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Federal Policy Implementation under the Affordable Care Act: Six Issues Whose Final Resolution Awaits, as Implementation Moves Forward

Posted on August 6, 2013 | Comment (1)

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By Sara Rosenbaum

Full implementation of the Affordable Care Act (ACA) begins in less than 2 months, when open enrollment in the new Health Insurance Marketplace commences. All of the essential policy decisions on which implementation turns are in place and the new Health Insurance Marketplace – the heart of the law – will begin enrolling individuals and small groups when open enrollment begins on October 1.

Since the Act was signed into law on March 23, 2010, the Obama Administration has published more than 70 final rules implementing its provisions (See Appendix A).  These final rules, which range from health insurance market reforms to pending regulation of the nutritional information available on food packaging, breathe life into the Act’s broad policies.

The Administration has supplemented its formal regulations with countless interpretive guidelines, such as letters to state officials, “Frequently Asked Questions,” agency transmittals, model application and reporting forms, guidance to plan issuers, and other sub-regulatory policies. These materials are designed to amplify key aspects of the implementation process while further easing the path to implementation for states, insurers, employers, and health care providers.

In addition, the Administration has awarded tens of billions of dollars in federal ACA implementation funding in order to support state efforts, enable states to develop state-based Marketplaces, institute the federally-facilitated Marketplace, streamline eligibility systems, support innovations in health care delivery and program administration under Medicaid and CHIP, speed innovations in health care for Medicare beneficiaries and other patient populations, improve the training and education of medical and health care professionals, expand school-based health care, expand access to health care in medically underserved communities, and improve community health.

Finally, the Administration has built www.Healthcare.gov. In addition to offering quick links to a wide array of federal policies, the website acts as a major source of information on health reform for consumers, small businesses, and the public at large.

Millions of Americans already have realized benefits under the ACA, through greater access to coverage, as well as coverage of higher value and better quality. The ACA is credited with promoting the stabilization of health care costs, and its investments have led to better access to health care in medically underserved communities. With full implementation set to commence, tens of millions of Americans will gain access to affordable insurance coverage, in many cases, undoubtedly, for the first time in their lives. Equally important, full implementation of the ACA will usher in a new era in U.S. health care, when (for all but the poorest Americans living in the 27 states that, as of August 2013, have not yet expanded Medicaid),[1] the availability of an affordable health insurance plan will no longer drive people’s most basic work/life decisions; a pathway to coverage will exist.

In any law as large and complex as the ACA, it is inevitable that certain important policy issues still await resolution. The issues identified here do not impede implementation. But they are important issues nonetheless, and their resolution will strengthen health reform as it moves forward.

The Administration itself already has flagged a number of issues for post-implementation resolution. For example, on July 2, the Administration issued a public statement that it was delaying for one year implementation of the reporting system needed to enforce the Act’s shared responsibility provision related to employers. In final regulations published on July 15, the Administration also announced a delay in issuing final policies governing the appeals process available to individuals denied coverage through the Exchange.

Here are an additional 6 issues that await final disposition. These issues have been identified by GPS staff by reviewing the law and regulations, as well as through consultations with experts.

1. Nondiscrimination on the basis of race, national origin, gender, age, or disability in the provision of federally subsidized health insurance

What the law says

Section 1557 of the Affordable Care Act extends a series of pre-existing federal nondiscrimination laws to the new market for federally subsidized private health insurance purchased through the health insurance Marketplace. Specifically, §1557 of the Act extends existing civil rights protections against discrimination based on race, sex, disability, or age, and specifically applies these protections to “any health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an Executive Agency or any entity established under this title (or amendments).” In other words, §1557 makes clear that “federal financial assistance” includes health insurance premium subsidies and cost-sharing assistance used to purchase coverage through the marketplace.

Section 1557 empowers the HHS Secretary to promulgate regulations implementing the provision but does not command her to do so. On July 31, the HHS Office for Civil Rights published a Federal Register notice[2] seeking information on how §1557 should be implemented. The Request for Information (RFI) summarizes the potential impact of §1557 on previous federal civil rights laws and notes that certain other provisions of the ACA also establish important non-discrimination protections related to access to coverage. The RFI does not thoroughly review all of the key ACA provisions that would relate to how §1557 is to be interpreted, nor does the RFI specifically describe how §1557 broadens the meaning of federal financial assistance to include federal insurance subsidies, which in turn has the effect of classifying QHPs sold in the Marketplace as federally assisted entities. This classification of private, tax-subsidized insurance as federally assisted represents a profound break from certain prior civil rights laws. Furthermore, because §1557 is additive of other non-discrimination protections under the ACA, it presumably expands the reach of the protections to practices not otherwise addressed by other ACA provisions.

What implementation policies remain unaddressed?

Because §1557 specifically expands the meaning of federal financial assistance, the scope of this expansion of the law’s most basic definition (what constitutes federal financial assistance) will need to be addressed. Similarly, because §1557 exists in addition to other the Act’s other non-discrimination provisions, HHS will need to determine what types of practices would potentially raise red flags under §1557, even though such practices otherwise might be permissible in the absence of §1557’s broad guarantee. Key areas of consideration will be how §1557 interacts with and amplifies on the non-discrimination rules under the ACA’s essential health benefit (EHB) provisions, what types of benefit limits and utilization management practices might be discriminatory, what approaches to access and network composition formation, as well as the use of essential community providers, might raise possible concerns. HHS will also need to consider §1557 in the context of outreach and enrollment practices by Exchanges and the conduct of Navigators and in-person assisters.

HHS will also need to develop standards to guide insurers, Marketplaces, and other affected entities. These standards ideally would take the form of prospectively issued, illustrative examples of potentially discriminatory practices, as well as an oversight and information collection system that meshes with other information collection mechanisms under way and designed to efficiently produce compliance information. Agency oversight and enforcement is particularly important in the case of potential discrimination based on race or national origin. This is because of a United States Supreme Court decision in 2001 in Alexander v Sandoval,[3] which eliminated a private right of action on the part of individuals who believe that they have experienced de facto discrimination by federally assisted entities. With private enforcement actions no longer possible in the case of conduct involving the potentially disparate impact of facially neutral policies, the importance of government oversight grows. A precedent for more active Agency oversight can be seen in special health care compliance standards issued by HHS in 2000 and updated in 2003 to ensure language access by individuals whose primary language is not English.

2. Non-discrimination by qualified health plans in the provision of essential health benefits

What the law says

Closely related to §1557 is §1302 of the ACA, which establishes certain non-discrimination standards in the case of health plans governed by the law’s “essential health benefit” (EHB) requirements. Section 1302 requires the Secretary, in implementing the EHB provisions, to take “certain considerations” into account. First, the Secretary must “ensure” that EHBs “reflect an appropriate balance” and are not “unduly weighted” toward any single EHB category (and by implication, away from other EHB categories such as rehabilitation and habilitation coverage). Second, the Act bars the Secretary from making “coverage decisions, determin[ing] reimbursement rates, [or] establish[ing] incentive programs, or design benefits” in ways that “discriminate against individuals because of their age, disability, or expected length of life. Third, the Secretary must ensure that EHB design takes “into account the health care needs of diverse segments of the population, including women, children, persons with disabilities, and other groups”. Fourth, the Secretary must “ensure that health benefits established as essential not be subject to denial to individuals against their wishes on the basis of the individuals’ age or expected length of life or of the individuals’ present or predicted disability, degree of medical dependency, or quality of life.”

What implementation policies remain unaddressed?

Under final EHB regulations issued in 2013[4] the Secretary has elected to delegate broad discretion to states and QHP issuers regarding how they define coverage and structure networks essential to the effectuation of coverage. Thus, although the final HHS rules repeat the non-discrimination standard found in the statute, they offer no further amplification, despite evidence that without further clarification, states may be unable to do an adequate job of interpreting and applying the law.[5] Unlike other situations involving non-discrimination standards (for example, see the tri-agency interim final rules on mental health parity),[6] the final regulations lack illustrative examples that put plans on notice regarding what types of coverage, utilization, and provider management practices would raise flags under the federal non-discrimination standard. As a result, the rules fail to put QHPs on notice regarding conduct that might raise agency concern. Nor do final regulations governing QHP networks[7] or final guidance on to plans operated in the federally-facilitated Exchange[8] explain the types of network formation and management practices (including contracting with essential community providers) that might raise potential violation issues.

3. Enforcing the Act’s health insurance market reforms

What the law says

At the core of the ACA are far-reaching changes in the framework for regulating health insurance offered by employers and in the individual health insurance market. The public is now familiar with some of the best known reforms: barring the denial of insurance coverage based on health status; barring the use of pre-existing condition exclusions; requiring that insurers spend a minimum amount on health coverage for members (known as the medical loss ratio); barring discriminatory pricing practices that fall outside of certain permissible variations based on age, geography, family status, and tobacco use; limiting the use of waiting periods before coverage begins; requiring coverage of certain preventive benefits without cost-sharing, requiring coverage of young adults up to age 26; and barring annual and lifetime limits on coverage.

The ACA insurance reforms rest on a complex enforcement and oversight system. The reforms are federal and apply to all state insurance markets as a matter of federal law, in order to guarantee that all U.S. residents can benefit from them. At the same time, however, under other long-standing U.S. laws, states are the primary regulators of health insurance. Under what might be thought of as a “power-sharing” arrangement, which was first established under the 1996 Health Insurance Portability and Accountability Act (HIPPA) (whose provisions served as the launch-pad for the more sweeping ACA reforms), states remain the primary regulators of health insurance, with a federal fallback regulatory system in the event that a state either will not or cannot enforce the reforms.

Federal regulations[9] provide the broad outline for this shared enforcement system. CCIIO’s website offers a broad overview of this process of shared enforcement as well as listing those states that have already notified the HHS Secretary that they do not intend to enforce the new ACA market reforms.[10] Still to be addressed is an explanation of how the federal government will work with states to monitor insurance performance. Also undeveloped as yet is a user-friendly system (similar to the one developed for the HIPAA Privacy Rule) for individual consumers who believe that an insurer may have violated a federal obligation and who seek redress. Although Navigators are authorized to assist members file federal and state complaints, the absence of a clear system for bringing such complaints forward can be expected to act as a barrier to such efforts.

What implementation policies remain unaddressed?

Given the joint approach to enforcement of the market reforms, it is important to develop broader guidance aimed at consumers and health care providers experiencing what they believe to be a possible violation of one or more of the ACA market reforms. What types of violations might be possible? What types of practices might signal a violation of the law? How can complaints be filed, and where should they be filed? How will HHS and states coordinate their investigations? Should complaints be filed with states initially, even in states that already have told HHS that they will not enforce the new market regulations? What types of follow-up steps should consumers take, and what should they do about paying provider claims they may incur while an investigation is underway? How long will the resolution process take, and with whom should they communicate?

4. Aligning the Medicaid and Exchange markets

What the law says

The ACA contemplates a close alignment between the new Health Insurance Marketplace and Medicaid. This alignment shows up in efforts by the Administration to present Medicaid, CHIP, and advance premium tax credits as different forms of insurance affordability programs, its emphasis on the use of single streamlined applications into all forms of affordability programs, the use of Exchanges to conduct eligibility determinations for Medicaid and CHIP (at state option), the emphasis on certifying health plans to participate across all insurance affordability program markets, and options for utilizing Medicaid as a form of premium assistance in order to secure Exchange coverage. The Administration has published extensive regulations and guidance materials addressing these issues.

Another issue has to do with state Medicaid eligibility standards and how these standards interact with the income eligibility thresholds for coverage through the Exchange. Under current law, many states extend Medicaid eligibility (either as a state plan option or via a §1115 demonstration) to children and adults whose incomes exceed the Exchange threshold of 100% of the federal poverty level. Examples are children enrolled in Medicaid who have incomes higher than 133% of the federal poverty level, children covered through separate CHIP programs, pregnant women with incomes that exceed 133% of poverty, and nonelderly adults with disabilities whose incomes exceed the federal poverty threshold but receive Medicaid through special expansion options related to coverage for working-age adults with disabilities or adults who need expanded home and community-based care in addition to traditional Medicaid coverage. Under Medicaid, coverage tends to be broader, and cost-sharing tends to be lower.

In the case of children, the ACA establishes a maintenance of effort requirement that prevents reduction in coverage until 2019. But the maintenance of effort requirement for adults ceases at the point at which Exchanges become operational. How states approach coverage for adults after this point emerges as a major question, since under the ACA Medicaid constitutes “minimum essential coverage,” eligibility for which in turn bars individuals from receiving coverage through Exchanges. The question is whether special Medicaid programs for selected populations and conditions will be treated as minimum essential coverage, thereby prohibiting these populations from securing basic coverage through a QHP, with supplemental Medicaid coverage for special health needs.

What implementation policies remain unaddressed?

Still to be developed are implementation policies to aid states in making decisions about how they will structure their Medicaid eligibility rules going forward. Guidance is needed on when Medicaid does – or does not – constitute minimum essential coverage. Would a special pregnancy package for lower income women be considered minimum essential coverage, or might special Medicaid benefits and cost-sharing protections simply operate as a supplement to the standard pregnancy coverage available from a QHP? Would the provision of special Medicaid benefits that enable adults with disabilities enter and remain in the workplace (such as the services of personal attendants and special equipment) represent minimum essential coverage, thereby preventing QHP enrollment with premium assistance? Or could these adults qualify for advance premium tax credits and QHP enrollment while still receiving additional coverage for their long term care needs from state Medicaid programs?

5. Fallback policies in Marketplaces with no, or inadequate, QHPs

What the law says

The ACA establishes a Health Insurance Marketplace on a nationwide basis so that all qualified individuals will be able to gain access to affordable coverage through the Marketplace. Recent regulations issued by HHS clarify that individuals who are unable to find an affordable plan will be granted a hardship exemption. But more fundamentally, what will happen in markets in which either no – or insufficient– QHPs are available to meet the demand? Recent news stories from the Mississippi Delta Region suggest that this problem is a real one. In that state, the insurance commissioner has stepped in to persuade at least one insurer to enter the Marketplace. But other communities and regions that experience sparse populations, populations with lower income, limited health care access points, or a combination of the three, also may find that the QHP market is either under-developed or non-existent. Recent information from the Office of Personnel Management suggests that fewer than all states, and all regions within states, may be served by multi-state plans.

What implementation policies remain unaddressed?

Remaining questions are how many of these communities may exist on October 1 and what steps might be taken to incentivize either any, or a greater, QHP presence. What steps would the Administration be authorized to take to encourage QHP growth? For example, in states that have a developed Medicaid managed care market, might HHS work with state insurance regulators to create a fast-track licensure and QHP certification process in order to enable Medicaid plans to serve the Exchange market? Could a similar effort be undertaken in the case of insurers offering plans to state or local employees? Would OPM be able to persuade licensed insurers operating in the federal employee health plan market to offer plans in federally facilitated Exchanges? In short, what policies does the Administration intend to pursue in the event that insurance “deserts” materialize?

6. The community benefit obligations of nonprofit hospitals seeking federal tax-exempt status

What the law says

Section 9007 of the ACA establishes important new obligations for nonprofit hospitals that seek federal tax-exempt status. These obligations include prohibitions on billing and collection practices, the use of affirmative financial assistance policies to aid patients who cannot afford care, compliance with the Emergency Medical Treatment and Labor Act (EMTALA), and the development of comprehensive community health needs assessments (CHNAs) for the communities served by hospitals, along with implementation strategies.

The Treasury Department and the Internal Revenue Service have issued proposed rules implementing these new obligations but have not yet finalized their provisions. Important policy questions also remain unaddressed. As the number of uninsured Americans begins to decline, an important question arises as to how hospitals will modify their community benefit investments to reflect a shift in the rate of insurance among the population. Will hospital investments in community health improvement activities increase? National studies of hospital community benefit expenditures suggest that about half of all community benefit investments reported by hospitals are attributable to the difference between hospitals’ reported operating costs and what they are paid by Medicaid programs. Will the amount of funding attributable to such expenditures be allowed to rise? In the case of hospitals who lose Medicaid funding because of practices that that fall short of the quality performance benchmarks that now apply to the program, will they be permitted to claim these quality-driven shortfalls when calculating their community benefit expenditures?

What implementation policies remain unaddressed?

Still pending are the proposed financial assistance regulations as well as regulations applicable to the conduct of CHNAs and implementation strategies. Also needed are policies that optimally would be jointly developed by Treasury/IRS and CMS, that set guidelines regarding the calculation and reporting of community benefits in the form of Medicaid expenditures, as well as policies that address how Medicaid payment losses connected to quality performance can be treated for purposes of community benefit calculations.



[1] Kaiser Family Foundation State Health Facts. Retrieved August 3, 2013 from http://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/.
[2] http://www.ofr.gov/OFRUpload/OFRData/2013-18707_PI.pdf.
[3] 532 U.S. 275 (2001).
[4] 78 Fed Reg 12834, February 25, 2013.
[5] Keith, K., Lucia, K., and Monahan, C. (July 2013). Nondiscrimination Under the Affordable Care Act. Georgetown University Health Policy Institute. http://chir.georgetown.edu/pdfs/NondiscriminationUndertheACA_GeorgetownCHIR.pdf
[6] 75 Fed Reg 5410, February 2, 2010.
[7] 77 Fed Reg 18310, March 27, 2012.
[8] http://healthreformgps.org/resources/cms-releases-final-letter-to-issuers-on-exchanges/.
[9] 45 C.F.R. §150 et seq.
[10] http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/compliance.html
Kaiser Family Foundation State Health Facts. Retrieved August 3, 2013 from http://kff.org/medicaid/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/.
532 U.S. 275 (2001).
78 Fed Reg 12834, February 25, 2013.
Keith, K., Lucia, K., and Monahan, C. (July 2013). Nondiscrimination Under the Affordable Care Act. Georgetown University Health Policy Institute. http://chir.georgetown.edu/pdfs/NondiscriminationUndertheACA_GeorgetownCHIR.pdf
75 Fed Reg 5410, February 2, 2010.
77 Fed Reg 18310, March 27, 2012.
45 C.F.R. §150 et seq.

Comment (1)

  • Gene Buccelli says:

    Thank you. Very thoughtful and comprehensive. Who will complete the strategic plans to answer your six major issues?

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