DOL, Treasury and HHS Issue Proposed Rule on Level Funded Plans and More

By Kathryn Bjornstad Amin, A. Xavier Baker, Lisa Campbell, Patrick O'Neil, Ryan Temme, Groom Law Group proposed rule (Groom Law Group Insight: Excerpts focus on level-funded plans) - The Tri-Agencies request for comments on level-funded plans and their concern that stop-loss coverage with low attachment points could be viewed as health insurance coverage mirrors efforts in a small number of states to limit the sale of stop-loss coverage to small employers. If the Tri-Agencies adopt rules akin to the efforts in certain states, then the ability of small employers to self-fund their benefits could be materially limited, if not impossible. 

On July 7, the Departments of Labor, Treasury, and Health and Human Services (the “Tri-Agencies”) published a long-anticipated proposed rule that:

• solicits information about the use of level-funded premium plans in the small group market;

• reinterprets short-term, limited-duration insurance (“STLDI”);

• changes the requirements for fixed indemnity and hospital indemnity excepted benefits;

• solicits comments on requirements for specified disease or illness excepted benefits; and

• clarifies the tax treatment under Code section 105 of fixed amounts received through employment-based accident or health insurance that are paid regardless of the amount of medical expenses incurred (see our separate alert here regarding this part of the Proposed Rule).

A White House published fact sheet on the Proposed Rule is available here. Overall, the Proposed Rule seems focused on the effects of various coverage options on the stability of the risk pools (and premiums) in the individual and small group markets and consumer protection against deceptive or misleading marketing, which is consistent with the Biden Administration’s January 28, 2021 Executive Order directing federal agencies to protect and strengthen the Affordable Care Act.

Level-Funded Plan Arrangements

The Proposed Rule cites concerns raised by “interested parties” that level-funded plans are not required to comply with federal or state consumer protection and insurance regulations—particularly if the arrangement uses “stop-loss coverage that has low attachment points.”

For example, the Tri-Agencies raise whether stop-loss coverage would deny a claim because of an annual or lifetime dollar limit that would not be permissible in the group insurance market. Likewise, the Tri-Agencies note that self-funded small group plans would not be subject to “various essential health benefits and consumer protections such as those included in MHPAEA.” But the Proposed Rule does not address that state insurance laws regulate the stop-loss attachment point, thereby largely obviating the concern about low attachment points.

The Tri-Agencies also recognized the interested parties’ concerns whether level-funded plan sponsors’ contributions are not properly segregated from other funds held by their service providers and whether the service providers “might inadvertently be establishing multiple employer welfare arrangements,” thereby subjecting the plans to state insurance regulation and additional ERISA obligations. Although the Tri-Agencies acknowledged these concerns, it is not clear that they endorsed them. Rather, they provide a basis for further investigation.

Stopping short of proposing any particular regulations or actions regarding level-funded plans, the Tri-Agencies solicit a wide array of information on the use and prevalence of level-funded plans, particularly in the small group market, such as:

• How prevalent are level-funded plans by: private or public employer, state or other geographic area, and number of individuals are covered?

• What types of benefits typically are and are not offered by level-funded plans?

• How comprehensive are the benefits offered?

• How do the benefit packages differ from fully-insured plans?

• How is the stop-loss coverage attachment point determined, what factors are considered, and by whom?

• What consumer protections apply, particularly if a claim is reimbursed through stop-loss insurance?

• What are the effects of level-funded plans on the small group market?

Comments to the Proposed Rule are due by September 11, 2023.

The $50 billion question: Are the right people steering the opioid settlement payouts?

By Aneri Pattani - As more than $50 billion makes its way to state and local governments to compensate for the opioid epidemic, people with high hopes for the money are already fighting over a little-known bureaucratic arm of the process: state councils that wield immense power over how the cash is spent.. Read Full Article… 

VBA Article Summary

1. Lack of Oversight: Opioid manufacturers and distributors are paying over $54 billion in restitution to settle lawsuits related to the overdose epidemic. However, there is little oversight on how this money is spent. State and local governments are responsible for allocating the funds, but the decision-making process varies across states. In some states, councils have the ultimate say on the money, while in others, they establish budget priorities and make recommendations. This lack of uniformity raises concerns about whether the funds will be appropriately directed towards improving addiction treatment programs and recovery houses or towards other priorities such as law enforcement and prisons.

2. Diverse Council Composition: The composition of the councils responsible for allocating the opioid settlement funds varies widely. Members range from doctors, researchers, and county health directors to law enforcement officers, town managers, business owners, individuals in recovery, and parents who have lost children to addiction. However, criticism of the councils has emerged due to shortcomings in representation. Some councils do not align with the hardest-hit populations in terms of race or geography. Additionally, an overrepresentation of specific professional groups may result in the funds being directed towards their particular interests, potentially neglecting other needs. Furthermore, there is a lack of reserved seats for individuals who have personally dealt with substance use disorders or supported family members through addiction.

3. Challenges in Decision-Making: The allocation of the opioid settlement funds raises questions about how restitution should be defined and distributed. Different stakeholders advocate for different priorities. For instance, syringe service programs may prioritize immediate funding for overdose reversal medication, while hospital officials may emphasize longer-term investments in staffing and treatment beds. The diversity of perspectives and interests among council members can lead to competing priorities and potential biases. Concerns have been raised in certain regions that law enforcement officials on the councils may direct a significant portion of the funds towards their own needs, while others worry that rural counties and minority communities are being underrepresented in decision-making processes. Achieving balance and equitable distribution of funds is a significant challenge that requires diverse representation and careful deliberation.

‘This Is Almost Biblical in Its Impact’: Providers Push Back Against CMS’ New Proposed Rules

By Katie Adams - CMS recently revealed its proposals to raise reimbursement rates for hospital outpatient departments and cut payments for physicians. Next year, the agency is planning to decrease physicians’ pay by 1.25% and increase outpatient payment rates by 2.8%. Provider groups are unhappy with the news — AMA President Dr. Jesse Ehrenfeld said the new physician fee schedule will be “almost biblical in its impact.” Read Full Article…

VBA Article Summary

1. Proposed Changes to Physician Fee Schedule: The Centers for Medicare and Medicaid Services (CMS) has unveiled its proposed changes to the physician fee schedule for 2024. The plan includes raising reimbursement rates for hospital outpatient departments but cutting payments for physicians. These changes aim to balance the reimbursement system and align it with the evolving healthcare landscape.

2. Proposed Rule for Outpatient Prospective Payment System (OPPS): Alongside the physician fee schedule, CMS also released the proposed rule for next year's Outpatient Prospective Payment System (OPPS). The rule outlines the payment rates for hospital outpatient services. Under this proposal, reimbursement rates for hospital outpatient departments would see an increase, reflecting the agency's efforts to support hospitals and improve access to care.

3. Provider Groups Express Dissatisfaction: Despite CMS's proposed changes, provider groups have expressed discontent with both plans. They argue that physicians and provider organizations require more significant monetary relief to sustain their operations and provide quality care to patients. The discontent from these groups underscores the ongoing challenges faced by healthcare providers in navigating reimbursement structures and the need for further dialogue and collaboration with CMS.

Healthcare grant allows regional dental clinic to provide more coverage

By Bob Stuart - Dr. Jasmine Lee is the product of a partnership between the Augusta Regional Dental Clinic and the Virginia Healthcare Foundation. A $100,000 grant from the foundation allowed the Fishersville clinic to hire Lee, a VCU Dental School graduate, a year ago. She recently celebrated her one-thousandth patient encounter at the clinic, which offers treatment to underserved patients in Waynesboro, Staunton and Augusta County. The clinic has served patients for 20 years and provided care to 4,700 patients in 2022. Read Full Article… 

VBA Article Summary

1. Positive patient impact and career growth: Dr. Lee, a Northern Virginia native, expressed her satisfaction with the dental clinic, describing it as a great experience and a dream job. She credits her training at VCU for improving her ability to care for patients. The dental clinic provides practical training in patient treatment to third and fourth-year dental students. This hands-on experience has allowed Dr. Lee to enhance her skills and make a positive impact on the patients she treats.

2. Going beyond the call of duty: Sophie Parson, the executive director of the dental clinic, acknowledges Dr. Lee's exceptional dedication. Dr. Lee's focus extends beyond just treating patients; she prioritizes patient education and ensures they take care of themselves. By emphasizing proper dental hygiene and dietary habits, she aims to empower patients to maintain good oral health. Parson emphasizes that the clinic serves a diverse group of patients, including school bus drivers, cashiers, medical practice receptionists, students, retirees with disabilities, and more.

3. Game-changing addition and future aspirations: Dr. Albert Schulz, the clinical supervisor at the dental clinic, recognizes the transformative impact of Dr. Lee's presence on the team. The feedback from patients has been overwhelmingly positive, with the clinic estimating a significant increase in patient numbers since Dr. Lee joined. Her proficiency in Spanish has also allowed her to connect with and serve the Hispanic population effectively. As a married mother expecting her second child, Dr. Lee expresses her desire to continue working at the dental clinic. Additionally, she shares her long-term plans to work at a nonprofit, indicating her commitment to making a difference in the community.

Supplemental funding for the dental clinic: The article also mentions that the Fishersville clinic, specifically the Augusta Regional Dental Clinic, has received a substantial grant of $75,000 from the Virginia Healthcare Foundation. This funding is intended to support the clinic by helping to cover the salary of a dentist, further facilitating their mission of providing dental care to patients who may be unable to afford insurance or treatment co-pays.

Remove the hurdles for mental health and substance abuse benefits

US Labor Department pushes changes

By Lisa M. Gomez - In 2008 Congress passed a law requiring health plans and insurance companies to treat individuals with mental health conditions and substance use disorders fairly. However, the law — called the Mental Health Parity and Addiction Equity Act (MHPAEA) — doesn’t require plans to offer any specific mental health or substance use disorder benefits or even to make benefit packages more generous. It simply instructs insurance companies to refrain from creating any new barriers for patients to get mental health and substance use disorder benefits. Read Full Article…

VBA Article Summary

1. Disparity in Access: Despite the promise of parity between mental health and medical/surgical benefits, individuals with treatable mental health conditions and substance use disorders continue to face more restrictive limitations compared to those seeking medical/surgical benefits. While financial requirements have improved, other obstacles such as prior authorization remain a significant challenge, preventing access to necessary treatment.

2. Unlawful Limitations: Individuals living with mental health conditions or substance use disorders encounter illegal and discriminatory restrictions, including tougher pre-authorization requirements, fail-first policies, special gatekeepers for benefits, categorical treatment limitations, and other unjustifiable barriers. Moreover, finding mental health and substance use disorder treatment providers within their insurance network is often more difficult, exacerbating the problem.

3. Ensuring Compliance: The Employee Benefits Security Administration (EBSA), a US Department of Labor agency, is committed to protecting the rights and interests of workers and beneficiaries. The EBSA enforces the elimination of discriminatory practices by health plans, such as blanket pre-authorization requirements, unequal coverage for nutrition counseling, lack of applied behavioral analysis therapy (ABA) for autism treatment, insufficient medication-assisted treatment for opioid use disorders, and the presence of special gatekeepers. However, achieving full compliance with mental health parity laws remains a challenge, despite the widespread impact of mental health conditions and substance use disorders on individuals of all demographics.

Conclusion: While progress has been made in reducing disparities, there is still a long way to go to achieve full compliance with mental health parity laws. Mental health and substance use disorders affect millions of individuals in the US, necessitating comprehensive and accessible care. Plans and insurance companies must fulfill their obligations under the law to address the rising rates of anxiety, depression, and overdose deaths. The EBSA is dedicated to supporting workers and beneficiaries, providing assistance and guidance in navigating the complex landscape of mental health and substance use disorder benefits. By working together, we can move towards a healthier future for individuals living with these conditions.

Specialty drugs: employers are weary (and for good reason)

By Paul Fortunato - The specialty drug pipeline is evolving and contributing to rising costs. Over the last 10 years, the total specialty-drug market spend has approximately doubled, and is expected to hit $310 billion this year. The staggering specialty market increase is due in part to two major shifts. First, the market has historically been impacted by less than 2% of the population with relatively rare diseases using speciality prescriptions. However, rare diseases impact 30 million people in the U.S. Specialty drug utilization has also moved beyond rare diseases to now target more common, chronic conditions, opening the door for more people to use these prescriptions. Read Full Article… 

VBA Article Summary

1. The rising dominance of specialty drugs: In 2023, approximately 80% of the drugs expected to be approved by the FDA are specialty drugs. These drugs have seen increased demand, greater availability, and complex manufacturing processes, leading to higher costs. Manufacturers are focusing more on specialty drugs due to their profitability and lack of competition. Consequently, these drugs are frequently prescribed but have become less affordable.

2. Impact on patient health and financial burden: The soaring costs of specialty drugs pose a threat to patient health. Some patients are forced to make difficult choices, such as not filling prescriptions, cutting pills in half, or skipping doses due to financial constraints. To address this issue, employers and their benefits advisors are offering more comprehensive benefits plans that include pharmacy coverage. Access to affordable medications is crucial for employees to maintain their health and productivity.

3. Risks and strategies for employers: Employers who provide pharmacy benefits plans face the risk of exponentially growing costs. A single specialty claim can significantly impact an employer's budget. On average, plan sponsors spend $38,000 annually on specialty drugs compared to $492 for non-specialty medications. To manage costs and risks associated with specialty medications, employers can adopt two key strategies. First, they can identify and eliminate wasteful practices, such as inappropriate use of medications. Employers should establish systems to evaluate the appropriateness and necessity of prescribed medications. Second, employers should add a layer of protection to their pharmacy benefits plans, such as stop-loss insurance. This insurance provides reimbursement after exceeding a predetermined deductible and helps mitigate the financial impact of catastrophic drug claims.

By addressing wasteful practices and implementing protection measures, employers can effectively manage the escalating costs of specialty medications while ensuring the health and well-being of their employees.

FDA seeks feedback on technologies to enable healthcare at home

By Nick Paul Tailor - The development of remote patient-monitoring devices and other connected medical technologies has made it possible to treat more patients at home. In theory, home care can help reduce costs and risks associated with spending time in healthcare facilities and lessen burdens on patients. The COVID-19 pandemic accelerated uptake and validation of telehealth and remote monitoring, setting the stage for wider use of the technologies. Read Full Article… 

VBA Article Summary

The U.S. Food and Drug Administration (FDA) is seeking public input on the transition to at-home care and how regulators can support enabling technologies. The FDA aims to advance health equity and has posed a series of questions to the medtech industry regarding the development of devices for non-clinical care settings.

1. Supporting the Development of Home-Based Devices: The FDA is actively seeking input on how it can support the development of medical devices intended for use in non-clinical settings. This includes exploring ways to facilitate access to safe and effective devices that can be used at home, aligning with the agency's commitment to advancing health equity.

2. Leveraging Digital Health Technologies: The FDA is interested in understanding how digital health technologies can enhance home-based healthcare. Questions in this area address the potential of these technologies to support remote care and their impact on patient outcomes. The FDA is keen to explore design attributes that can improve acceptance among diverse patient populations, including older adults and non-English speakers.

3. Informing Regulatory Reviews: The FDA is seeking insights into generating data that can inform regulatory reviews of at-home care technologies. This includes understanding the factors that effectively institute patient care in home-based settings and identifying medical procedures suitable for transitioning to the home. The agency aims to ensure that access to medical technologies is not hindered when individuals are unable or unwilling to access care in clinical settings.

The FDA's Center for Devices and Radiological Health has requested comments from the public, industry stakeholders, and healthcare professionals on these topics until the end of August. This initiative demonstrates the agency's commitment to expanding access to safe and effective medical devices outside of traditional clinical settings, ultimately promoting health equity and patient-centered care.