Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at jsimmons@healthleadersmedia.com.
Physicians hoping to see a postponement at last of a 21% cut in Medicare and TRICARE reimbursements faced disappointment on Thursday as the Senate failed to pass a new "doc fix" amendment to the jobs bill (HR 4213). The Senate is not likely to vote on the provision again until next week.
Thursday was significant because it was the last day that the Centers for Medicare and Medicaid Services' contractors would hold claims so that the 21% reduction would not be removed from payments made to physicians for service claims provided on and after June 1. (June 1 was the deadline for the previous extension of the doc fix by Congress.)
While CMS is expected to cut 21% on fees starting with Friday claims, providers can expect to eventually get that cut amount back if Congress approves a sustainable growth rate (SGR) fix that is retroactive to June 1. CMS also is expected to release guidance on whether it will be giving physicians permission to waive small beneficiary co payment amounts linked with a retroactive fix.
However, that action is unlikely to appease many of the major physician groups who have become increasingly vocal for a fix to permanently drop the SGR formula.
The change to the SGR proposed this week in the Senate would provide a shorter timeframe for a payment raise than the proposal under consideration last week: With the latest version, a 2.2% raise was called for physicians through Nov. 30 of this year—rather than the 2.2% over 19 months proposed in an earlier amendment. The shorter period would create in part a less expensive jobs bill (which declined from a $140 billion package the previous day to $118 billion on Thursday).
The drop in cost, however, failed to sway Republicans for supporting the bill. The jobs bill was unable to get the needed 60 votes to avoid a filibuster on Thursday: Voting along party lines, the bill eventually was defeated 56-40. The House's jobs bill—which included a 19-month SGR postponement—was passed three weeks ago.
In comments made before the Senate vote, new American Medical Association President Cecil Wilson, MD, said that implementing the 21% cut in Medicare payments will impact seniors' healthcare" as "physicians are forced to make difficult practice changes to keep their practice doors open."
Referring to the six-month delay proposed in the latest amendment, Wilson said that "continued short term actions are creating severe instability" as physicians make decisions to "protect their practices from Medicare's volatility."
The American College of Physicians, in a statement, was critical that this was the third time this year that Congress considered short-term patches to stop the payment cut.
ACP said that it initially supported an approach proposed by Congress last month that guaranteed no cuts in payments for three years—as a more permanent system to Medicare updates was considered. It said, though, it will "continue to apply maximum pressure on Congress" to stop cuts "by enacting legislation that provides stable and predictable payments—with the goal of a permanent fix."
Antibiotic-resistant organisms—the so-called "super bugs"—may be gaining an upper hand if action is not taken very soon on the healthcare front.
At a hearing last week on antibiotic development, Rep. Henry Waxman (D-CA), chair of the House Energy and Commerce Committee, said that the goal both in the United States and abroad is that individuals keep on benefitting from life-saving treatments.
Providing that, though, can be tough. "By definition, this is an inherently difficult goal to achieve—after all, the very use of antibiotics leads to the development of pathogens that can no longer be treated by those antibiotics," Waxman said. In this case, rather than "use it or lose it," with antibiotics it is "use it and lose it."
The impact of these super bugs is being felt worldwide. In a report released Tuesday by the Washington, DC-based Center for Global Development, many international drug distribution programs were found to be creating drug resistance themselves—and endangering the lives they should be saving.
For instance, in nations with the highest use of antibiotics, 75% to 90% percent of Streptococcus pneumoniae strains were already drug resistant.
In many poorer countries, drug expenditures can range from 20% to 60% of total expenditure on health. When first line drugs fail, alternatives were more costly and require greater medical oversight: Curing one patient of extensively drug resistant tuberculosis costs the same as curing 200 patients with ordinary TB, the report notes.
"Drug resistance is a natural occurrence, but careless practices in drug supply and use are hastening it unnecessarily," the Center's Rachel Nugent, who led the group writing the report, said in a statement.
Back in the U.S., antibiotic resistance can be considered an economic burden on the healthcare system, too, Centers for Disease Control and Prevention Director Thomas Frieden, MD, told the House panel earlier this spring.
Resistant infections not only cost more to treat—but also can prolong healthcare use, Frieden said. For instance, in a 2008 study of medical costs for antibiotic resistant infections, it was estimated that infections in 188 patients at a single healthcare institution cost between $13.35 million and $18.75 million.
Unfortunately, as Frieden points out, infections caused by antibiotic-resistant bacteria—despite precautions taken—still remain an everyday occurrence in healthcare settings.
Antimicrobial resistance is a complex issue and addressing it will require "creativity and persistence," said Janet Woodcock, MD, director of the Food and Drug Administration's Center for Drug Evaluation Research, at the House hearing.
This will include, she said, developing new vaccines—"diminishing the need for antimicrobial treatment in the first place," Woodcock said. Prevention of infections through the use of vaccines has virtually eliminated or markedly decreased the problem of resistance in organisms such as Haemophilus influenzae type b, virtually eliminated in the U.S., but still a problem in other parts of the world, and Streptococcus pneumoniae, also known as pneumococcus.
Also, improved diagnostics will help curb overuse of antibiotics, she said, by allowing physicians to determine whether a patient has a bacterial infection and, if so, whether it is resistant to conventional antibiotics.
Educating providers—and patients—about the overuse of antibiotics has been important, said Sandra Fryhofer, MD, a member of the American Medical Association's Council on Science and Public Health. However, the use of antibiotics for the treatment of pediatric acute otitis media has not subsided despite the issuance of a watchful waiting guidance from the American Academy of Family Physicians and the American Academy of Pediatrics six years ago.
Unfortunately, the issue that will not go away is that new drugs that battle antibiotic resistance need to be created. Many pharmaceutical manufacturers, though, have been increasingly reluctant to move in such a direction because of high costs and low returns on investment.
Thus, "innovative incentives" must be developed, Fryhofer said, to foster “continued research and development of novel antibiotics to make sure that these important tools that combat infectious diseases remain available for future generations of physicians."
One AMA proposal, announced Wednesday at its annual meeting, is to educate the public about antibiotic resistance and to create incentives for manufacturers to develop 10 new antibiotics by 2020.
But will that be soon enough? Take the case of the new antibiotic linezolid—considered one of the few effective antibiotics to fight severe MRSA infections. However, in new research reported this month in the Journal of the American Medical Association, new cases have been reported already of linezolid resistant Staphylococcus aureus (LRSA) in Spain, Germany, Brazil, and even the U.S.
As far as super bugs are concerned, the fight continues.
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In 2009, the last full year before healthcare reform legislation went into effect, 15.4%—or about 46.3 million Americans—had no healthcare insurance, according to a Centers for Disease Control survey released Wednesday. This rate is slightly up (from 14.7% or 43.8 million Americans) from 2008.
The percentage of adults aged 18 to 64 years who lacked coverage at the time of contact by the CDC's National Center for Health Statistics increased from 19.7% in 2008 to 21.1% in 2009. A corresponding decrease in private coverage occurred among adults aged 18 64 from 68.1% in 2008 to 65.8% in 2009.
Also in 2009, individuals age 65 or younger with private health insurance were enrolled in a high deductible health plan— including 6.3% who were enrolled in a consumer directed health plan. Almost half of persons with a private plan obtained by means other than through employment were in high-deductible plans; about 20.4% of persons with private plans were in a family with a flexible spending account for medical expenses.
About 21% of individuals age 65 years or younger were covered by public plans. More than a third of children (37.7%) were covered by a public plan—compared with 14.4% of adults aged 18 64. Those children covered by a public health plan increased from 34.2% in 2008 to 37.7% in 2009—possibly due to expansion of children's coverage at the federal level in 2009.
In 2009, 11.8% of poor children and 12.1% of near poor children did not have health insurance. The percentage of near poor children who lacked health coverage decreased from 15.6% in 2008 to 12.1% in 2009. Meanwhile, the percentage of poor adults aged 18 64 years who lacked coverage at the time of the CDC survey increased from 37.7% in 2008 to 42.5% in 2009.
Approximately one in four persons under age 65 in Florida and Texas, and one in five persons under age 65 in California and Georgia, lacked coverage at the time of the CDC survey. By contrast, rates of non-coverage at the time of survey in Illinois, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Washington, and Wisconsin were lower than the national average.
For all persons under age 65 years, the largest age group without insurance were those aged 18 24 (29.6%). This area is anticipated to change quickly under provisions approved earlier this year that would allow young adults to stay on their parents' plans.
Today's graduate medical education (GME) system needs to do more to prepare physicians to make a mark on delivery and payment system reform and to increase the value of healthcare, the Medicare Payment Advisory Commission (MedPAC) suggests in its 2010 Report to the Congress: Aligning Incentives to Medicare released Tuesday.
"The Commission does think that the current graduate medical education system produces superb physicians . . . but that there are concerns with the current structure," said MedPAC Executive Director Mark Miller, PhD, at a briefing.
Ongoing MedPAC research has raised questions about the ability of the medical education system to "produce a mix of medical professionals that will lead change in health delivery—lead that change from a focus on fee-for-service medicine to focusing on quality, coordination, and restraint of costs," Miller said.
Many current curriculums with residency programs examined by MedPAC failed to look at working with multidisciplinary teams, using quality metrics, and employing information technology. "The training systems tended to be highly focused on inpatient care—and less on out-of-hospital types of care," Miller said.
To change this, MedPAC is recommending that Medicare reallocate some of the $9 billion of subsidies allotted for GME annually. Specifically, it called for $3.5 billion to be allocated only to sponsoring education programs that "meet these higher criteria" such as working on teams and coordinating care, Miller said.
These programs also should have "stronger out-of-hospital" training as well, with focuses on such areas as nursing homes, clinics, or physician settings, Miller said. "That's not to abandon hospital care, which is clearly important for training, but to have a stronger focus on [outpatient care]."
MedPAC also suggested for GME that:
A workforce analysis be considered by the Health and Human Services secretary to determine the number of residency positions needed in the U.S. by total and by specialty. This analysis also would examine the optimal level of other health professionals.
Strategies be examined for increasing the diversity of the health professional workforce (e.g., increasing the shares from underrepresented rural, lower income, and minority communities). "There's never been a systematic evaluation of what works and what doesn't," Miller said.
In the annual report, MedPAC also took a closer look at the in-office ancillary services exception that permits physicians to deliver health services under the Stark law. In staff studies, it found that outpatient therapy was "rarely provided on the same day as a related evaluation and management or consultation office visit"—which was one of the "key rationales" for the exception, the report said.
Overall, less than half of advanced imaging, ultrasound, and clinical lab tests were performed on the same day as an office visit, with about half of standard imaging studies performed on the same day as an office visit. Outpatient therapy services were not generally associated with a related office visit at all.
Pulling up short of making recommendations, MedPAC instead suggested that several options should be examined for these services:
Exclude therapeutic services such as physical therapy and radiation therapy from the IOAS exception.
Limit the in-office exception to physician practices that are clinically integrated.
Exclude from the exception diagnostic tests that are not usually provided during an office visit.
Reduce payment rates for diagnostic tests performed under the exception.
MedPAC also suggested that legislation be considered to give Medicare more flexibility with "innovative purchasing policies" to improve the delivery of healthcare services. Medicare currently has legislative limits that prohibit it from adopting such policies quickly, Miller said.
As one example, MedPAC found Medicare's ability to use policies such as reference pricing—in which a new item or service is paid at the same payment rate as clinically comparable items of services—has been limited due to lack of clear legal authority.
Also, in Medicare, no basic authority exists that says 'you can pay differentially on the basis of performance," Miller said. "Again, there are exceptions ... but there is not a broad authority that says Medicare's payment should vary on the basis of quality, outcomes."
Final interim rules issued by the departments of Health and Human Services, Treasury, and Labor on Monday specify when group health plans will be exempted—or "grandfathered in"—when complying with the new healthcare reform requirements.
Under the interim rules, all health plans—whether or not they are grandfathered plans—must provide specific benefits to their customers for plan years starting on or after Sept. 23, 2010, including: No lifetime limits on coverage for all plans, no rescissions of coverage when people get sick and have previously made an unintentional mistake on their application, and extension of parents’ coverage to young adults under age 26.
For those getting their health insurance through employers, additional benefits will be offered—no matter if their plan is grandfathered—including: no coverage exclusions for children with pre existing conditions, and no "restricted" annual dollar limits on coverage.
Plans will lose this "grandfather" status if they choose to significantly cut benefits—for instance, if they eliminate conditions already covered such as diabetes, cystic fibrosis, or HIV/AIDS. That status also will be lost if plans significantly raise copayment charges over the two years (for instance, from $30 to $50), or significantly raise deductibles (for example, from $1,000 to $1,500) also over the next few years.
The grandfathered plans, though, can increase deductibles and out of pocket limits—but only within a certain percentage. The maximum percentage is defined as an increase in the medical care component of the Consumer Price Index since March 23 (when the reform bill was signed), plus 15%.
The flexibility over plan deducible and limits will encourage employers to continue offering health coverage to their employees and help to ensure coverage for all Americans, said Secretary of Labor Hilda Solis.
The new rule provides flexibility to "employers who offer quality insurance to make routine changes and still continue offering the same coverage to employees," said Sen. Max Baucus (D-MT), chair of the Senate Finance Committee, in statement.
Between 71% and 87% of larger employer plans, currently serving 133 million enrollees are expected to remain grandfathered in through 2011; by 2013 (before health exchanges are implemented), between 35% and 66% will remain grandfathered in.
For smaller employee plans with 43 million covered enrollees, between 58% and 80% are expected to remain grandfathered in 2011; by 2013, that rate is expected to drop to between 20% to 51%. By 2014, small businesses and individuals who purchase insurance on their own will gain access to the competitive market exchanges under the current healthcare reform act.
Physicians worried about the 21% cut in Medicare and TRICARE payments that started June 1 were the subject Saturday of President Obama's weekly address in which he called for "permanently reforming" the way physicians are paid.
Citing the initial role of the sustained growth rate (SGR) a decade ago to slow Medicare costs, Obama said the cuts proposed by the SGR would not "only jeopardize our physicians' pay, but our seniors' healthcare."
When the Senate began its weekend recess last week, it left behind the jobs bill (HR 4213) that included the physician payment fix amendment introduced earlier in the week to postpone payment cuts. Under the current amendment, which uses the same language passed by the House two weeks ago, physicians would see an increase in payment rates of 2.2% for the remainder of 2010 and a 1% increase in 2011.
"I realize that simply kicking these cuts down the road another year is not a long term solution to this problem," Obama said. He added that for years, "I have said that a system where doctors are left to wonder if they'll get fairly reimbursed makes absolutely no sense."
"I am committed to permanently reforming this Medicare formula in a way that balances fiscal responsibility with the responsibility we have to doctors and seniors," said Obama. Specifically, this will be done through "significant steps to slow the growth of Medicare costs through health insurance reform" and by eliminating at least half of the waste, fraud, and abuse in the healthcare system by 2012.
In Chicago, at the annual American Medical Association meeting this weekend, AMA President J. James Rohack, MD, said that the association was "pleased to see President Obama stand with seniors and their physicians" to stop a "looming Medicare meltdown."
According to AMA's new online survey, already "31% of primary care physicians are limiting care to Medicare patients."
While the 21% cut has been in effect since June 1, the Centers for Medicare and Medicaid Services has told its contractors to hold claims for Medicare reimbursement for 10 business days to avoid disruption. That hold period is scheduled to end Tuesday.
The Senate left for the weekend yesterday—leaving behind the jobs bill (HR 4213) that includes the "doc fix" amendment introduced earlier in the week to postpone a 21% cut in Medicare and TRICARE for the next 19 months. But when they return on Monday, senators may take under consideration another amendment that calls for a longer period to postpone payment cuts.
Sen. Debbie Stabenow (D-MI) is reportedly considering an amendment that would stop the 21% Medicare cut with a formula that reflects increases in physician practice costs, while providing somewhat more stability in payments through 2013. Stabenow was author of a bill introduced last fall (S. 1776) to overturn the 21% cut and sunset the use of the sustainable growth rate (SGR) formula; that bill was defeated 47-53.
The American College of Physicians said it supports this possible amendment "as a positive step forward to a permanent solution." The amendment could create payment updates that help reflect increases in physician practice costs through 2011.
The amendment provisions, which are based on legislation (HR 3961) passed by the House in November, "recognizes the importance of ensuring that spending on all physician services be allowed to grow at a higher rate of growth than the unrealistic limits set by the SGR," said ACP President J. Fred Ralston, MD, in a letter to the Senate.
The current amendment in the jobs bill uses the same language passed by the House two weeks ago: physicians would see an increase in payment rates of 2.2% for the remainder of 2010 and a 1% increase in 2011. Rates would return to present law after 2011.
At the current time, the 21% cut is in effect (since June 1) for physician payments. However, the Centers for Medicare and Medicaid Services has told its contractors to hold claims for Medicare reimbursement for 10 business days "to avoid disruption in the delivery of healthcare services." That deadline, however, ends on Tuesday unless Congress approves legislation that addresses the 21% cut.
As physicians evaluate new payment options under healthcare reform, they should look at the new building blocks holding up the future economic structures. This can help in working with new healthcare delivery "pathways" such as accountable care organizations (ACOs), payment bundling, patient medical homes, and gainsharing, according to a new American Medical Association white paper released Thursday.
Since many pilot projects are already underway in the private sector, "it’s critical that physicians in all practice sizes have the tools to succeed in these new programs." said Cecil Wilson, MD, AMA's president-elect in a statement.
In new paper, called "Pathways For Physician Success Under Health Care Payment And Delivery Reforms," author Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform, said the new payment reform proposals vary from the current payment system in at least one of five ways:
Paying more for some services. New payment systems may pay for certain services—or ways of delivering services—that are not currently paid for today. Or, they may pay more for services than are paid for today.
Basing payment on quality. New payment systems may make the payment amount for a service dependent on the quality of the service delivered. Examples will include pay for performance; nonpayment for services required to treat complications, limited warranties, non payment for services failing to meet minimum quality standards, and quality based tiering.
Bundling separate services into one payment. New payment systems may make a single combined payment for two or more services for which a physician is currently paid separately—or for services not currently paid for.
Making payments dependent on the amount and costs of services delivered by other physicians. New payment systems may make a physician’s payment dependent on the number of services or the cost of services delivered by other providers. This will include areas such as shared savings/gain sharing, bundling multiple providers into a single episode payment, and virtual bundling.
Paying to support specific provider structures, systems, and locations. The new payment systems may pay more for certain kinds of infrastructure or practice structures—or for physician practices located in particular geographic areas or serving specific kinds of patients.
In addition, each of these categories will be accompanied by changes in payment methods, including: condition/severity adjustment; outlier adjustments, quality and resource use measures and performance targets; patient attribution rules; and insurance benefit designs (including value based benefits and wellness incentives).
"This new member benefit maps out pathways to success, including compensation and legal issues and real life examples from physician practices," said Wilson. Other topics discussed in the white paper include the opportunities and challenges for physicians in small independent practices, and the key skills and resources needed to overcome barriers.
However, "physicians do not need to be employed by hospitals or join large group practices" in order to successfully "achieve the goals of managing costs and quality that payment reforms are designed to support," said Wilson.
When it comes to providing quality acute care for senior patients, at least half a dozen models have been identified and tested successfully by hospitals and health systems. However, a problem exists: These programs have generated little excitement among the healthcare community that may view them as cost centers as opposed to profit centers. Two geriatricians who have found ways to improve care for older patients want to change that thinking.
Bruce Leff, MD, a professor of medicine at Johns Hopkins University School of Medicine in Baltimore, and Albert Siu, MD, professor and chairman of Geriatrics and Adult Development at the Mount Sinai School of Medicine in New York City, are behind the launch of the Medicare Innovations Collaborative, or Med-IC (www.med-ic.org), a pilot program designed to spread these ideas to hospitals and health systems across the country.
Med-IC is not just specifically an expansion of work by JHU and Mount Sinai. "It's an effort to try to disseminate work that's been done with [other] geriatric models of care," Siu says. Since November, six organizations have been on a one-year pathway with Med-IC to find out what models can work for them: Aurora Sinai Medical Center, Milwaukee; Carolinas HealthCare System/Mercy Hospital, Charlotte, NC; Crouse Hospital, Syracuse, NY; Geisinger Health System/Geisinger Clinic, Danville, PA; Lehigh Valley Health Network, Allentown, PA; and University Hospitals Case Medical Center, Cleveland.
"You have all these models for which there is a real good evidence base. But they tend not to get implemented because putting one of these models into a hospital is very different than putting in a new CAT scanner or prescribing a pill," says Leff, who also has a joint appointment with JHU's Department of Health Policy and Management. "These models are complex. You need staff. You just can't pull them off the shelf."
He adds that while the academic community has been "very good at putting the scientific information" out there, it has fallen short in getting healthcare leaders to actually implement that information. "You have to change your organization. You have to integrate it with your information systems," Leff says. "[There are] lots of barriers to getting complex clinical models into practice."
Heaped onto this is the idea that geriatrics is "just not viewed in a positive way," says Leff. "I think that geriatrics has carried a lot of negative marketing baggage: Hospital leaders and system leaders think of taking care of older people as the cost of doing business as opposed to a business opportunity to improve."
The initiative is aimed particularly at community-based hospitals for which Medicare is still perhaps a desirable line of business, Leff says. While Medicare patients "probably are not the most profitable," there are ways to provide quality care outside of the hospital and, if they are admitted, ways to "move through the hospital safely, effectively, and efficiently."
Leff has had the opportunity to see how one model developed at JHU, called Hospital at Home, has made a difference during its 15-year history. The program helps patients stay in their homes—rather than in the hospital—to receive acute care services with fewer complications, as seen in several studies. While the program may not appeal to all hospitals (especially because it generates fewer inpatient dollars), it may attract those hospitals with concerns about limited bed capacity.
Likewise, Siu has seen positive results at the 1,171-bed Mt. Sinai through the use of Acute Care for Elders, a patient- centered model that provides geriatric assessments, quality improvement, interdisciplinary team rounds, and medical care review. Mt. Sinai also provides consultative services with one of the nation's largest palliative care programs.
When Med-IC, working with a grant from Atlantic Philanthropies, decided to form a collaborative, it received 20 applications from organizations—each with a record of good geriatric care, Siu says. The goal was that each site test one or more innovative programs designed to improve care for its Medicare patients with multiple chronic conditions.
Senior patients with challenging conditions are making up an increasingly significant portion of the hospital population, Siu says, and their care is complex and expensive. The six sites are serving as "learning laboratories." Aside from Hospital at Home, ACE, and palliative care, the other models include:
NICHE (Nurses Improving Care to Healthsystem Elders), a program providing clinical and organizational tools for improving hospital care of older adult patients, with oversight by a nursing team.
HELP (Hospital Elder Life Program), designed to prevent delirium among hospitalized older patients using trained volunteers and skilled interdisciplinary staff.
Care Transitions Intervention, a program for patients with complex care needs and family caregivers that helps them learn self-management skills and meets their needs during the transition from hospital to home.
While Med-IC is supplying ongoing consultative support, the sites are mostly paying for their own costs related to the collaborative program. The leaders in the collaborative organizations are those who saw "that you couldn't run away from Medicare"—which now accounts for 37% of hospital admissions and 50% of hospital bed days, Siu says. "Medicare will become a part of hospitals' businesses, and hospitals need to learn better ways of managing this population without losing their shirts."
One of those hospitals taking up the challenged is the 457-bed Carolinas Medical Center/Mercy. Prior to the collaborative, the medical center only had a palliative care model. It is looking to test all of the models during the year—and eventually disseminate its findings to others in the 30-hospital Carolinas HealthCare System.
CMC/Mercy saw this as a chance "to learn more about how to develop a senior service line" that was part of a strategic business plan created three years ago, says Phyllis Wingate Jones, the medical center's president. "We saw it as a real opportunity, particularly for a community hospital, to do more to in terms of providing a continuum of services to seniors and to do that in a quality manner," she adds.
Meanwhile, Aurora Health Care, a Milwaukee-based integrated healthcare system, is looking to expand its ACE program for cardiac patients—such as through the e-Geriatrician program, which helps geriatricians perform "virtual rounds" via telemedicine, says Michael Malone, MD, medical director of Aurora's senior services.
Aurora is also looking to expand palliative care, with healthcare professionals who see older patients working with palliative care experts to improve the "ability to use palliative care principles in daily care," Malone says. "We posed that primary care providers should be stepping forward to help patients and their families with their skills—instead of taking a step backward and letting someone who doesn't even know the person address those needs."
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In what may become part of a trend among the states, New York Gov. David Paterson signed into law Wednesday a bill that reinstates the New York State Insurance Department's authority to review and approve health insurance premium increases before they take effect and adds a medical loss ratio that insurers must meet.
Beginning in 2000, New York had regulated health insurance premiums with a "file and use" law that limited the state's ability to disapprove health insurance premium increases and allowed the insurance industry to self regulate.
The new law contains provisions to ensure that a specified percentage of premiums are returned to consumers in the form of benefits: It raises the medical loss ratio—the percentage of premium spent to provide medical care—from 75% to 82% for small businesses and from 80% to 82% for individuals.
In a statement released late Wednesday, Health and Human Services Secretary Kathleen Sebelius called the New York action "a bold move to hold insurance companies accountable and prevent the kind of unreasonable rate increases that have made health insurance unaffordable for many American families."
Last month, Sebelius had sent a letter to governors and state insurance commissioners that called on them to review the authority they have under their state laws to determine whether they have the regulatory tools needed to approve health insurance rates before they take effect.
Earlier this week, HHS announced the availability of $51 million in Health Insurance Premium Review Grants under the new healthcare reform act. This money will fund the first round of grants available to states through a new $250 million grant program that is aimed at strengthening insurance rate review processes.
The new law will apply to all rate increases taking effect on or after Oct. 1, 2010. Under the new provision, health insurers and managed care plans will be required to send an application to the state insurance department to implement premium increases. The department will have the opportunity to review the rate applications, as well as the underlying calculations, and may approve, modify or disapprove the rate application.
The legislation also provides an opportunity for policyholders and the public to comments to the insurer and the insurance department on the rate applications. The insurance department is required to post the comments on its Website through a forum designed for public input and discussion.
Also, under the legislation, small businesses and individuals will also receive longer notice of rate increases—60 days instead of 30 days—to allow them more time to consider alternative coverage options if they cannot afford a rate increase.
