have paid less for coverage due to eligibility for the premium tax credit," Fontenot said.
Preserving HIPAA excepted benefits to ensure access to health coverage that promotes financial security for specific needs. "We appreciate the proposed rule creates a new type of HRA to expand access to Excepted Benefits. However, we urge the tri-agencies to allow reimbursement from an Excepted Benefit HRA only for existing HIPAA Excepted Benefits, which do not include short-term, limited duration insurance," Fontenot said.
