Just 32 months later, Obama administration tells us what ObamaCare plans must have in them

posted at 4:16 pm on November 21, 2012 by Mary Katharine Ham

Before Health and Human Services Secretary Kathleen Sebelius pushed back the deadline last week, governors were required to tell the feds by Nov. 16 whether they planned to build their own state-based exchanges for health care or let the federal government do it for them. They were required to submit detailed plans for building those state exchanges by the same day.

But it was not until yesterday that the federal government finally released a proposed regulation defining “essential health benefits”— a fundamental rule for planning these exchanges. See, ObamaCare legislation promised that come 2014, health insurance plans would have to cover certain “essential health benefits” in 10 broad categories to be compliant with the new federal law, but it passed on defining the specifics until now.

In other words, the federal government was demanding governors finish their detailed plans for implementing state-based health care exchanges four days before it even told them exactly what plans in those exchanges had to look like.

The task of defining “essential health benefits” fell to the Department of Health and Human Services, which kinda sorta kicked it to the states in a 13-page informal guidance it published in December 2011. That guidance suggested states choose a plan as their benchmark from these:

(1) the largest plan by enrollment in any of the three largest small group insurance
products in the State’s small group market
(2) any of the largest three State employee health benefit plans by enrollment
(3) any of the largest three national FEHBP plan options by enrollment or
(4) the largest insured commercial non-Medicaid Health Maintenance Organization
(HMO) operating in the State.

This allowed some flexibility for states and perhaps spared the insurance market more major disruption caused by one federally mandated standard. But not all suggested state plans include benefits in each of the 10 categories required under ObamaCare, and states didn’t know until yesterday whether and how they’d need to supplement the plans they chose. Hell, they didn’t know until yesterday, for sure, whether HHS would actually make a rule in accordance with the guideline it issued. States were to a great degree taking HHS’ intentions on faith and guessing at what their benchmark plans might be missing. Kaiser reported on some of the problems with this approach in September:

States are still waiting for more guidance from the administration on how to define habilitative services — one of the benefits covered in the law — and whether the federal government will require plans to offer more than one prescription drug in each class of drugs, said Caroline Pearson, a director at Avalere Health. Habilitative services differ from rehabilitation in that the patient is learning a new skill, such as walking for the first time, rather than having a former function restored.

Lo and behold, the new rule requires significantly more prescription drug coverage than the guidance suggested and states prepared for. To borrow and twist a phrase: Things that could have been brought to my attention before yesterday!

The proposed rules go beyond informal guidance issued by the administration last December, most notably by requiring more comprehensive coverage of prescription drugs.

Administration officials originally suggested that insurers would have to cover at least one drug in each therapeutic class. The new rules will, in many states, require insurers to cover two or more drugs in each class.

State-based exchanges are supposed to open for enrollment in October, about 11 months from now, but I’m sure there’s a good reason the administration held off on announcing these fundamental regulations:

The proposed rules, issued more than two and a half years after President Obama signed the Affordable Care Act, had been delayed as the administration tried to avoid stirring criticism from lobbyists and interest groups in the final weeks of the presidential campaign.

More from National Journal, just days before the presidential election:

When it comes to health care, delaying regulations could help the president politically by avoiding discussion of the controversial health reform law. But that makes life difficult for states and industries that need to prepare for the coming changes. The law has several looming deadlines. States must decide this month whether they will build their own insurance exchanges, even though they have not received regulatory detail on key elements of how those exchanges would work and be funded. Insurance companies need to have health plans ready to sell in those exchanges by October 2013, even though regulators have failed to describe what benefits they must include. Large employers are expected to comply with the mandate that they cover their full-time employees, but they, too, lack clarity on what sort of insurance plans they must provide or how much employees can be expected to chip in.

“It is extremely difficult for states,” said Krista Drobac, the director of the health division at the National Governors Association. “Informally, we’ve been told that regulations are all on hold until after the election.”

Though the regulations are critical for implementation, many have unpleasant political ramifications. Rules specifying how and when the federal government would run state insurance markets would likely raise cries of “government takeover.” And insurance industry regulations with the potential to raise premiums or eliminate existing insurance products could inspire criticisms that Obama was dishonest when he told people that, under his law, “if you like your plan, you can keep it.”

Several people who work closely with the Centers for Medicare and Medicaid Services, the agency at the Health and Human Services Department responsible for most of the outstanding health care regulations, say they’ve been told the delays are due to political considerations, not technical difficulties.

Note that the quote in that story is from the National Governors Association, not a Republican or conservative organization. So, as supporters of ObamaCare lash out at Republican governors and conservatives for “undermining” the law, they ignore the very real technical obstacles the Obama administration imposed on states and insurance companies for its own political reasons.

Supporters are also worrying over the realization that running exchanges for dozens of states may be a technical heavy lift that’s just not possible. ObamaCare gave states the option to let the federal government set up an exchange for them, and though many states have worked without regulatory certainty to create those exchanges, noticeably absent is any hint of a federal exchange and what it would look like. There’s a reason for that, as the New York Times reported in August:

The markets, known as exchanges, are a centerpiece of President Obama’s health care law, and running them will be a herculean task that federal officials never expected to perform.

When Congress passed legislation to expand coverage two years ago, Mr. Obama and lawmakers assumed that every state would set up its own exchange, a place where people could shop for insurance and get subsidies to help defray the cost.

Oops. Who could have anticipated that in a diverse country where more than 50 percent still oppose the massive federal overhaul of health care passed against the will of the people through a special legislative process with absolutely no bipartisan support, with its costs and requirements systematically hidden or avoided for 32 months, that some states wouldn’t jump in with both feet? This also sets up a constitutional fight over whether the federal government can even offer subsidies through its own exchange (the law only establishes subsidies through state-based exchanges, not the federal one). Luckily, in the world of an ObamaCare supporter, all of the mistakes made in drafting the law or overestimating the ability of the federal government to implement it can be laid at the feet of Republican governors, not you know, the people who drafted the law.

But let’s say every single state was willing to build an exchange. These state exchanges, as the Washington Post notes, are often described as a Travelocity site for health care, but that oversimplifies the matter. If all states needed to do was build a decent website— well, I might still be skeptical, but there’d be a chance. Once again, though, states are missing an important puzzle piece which is the responsibility of— wait for it— the federal government:

A state can’t figure out how much an individual earns on its own. For that, it needs to ping a federal data hub that does not yet exist.

The federal government recently contracted with the healthcare IT firm QSSI to build that data hub, and they plan to make it available to both the exchanges that states run and those that the federal government sets up. It will determine whether individuals are eligible for Medicaid, subsidies or no benefit at all.

The challenge here is for states, which may have complex Medicaid rules or old computer systems, to actually plug into the federal hub.

“In many states, the Medicaid system is the best technology that the 1980s could offer,” says Bruce Caswell, who runs the health-services segment of Maximus, a firm that works on large government data systems. “As a consequence, they might have brittle interface capabilities.”

The Washington Post piece assumes the federal data hub itself will work perfectly, even though it’s meant to cull an incredible amount of data and pair it with an incredibly complex set of eligibility requirements. I think even that’s an open question, but here’s the bottom line: This is a giant tech undertaking which will need to serve many localities with different needs, link existing technologies and personnel with a new, giant federal hub, and somehow make sure all of them work together to smoothly to guide consumers who have no idea what to expect in subsidies or services through a brand new web portal for health insurance. They have less than a year to accomplish this. It seems there has been no pilot program, no training, and no beta testing. This thing is ORCA on steroids.

Oh, and there’s a 30-60 day public commenting period before HHS even finalizes the rules it proposed Tuesday. So, make it nine months to implementation. Here’s hoping.


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