PricewaterhouseCoopers and Medco Health Solutions released two new views of cost trends in health care during the past week, building on the release of the Milliman Medical Index.   PwC Health Research Institute’s “Behind the numbers: Medical cost trends for 2012,” examines the medical cost trends for employers in 2012.  This new report found “Medical cost trend is expected to increase from 8 percent in 2011 to 8.5 percent in 2012.”  And two main drivers identified by PwC are provider consolidation and cost-shifting to the private sector.

Providing a view of prescription drug utilization and pricing trends, Medco’s Annual Drug Trend Report showed this week that while the overall growth of prescription drug prices is at an historic low (as a result of increased use of generic drugs), the cost of specialty treatments is still increasing at an alarming rate.  According to Medco’s report “Specialty drug trend was 17.4 percent in 2010, fueled by unit cost growth of 11.5 percent.”

Federal

There is no Federal report for this week.

States

ARIZONA: The Department of Insurance (DOI) held a public hearing on rate review as part of its Health and Human Services (HHS) grant activities. The DOI has retained Mercer Consulting to assist in performing a gap analysis to identify areas that need to be addressed in order to comply with the requirements of the Affordable Care Act (ACA). During the hearing, it was noted that the state’s current statutory scheme does not authorize the DOI to review a health insurer’s medical loss ratio, potentially not allowing the state to meet the HHS requirement of having “an effective rate review process.”

The Director of Insurance and the Governor’s office also hosted their first workgroup on the implementation of an exchange. Despite the legislature’s refusal to pass an exchange bill, there is concern at the executive level about a lack of preparedness in the event the ACA is not repealed or found unconstitutional. This week’s topic was the qualified health plan certification, and participants focused on not adding requirements beyond the ACA minimum benefit requirements.

CALIFORNIA: The Appropriations committees of both houses are wading through many bills that would have varying impacts on state finances.  Bills meeting certain dollar thresholds are sent to “suspense” filing for consideration at later hearings.  Most of the legislation that Aetna and other allies have opposed has been sent to the “suspense” filing, including a bill on rate regulation and all bills on benefit mandates, because of the fiscal impact of each bill and potential conflicts with federal guidance on essential benefits. These bills may be revived at a later date, or they may be held by the committees.  We expect the majority of the bills to be voted off the suspense file by the end of the month, including.

Rate regulation – According to Appropriations, there would be an annual fee-supported special fund cost of at least million to DMHC and CDI.
Rate regulation – According to Appropriations, there would be an annual fee-supported special fund cost of at least million to DMHC and CDI.
Autism mandate – According to the committee analysis, this bill would result in annual costs to the following state entities:
CalPERS: million
Medi-Cal, for enrollees in managed care plans: 4 million
MRMIB plans (Healthy Families, AIM, MRMIP): million

In state budget news, the governor will release his May revision to the state budget next week, taking into account new revenue figures that show the state taking in more than billion in unanticipated new tax dollars. The governor still believes that asking voters to extend the higher tax rates set to expire this summer is the right thing to do because the higher revenue forecasts would not close the entire budget shortfall.  Republicans, however, have been quick to argue that higher revenue forecasts mean that extending tax rates is not needed at this time.

CONNECTICUT: The legislative session adjourns June 8, but the legislature has yet to reach a conclusion on several major issues, including an exchange bill, a rate review bill and the SustiNet bill.  Although the SustiNet compromise bill language is not public, the Administration and press reports have said that the bill does not include a public option but would create an advisory board on health reform implementation and examination of future state reforms. In addition, an anti-most favored nation clause bill has passed the House and now goes to the Senate for its consideration. Aetna supported the bill with amendments. The bill is expected to pass. Additionally, the recently released HHS rate review rule may push legislators to advocate for adoption of the federal 10 percent trigger for rate review in Connecticut, just in case the federal law is repealed.

DELAWARE: The Department of Insurance (DOI) submitted a medical loss ratio (MLR) waiver application to HHS for its individual health insurance market. The DOI-requested adjustment proposes a three-year phase-in of the MLR as follows: 65 percent for 2011, 70 percent for 2012, and 75 percent for 2013.

GEORGIA:  Governor Deal has signed legislation that applies state prompt-pay standards to self-funded plans.  Aetna will be working with self-funded customers who have questions about the validity of the new law and its application to their plans, which are generally covered by ERISA.

INDIANA: Insurance Commissioner Stephen Robertson submitted an MLR waiver request to HHS seeking relief from the MLR regulation for the individual market and for consumer-directed health plans in both the individual and small group markets.  Specifically, for the individual market, Indiana is requesting that the MLR be waived for the individual market through 2014, or, as an alternative, that it be phased in as follows: 65 percent in 2011, 68.75 percent in 2012, 72.5 percent in 2013, 76.25 percent in 2014, and 80 percent in 2015, with an exemption from the MLR requirement until 2014 for new market entrants (defined as those that have not previously sold individual major medical health insurance products in Indiana for the previous 10-year period). For consumer-directed health plans in the individual and small group markets, Indiana is requesting a permanent waiver from the federal MLR requirements.

MAINE: Governor LePage has signed into law an Act to Modify Rating Practices for Individual and Small Group Health Plans. The new law is designed to open up Maine’s individual and small-group insurance market to competition. It also is supposed to:

help lower health insurance premiums by broadening Maine’s community rating system and allowing insurance companies to base their premiums on a more flexible set of criteria.
allow Maine residents to purchase insurance in four New England states beginning in 2014.
set up a reinsurance pool to cover individuals with serious illnesses. The pool would be subsidized by a covered lives assessment capped at per member per month.

The Maine People’s Alliance (a progressive advocacy group), the Maine Democratic Party, and others are looking into the feasibility of initiating a referendum on the new law. In order to get a referendum on the November ballot, opponents would have to file approximately 60,000 signatures with the secretary of state no later than 90 days after the enactment of the bill on May 17, 2011.

MONTANA: Governor Brian Schweitzer has decided to reconsider his amendatory veto of legislation that prohibits the state from enforcing the individual responsibility requirement contained in the ACA.  Noting the critical role that the individual mandate plays in lowering the cost of coverage, the Governor’s amendatory veto argued that the prohibition against enforcing the mandate in Montana should be contingent on whether residents have access to affordable coverage.  However, on May 13, the Governor reversed his position and signed the bill into law, as permitted under Montana’s statutory procedural guidelines.  The provisions of the law include legislative findings stating that the ACA individual coverage requirement will cause unnecessary expense and inconvenience to individuals and employers, and therefore the legislature prohibits any agency of the state from enforcing the provisions of the ACA and subsequent federal regulations that relate to the individual coverage requirement. The law specifies that the prohibition extends to requiring public employees to purchase or maintain coverage and state officials or employees from participating in boards, commissions, or entities of the NAIC that are assigned to recommend provisions that implement the individual mandate.

NEVADA: HHS informed the Nevada Division of Insurance that the state’s application for a transitional waiver from the MLR provisions contained in the ACA has been denied and amended.

In its response letter, HHS admits that application of the ACA MLR standard could in fact lead to destabilization of the state’s individual market but argues that the transitional waiver requested by the state (72 percent) exceeds the amount necessary to prevent destabilization and would ‘deny consumers an excessive amount of benefit.’  For this reason, HHS determined that Nevada should be granted a one-year transitional waiver under which the MLR for the state’s individual market will be 75 percent in 2011.

SB 440, which would create the Silver State Exchange, had its first hearing on March 18 in the Finance Committee, but no action to advance the measure was taken.

NEW JERSEY: Last week the Department of Banking and Insurance (DOBI) announced that Horizon Blue Cross Blue Shield of New Jersey has officially withdrawn its application to convert to a for-profit entity.

In the final round of public budget hearings, the non-partisan Office of Legislative Services (OLS) and State Treasurer, Andrew Sidamon-Eristoff, testified that state revenue is now expected to exceed forecast by 0 to 0 million due to higher income tax collection. This was welcome news as the legislature and the Christie Administration wrestle with various program cuts under the current budget proposal. Leadership in the legislature has called for restoration of property tax rebates and reconsideration of the proposed changes to the Medicaid program.  It has been reported the Administration is seeking to change Medicaid eligibility to 33 percent of the federal poverty level. Democratic legislators have come out en masse opposing this change.

NEW YORK:  James Wrynn will be the deputy superintendent for Insurance under the Department of Financial Services (DFS) after the consolidation of the New York State Insurance Department, of which he is currently superintendent, with the Banking Department. Benjamin Lawsky was nominated to be the superintendent of the DFS. At packed confirmation hearings, Lawsky appeared before the Senate Insurance Committee and then the Senate Banking Committee. Lawsky said he understands that prior approval has become “overly politicized.”  He said he would make addressing this his “number one priority.” He also said he planned to meet with all stakeholders on this issue in the coming months. He was unanimously approved by both Insurance and Banking Committees but must still appear before the Senate Finance Committee for its approval.

The NYS Department of Insurance held public hearings on exchanges that reports say were not well attended. The New York Health Plan Association testified that the success of any health insurance exchange boils down to the affordability of coverage it can offer.  The HPA said the best way to preserve affordability is through an independent authority, which could be created by passing very limited exchange legislation before the end of the legislative session. Such legislation could establish the governance and infrastructure of the exchange and charge it with conducting research to make recommendations regarding the policy issues that need to be addressed by 2014. A key issue to address is how to ensure that the exchange is financially sustainable by 2015, as the law requires.

NORTH CAROLINA: Legislation implementing an Exchange Advisory Board met with some consumer opposition last week.  Opposition centered mostly on the way in which the exchange will be funded.

OKLAHOMA:  In the final week of the legislative session, leadership in both chambers announced the formation of a special joint legislative committee to study how the new federal health care law affects Oklahoma. Senate Pro Tem Brian Bingman and House Speaker Kris Steele ordered the formation of the joint committee and announced that “studying this issue in more depth makes for healthy legislative process. The scope of this law is vast, so we need to make sure we are prepared to address this law in a conservative way that is best for Oklahoma.” The committee will have bipartisan membership. The joint committee will hold a series of public meetings over the legislative interim focusing on how the ACA affects Oklahoma. The committee will also explore how to best approach the law as the state awaits the outcome of its lawsuit challenging the law’s constitutionality. The committee will then make recommendations on how the state should address the federal health care law.

As a result, legislation that would create an Oklahoma health insurance exchange will not be heard this year.

TEXAS: The health care collaboratives that would be set up by pending legislation (Senate Bill authored by Senate Health and Human Services Chair Jane Nelson are intended to promote higher quality of care at lower cost. The collaboratives would allow groups of providers, such as hospitals and doctors, to bargain collectively with the people who pay them. The goal is to give providers more leverage in price negotiations with an eye to cutting overall health care costs. But staff at the Federal Trade Commission (FTC) say giving these collaboratives antitrust protection could have the opposite effect and could harm consumers. Staffers have flagged this key provision of the Lieutenant Governor’s health care agenda for the session, indicating that a tool intended to improve the efficiency and quality of care in Texas might in actuality “lead to dramatically increased costs and decreased access to health care for Texas consumers.” To get around any antitrust issues, SB 8 specifically gives collaboratives exemption from antitrust laws. The bill is in the final stages of passage and could be headed to the House floor at some point in the last 10 days of the legislative session.

Meanwhile, uncertainty hung over the Texas Capitol at the end of last week as budget negotiators worked to bridge the gulf between the House and Senate spending plans and avert a special legislative session. What had been a billion difference Wednesday was narrowed to a few hundred million dollars as the House agreed to the Senate’s proposal on public education. To help pay for the billion added into the budget, the House relies on the .2 billion of additional state revenue announced by Comptroller Susan Combs this week. Lt. Gov. David Dewhurst said he was optimistic that a deal was in the offing. Negotiators are taking it down to the wire trying to complete their work by the end of the legislative session on May 30.

WISCONSIN: The Wisconsin Office of Free Market Health Care’s (OFMHC) survey to gather stakeholder input on the design of a potential Wisconsin Health Insurance Exchange closed last week.  Now, the OFMHC will develop its plan for the exchange.  OFMHC has been tasked to design and implement a Wisconsin Health Insurance Exchange that utilizes a free-market, consumer driven approach.