CMS retains 340B, site-neutral payment cuts in final hospital payment rule

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The Trump administration finalized a hospital payment rule Friday that retains proposed cuts to off-campus clinics and the 340B drug discount program. 

The changes outlined in the hospital Outpatient Prospective Payment System (OPPS) rule come despite both cuts being struck down in legal challenges and amid major pushback from providers.

Site-neutral payments

The agency decided to move ahead with the two-year phase-in of the cuts to outpatient services for clinic visits furnished in an off-campus hospital outpatient setting. The goal is to bring payments to off-campus clinics in line with standalone physicians’ offices.

“With the completion of the two-year phase-in, the cost sharing will be reduced to $9, saving beneficiaries an average of $14 each time they visit an off-campus department for a clinic visit in [calendar year] 2020,” the Centers for Medicare & Medicaid Services (CMS) said in a fact sheet.

However, the two-year project that was supposed to start in 2019 has been halted because of a federal court ruling.

CMS decided to move forward with the cuts for off-campus clinics.

“The government has appeal rights, and is still evaluating the rulings and considering, at the time of this writing, whether to appeal the final judgment,” the agency said.

The American Hospital Association (AHA) said that the site-neutral payment rule was misguided and that CMS ignored the recent court ruling. 

“There are many real and crucial differences between hospital outpatient departments and the patient populations they serve and other sites of care,” said Tom Nickels, executive vice president of the AHA, in a statement.

CMS also finalized a proposed cut for the 340B program that cuts payments by 22.5% in 2020.

CMS has installed prior cuts in 2018 and 2019 to the program that requires drug companies to provide discounts to safety-net hospitals in exchange for getting their products covered on Medicaid.

However, a court ruling has struck down the cuts, and CMS is currently appealing the decision.

CMS said that it hopes to conduct a 340B hospital survey to collect drug acquisition cost data for 2018 and 2019, and the survey will craft a remedy if the appeal doesn’t go their way.

“In the event the 340B hospital survey data are not used to devise a remedy, we intend to consider the public input to inform the steps we would take to propose a remedy for CYs 2018 and 2019 in the CY 2021 rulemaking,” the agency said.

Hospital groups commented that CMS should drop both the 340B and site-neutral cuts because of the legal challenges.

Several groups weren’t happy that the cuts were still there.

“The agency also prolongs confusion and uncertainty for hospitals by maintaining unlawful policies it has been told to abandon in clear judicial directives,” said Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, in a statement Friday.

The hospital-backed group 340B Health added that CMS needs to stop this “unfunny version of ‘Groundhog Day’ and restore Medicare payments for 340B hospitals to their legal, statutory level.”




Kaiser can’t stop Hawaii health system from balance billing

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A federal court has dismissed a lawsuit Kaiser Foundation Health Plan filed against Honolulu-based Queen’s Health Systems after a contract between the parties expired May 30, according to The Honolulu Star-Advertiser.

Queen’s Health Systems, which includes four hospitals, provides emergency services to hundreds of Kaiser members each year. After the contract expired, and the parties were unable to reach a new agreement, Kaiser said it would pay the “reasonable value of Queen’s emergency services,” but “not necessarily 100% of billed charges,” according to the report.

In response, QHS said Kaiser members would be billed for the balance of charges not paid by Kaiser. Kaiser subsequently sued to prevent the billing practice and QHS asked the court to dismiss the suit.

In dismissing the lawsuit with prejudice Oct. 31, Judge Derrick Watson, a U.S. District judge in Hawaii, said there are “no real winners,” according to the report.

“Should QMC [Queen’s Medical Center] choose to balance bill Kaiser’s members for emergency services, QMC is unlikely to receive glowing attention from interested observers. In terms of dollars and cents, eventually someone or some entity will need to pay (or be ordered to pay) for the services QMC has rendered to Kaiser’s members.”

Kaiser told The Honolulu Star-Advertiser it intends to appeal the court’s ruling.


Judge strikes down Trump administration’s site-neutral payments rule

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In a huge win for hospitals, a federal judge has tossed the Trump administration’s rule instituting site-neutral payments.

District of Columbia Judge Rosemary Collyer ruled Tuesday that the Centers for Medicare & Medicaid Services (CMS) overstepped its authority when it finalized a plan to extend a site-neutral payment policy to clinic visits with the goal of paying the same in Medicare for evaluation and management services at physician offices and hospitals.

Hospital groups immediately rebelled against the plan. Within hours of the rule’s finalization in November, the American Hospital Association (AHA) vowed to challenge the change, as it would cut payment rates to hospitals significantly. AHA and the Association of American Medical Colleges formally did so about a month later.

CMS argues that the payment change would save Medicare beneficiaries $150 million per year, lowering average copays from $23 to $9. Those savings, however, are coupled with significant payment cuts to hospitals; the AHA estimated losses of $380 million in 2019 and $760 million in 2020.

In her order, Collyer said that the rule did not meet the standard of a method to control unneeded hospital use, as CMS argued in court filings.

“CMS believes it is paying millions of taxpayer dollars for patient services in hospital outpatient departments that could be provided at less expense in physician offices. CMS may be correct,” the judge wrote. “But CMS was not authorized to ignore the statutory process for setting payment rates in the Outpatient Prospective Payment System and to lower payments only for certain services performed by certain providers.”

Collyner did not require CMS to pay funds lost under policy change so far this year and instead requested a status report by Oct.1 from both parties to determine whether additional briefings are required to decide a suitable resolution.

In a statement, the AHA and AAMC praised the judge’s decision.

“The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care,” the hospital groups said. “Now that the court has ruled, it is up to the agency to put forth remedies for impacted hospitals and the patients they serve.”




Drug companies seek removal of judge in landmark opioid case

Drug companies facing more than 2,000 lawsuits over their alleged roles in the opioid epidemic demanded Saturday that the federal judge overseeing the case step aside, questioning his impartiality because he has consistently urged both sides to settle the case.

The request comes after a series of rulings against the companies by U.S. District Judge Dan Aaron Polster in the landmark trial slated to begin Oct. 21.

“Defendants do not bring this motion lightly,” the lawyers wrote in a filing Saturday morning on behalf of some of the nation’s biggest drug distributors and retailers but no drug manufacturers. “Taken as a whole and viewed objectively, the record clearly demonstrates that recusal is necessary.”

The lawyers contended Polster has overstepped his authority and created the appearance of bias. They cited his statements since the beginning of the case encouraging settlement so that money for badly needed drug treatment and other services could go quickly to communities hard hit by the opioid epidemic.

With just two counties “seeking $8 billion in cash for so-called ‘abatement,’ the Court has determined that it, not a jury, has the discretion to decide how much money defendants may pay to government agencies for medical treatment and other addiction-related services and initiatives,” the drug companies wrote.

Polster could not be reached for comment. A telephone call to his assistant Saturday went unanswered.

Lawyers for the more than 2,000 cities, towns, counties and tribal communities suing the drug industry called the attempt to remove Polster a desperate move. The lead plaintiffs’ lawyers said in a statement they “remain confident the judiciary will swiftly respond to yet another attempt by the opioid defendants to delay the trial.”

The plaintiffs have demanded the drug companies, including manufacturers, distributors and retailers, pay billions of dollars for the damage they allegedly caused. Since 1999, more than 200,000 people have died of overdoses of prescription narcotics, and another 200,000 have died from overdoses of heroin and illegal fentanyl, according to government data.

Two Ohio counties, Cuyahoga and Summit, are scheduled to begin trial next month as test cases to determine how other plaintiffs and defendants may fare before a jury.

As of now, they would face off against drug distributors McKesson Corp., Cardinal Health, AmerisourceBergen and Henry Schein; manufacturers Johnson & Johnson and Teva Pharmaceuticals; and retail drugstore chain Walgreens.

Two law professors called the defendants’ motion unusual and saw little chance it would succeed.

The law that authorizes large, consolidated cases like this one — known as “multidistrict litigation” — explicitly recognizes that judges would use the opportunity to encourage settlements, said Carl Tobias, a professor at Richmond University School of Law.

“Judges overseeing MDLs are supposed to encourage settlement and most MDLs end with settlements” for the majority of plaintiffs, Tobias wrote in an email.

Alexandra Lahav, a professor at the University of Connecticut School of Law, agreed.

“It is a highly unusual motion and not one that I think can win,” she wrote in an email. “I am not sure what the strategy is behind bringing it, and filing on Saturday, other than public relations.”

She added, however, “I don’t think there is anything wrong with filing a non-frivolous motion to bring attention to an issue and start a conversation. Given the courts’ historic emphasis on settlement, I just don’t see how that conversation goes anywhere.”

This past week, Purdue Pharma, the company most widely blamed for its role in the crisis, announced a tentative settlement with all the municipalities and about half the state attorneys general who have separately sued members of the drug industry in state courts. If finalized, that agreement would remove Purdue from the first trial.

Ohio Attorney General Dave Yost (R), whose state backs the Purdue settlement, also has asked to halt the trial, saying the municipalities should allow states to take the lead in the litigation.

In the lead-up to the trial, Polster denied a series of motions filed by the companies seeking to throw out, or limit, the case against them. Those included a defense motion to dismiss arguments that the drug companies conspired with each other to protect their companies from enforcement actions by the Drug Enforcement Administration.

Polster also rejected a motion to dismiss the plaintiffs’ legal theory that the companies created a “public nuisance” by inundating communities across the nation with enormous amounts of pain pills. And he denied a defense motion to dismiss a strategy to pursue the case under the Racketeer Influenced and Corrupt Organizations Act, originally created to prosecute the Mafia.

This past week, Polster agreed to an unusual plan that would include 30,000 jurisdictions across the United States in any settlement, if they agreed to it. It is aimed at preventing more lawsuits and ensuring that communities everywhere get some money from any settlement.

In their motion, the drug distributors and retail chains said the crucial test is whether a reasonable person would conclude that Polster appeared biased against the defendants.

They cited Polster’s statements inside and outside court “evidencing a personal objective to do something meaningful to abate the opioid crisis, with the funding to be provided through defendants’ settlements,” as well as “numerous improper comments to the media and in public forums about the litigation.”

And they noted Polster’s “apparent prejudgment of the merits and outcome of the litigation and singular focus on, and substantial involvement in, settlement discussions.”

They also protested his decision to limit defendants to 12.5 hours apiece to present their cases during the upcoming trial.

Last month, an appellate court admonished some of the defendants for a legal attack on Polster over an unrelated question. The panel of appellate judges said their claim that Polster’s “assurances are not entitled to our respect because [he] has been deceptive or duplicitous … is a very serious allegation and we find no merit to it.”



Trade Secrets Challenge Could Trip Up Trump Hospital Prices Plan

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A legal fight is looming over a Trump administration proposal that would require hospitals to list their standard prices for medical services and their negotiated rates with insurance companies—prices some believe are proprietary.

Hospital and insurance groups are likely to sue if the administration moves forward with a final rule, and the litigation could raise thorny legal questions about a company’s right to be competitive and a patient’s right to make informed health-care choices.

One way hospitals and insurance groups may try to fight the rule is by claiming their negotiated prices are trade secrets, health attorneys say.

“We’ve been looking in our research group at whether health-care prices can be trade secrets, and the law is very unsettled on this issue,” said Jaime King, associate dean and professor of law at the University of California Hastings College of Law in San Francisco.

The Centers for Medicare & Medicaid Services issued the proposed rule July 29 as part of a Trump administration push to make health-care costs more transparent.

It would require hospitals to list their standard prices and what individual insurers have agreed to pay for 70 “shoppable” medical services—like psychotherapy, blood tests, MRIs and ultrasounds—that can be scheduled in advance.

The government’s goal is to give consumers the information they need to compare what hospitals charge for similar services and to help them understand their potential financial liability for services they obtain at the hospital. Hospitals that fail to comply would be fined.

Listing the negotiated price an insurance company will pay on a patient’s behalf will show consumers how effective different health insurers are at negotiating lower out-of-pocket costs, attorneys say.

“We believe that this, in turn, will enable health-care consumers to make more informed decisions, increase market competition, and ultimately drive down the cost of health-care services, making them more affordable for all patients,” the CMS said in its proposal.

Legal Authority Questioned

The American Hospital Association was quick to object, contending in a prepared statement that the plan “exceeds the administration’s legal authority.” If the proposal is finalized, the trade group said it would look at its legal options.

“I think it’s reasonable for hospital groups to be looking at potential challenges if the rule is finalized as proposed,” said Philo Hall, senior counsel in Epstein, Becker and Green LLP’s health-care and life sciences practice.

The Affordable Care Act amended the Public Health Service Act by requiring hospitals to make public their “standard prices” for items and services. Attorneys say the CMS is now interpreting standard prices to also include the privately negotiated rates for each individual insurer.

But neither Congress, the Department of Health and Human Services, nor hospital groups have ever considered the standard prices provision in the ACA to include commercial and financial information that is treated as confidential in a highly competitive industry, said Hall. Hall served as counsel to the George W. Bush administration’s HHS Secretary Michael Leavitt and worked closely in that role with Alex Azar, the current HHS chief.

“The concern that the government is overstepping is not frivolous,” said Michael Adelberg, a former senior CMS official who now leads the health-care strategy practice of the Faegre, Baker, Daniels Consulting.

“I don’t know if you can say to two entities ‘You can engage in a contract in a competitive market, but the most important terms of that contract are public,’” he said. “I don’t know if you can do that.”

In a statement, America’s Health Insurance Plans said the CMS proposal would make it harder for insurance companies to bargain for lower rates. The group said even the Federal Trade Commission agrees that making hospitals disclose their privately negotiated rates would create a floor—not a ceiling—for what hospitals would be willing to accept.

When the HHS Office of the National Coordinator for Health Information Technology indicated in a proposal that it was considering adding network discounts and pricing data to the definition of electronic health information, UnitedHealth Group told the agency the details of the negotiated rates and the overall cost of its networks is a trade secret.

“Although federal courts have upheld regulations compelling the disclosure of Medicare cost report information, there is a significant difference between government payment information held by the government and the internal, proprietary information that the proposed regulation would compel UHC to disclose,” the insurance company said in comments in June.

CMS Could Prevail

The CMS proposal is similar to an HHS rule that would have required pharmaceutical companies to disclose the list price of their drugs in TV advertisements. A federal district court judge in July said the rule exceeded the administration’s regulatory authority and blocked it from taking effect.

In the drug pricing rule, the agency pointed to two provisions in the Social Security Act that tell the HHS secretary to make rules necessary for the “efficient administration of the Medicare and Medicaid program” as the source of authority.

But the U.S. District Court for the District of Columbia said there’s nothing in the law’s text, structure, or context to indicate Congress intended to give the HHS the power to issue a rule that forces drugmakers to disclose their list prices.

Attorneys say the agency’s authority to issue the hospital pricing rule is more explicit in the ACA.

“In this case, we have a different statutory provision that delegates the agency with a more specific task,” a former HHS attorney, who asked not to be identified, said in a conversation with Bloomberg Law.

“We’re not talking about a general statute concerning the efficient administration of the Medicare program to drug companies,” the former HHS attorney said. “We’re talking about an explicit statutory provision that directs the agency to require federally funded hospitals to disclose their ‘standard charges.’”

On that, the former HHS attorney said, the CMS could prevail. But it depends on how the agency defines “standard charges.” The agency could ultimately decide not to include negotiated rates after it considers the public comments.

In a statement, the CMS said its proposal is consistent with the ACA and responsive to patients and their advocates who say knowledge of negotiated rates is necessary for individuals to be able to determine their out-of-pocket costs for hospital services.

“All Americans have the right to know the price of their health care up front,” an agency spokesperson said. “Health-care prices shouldn’t be a mystery and consumers will be able to shop for health care just like they do for everything else they buy.”




Dignity Health to pay $100 million, make mandatory pension contributions in settlement

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Dignity Health, San Francisco, will pay $100 million to settle a long-running class-action lawsuit challenging its status as a church plan.

The settlement, set for final approval Aug. 1, calls for Dignity Health to contribute $50 million in 2020 and $50 million in 2021. It also requires mandatory funding contributions to the plan for five years and payment of $1.49 million to a related group of vested participants, according to motions filed June 27 with the U.S. District Court in San Francisco.

The settlement notice filed by the plaintiffs notes that Dignity Health has made previous voluntary contributions to the plan, including $271 million in fiscal 2018, but “has no obligation under the plan document to continue to do so,” and the impact of a merger into CommonSpirit Health on plan funding decisions is “unknown.”

Actuarial estimates provided by Dignity Health project required contributions of $162 million in 2021, $170 million in 2022, $178 million in 2023 and $187 million in 2024, according to the court filing.

The complaint in Rollins et al. vs. Dignity Health et al. was first filed in April 2013 by plaintiffs seeking more than $2 billion in missed pension contributions and other damages. Among other claims, the lawsuit challenged the interpretations made by the IRS and the Department of Labor that allowed the hospitals in the Dignity Health network, which have varying degrees of church associations, to be exempt from the Employee Retirement Income Security Act.

By December 2013, the District Court had ruled that Dignity Health did not qualify for a church plan exemption from ERISA because only a church can sponsor and maintain a church plan. After various motions, that decision was affirmed in July 2016, by the 9th U.S. Circuit of Appeals in San Francisco.

In August 2016, Dignity Health asked the U.S. Supreme Court to review the 9th Circuit’s decision, and the case was consolidated with two similar church plan challenges against Advocate Health Care Network and St. Peter’s Healthcare System.

The Supreme Court ruled in June 2017 that pension plans did not have to be established by a church to be exempt from ERISA, as long as they are controlled by or associated with one. Plaintiffs then filed an amended class-action complaint in November 2017 in the 9th Circuit.


ACA Litigation Round-Up: Risk Corridors, CSRs, AHPs, Short-Term Plans, And More

Litigation over various parts of the Affordable Care Act (ACA) and related regulations continues. ACA challenges are now under consideration by the Supreme Court and federal appellate and district courts across the country. This post provides a status update on ongoing litigation over the risk corridors program, cost-sharing reductions, the risk adjustment program, association health plans, and short-term plans. A previous post discussed the status of litigation over the contraceptive mandate.

Risk Corridors

As regular readers know, insurers sued the Department of Health and Human Services (HHS) for failure to make more than $12 billion in outstanding risk corridors payments. Lower court rulings were mixed. In June 2018, a three-judge panel of the Federal Circuit held that the government did not have to pay insurers the full amount owed to them in risk corridors payments. By a 2-1 majority, the court concluded that the ACA required the government to make risk corridors payments, but this obligation was suspended by subsequent appropriations riders that required these payments to be budget neutral.

The insurers’ request for en banc review by the Federal Circuit (meaning the case would be reheard by the entire Federal Circuit bench) was denied in November 2018. The insurers then petitioned the Supreme Court to hear their appeal in early February 2019. The petitions from the four insurers can be found here: Moda Health PlanBlue Cross and Blue Shield of North CarolinaLand of Lincoln, and Maine Community Health Options. The case is focused on whether Congress can use the appropriations process to amend or repeal substantive statutory payment obligations and whether these changes can be applied retroactively.

In early March, an array of stakeholders filed nine amici briefs, all in support of the Supreme Court hearing the cases. Briefs were filed by the U.S. Chamber of CommerceAmerica’s Health Insurance Plans, the Blue Cross Blue Shield Association, the National Association of Insurance Commissioners, the Association for Community Affiliated Plans19 state attorneys general led by Oregonsix insurers led by Highmark, and economists and professors.

The federal government’s response was initially due on February 4 but the Trump administration requested and received two extensions to file its response on May 8, 2019. In its opposition brief, the federal government asks the Supreme Court not to accept the appeal. The brief includes many of the same arguments made in the lower courts. In the government’s view, it was not required to make full risk corridor payments under the ACA because there was no appropriation to make such payments. Even if there was an obligation to do so, this obligation was subsequently eliminated by appropriation riders added by Congress. The federal government asks the court to look at the congressional history and context of the appropriations riders in precluding HHS from making full risk corridor payments.

The insurers have one more opportunity to respond before the Supreme Court considers whether to accept the appeal or not. If the Supreme Court does not agree to hear the case, the ruling by the Federal Circuit will stand, and insurers will not receive the more than $12 billion they are seeking.

Cost-Sharing Reduction Payments

In a related challenge, insurers have sued HHS for at least $2.3 billion in unpaid cost-sharing reduction payments (CSRs) since the Trump administration decided to stop making the payments in October 2017. To date, six insurers—in front of three different judges at the Court of Federal Claims—have succeeded in their challenges over unpaid CSRs. One of these lawsuits, brought by Common Ground Healthcare Cooperative, is a class action that includes more than 90 insurers. More insurers are being added to the class action on a regular basis, including four March, four in April, and one in May.

Federal Circuit

Three of the cases—brought by Montana Health CO-OP, Sanford Health Plan, and Community Health Choice—have already been appealed to the Federal Circuit and were consolidated. This means the three cases will be heard and decided together by the same panel of judges. The federal government filed its opening brief on March 22. Montana Health CO-OP and Sanford Health Plan filed their brief on May 1. Other insurers with pending lawsuits for unpaid CSRs filed amicus briefs in support of the insurers. Amicus briefs were filed by Blue Cross Blue Shield of North Dakota, L.A. Health Care Plan, Molina, and Common Ground.

Rulings for Montana Health CO-OP and Sanford Health Plan were limited to unpaid CSRs for 2017. However, Judge Elaine D. Kaplan of the Court of Federal Claims suggested that insurers could recover for 2018 and beyond even if insurers had used silver loading to insulate themselves from losses. (In mid-April, both insurers filed new complaints before Judge Kaplan for unpaid CSRs for 2018. Montana Health CO-OP sued for an additional $27 million, and Sanford Health Plan sued for an additional $11 million. Judge Kaplan stayed both cases pending a decision in the Federal Circuit.) The third case, for Community Health Choice, includes unpaid CSRs for 2017 and 2018. The amount of unpaid CSRs for 2018 was agreed to by the federal government and estimated based on 2017 costs.

Lower Courts

At least nine cases for unpaid CSRs, including the class action lawsuit, remain pending in the Court of Federal Claims. Two additional cases, brought by Maine Community Health Options and Common Ground, remain before Judge Margaret M. Sweeney. Judge Sweeney previously held that the insurers were owed unpaid CSRs for 2017 and 2018 and recently allowed Maine Community Health Options to amend its complaint to include nearly $36 million in unpaid CSRs for 2018. Common Ground separately estimated that its class is owed more than $2.3 billion for 2017 and 2018.

These estimates notwithstanding, the final amount owed will be determined through the CSR reconciliation process. In theory, insurers will complete this process in May 2019 and then the court can enter a final judgment reflecting actual 2018 CSR amounts by June. Judge Sweeney directed the parties to file a status report proposing the amount due to the class for 2018 within seven days of when HHS notifies all of the CSR class members of actual 2018 payments.

In mid-April, the plaintiffs asked for an extension of HHS’s deadline for the CSR reconciliation process, arguing that some class members would not have sufficient time to complete the submission process by the May 3 deadline. Judge Sweeney denied this request but noted that the government assured the court that all class members who ask for an extension to May 31 will be granted one. If a class member cannot meet the extended May 31 deadline and the government refuses to provide an additional extension, the plaintiffs can refile their motion.

In a separate challenge, Judge Thomas C. Wheeler held that L.A. Health Care Plan was entitled to unpaid CSRs for 2017. While the parties disagreed on the amount owed, L.A. Care filed an amended complaint on March 29 to reflect unpaid CSRs for 2018 and 2019 in the amount of about $83.5 million. L.A. Care will no longer seek unpaid CSRs for 2017 because it received more in advance CSR payments in 2017 than it ultimately paid out.

Most other CSR lawsuits—with a few exceptions like the lawsuits brought by Blue Cross Blue Shield insurers in North Dakota and Vermont—have now been stayed pending a decision by the Federal Circuit. The lawsuit brought by Guidewell Mutual Holding Corporation (which includes Blue Cross and Blue Shield of Florida, Florida Health Care Plan, and Health Options) was recently stayed as was a lawsuit brought by Health Alliance Medical Plans. The lawsuit brought by Harvard Pilgrim Health Care was separately stayed , but the insurer received permission to file an amended complaint to include about $21.5 million in unpaid CSRs for 2018. Molina’s $160 million challenge remains stayed until after a final, non-appealable judgment is issued in Moda Health Plan.

Risk Adjustment Program

Litigation continues over the methodology used in the risk adjustment program. A lawsuit brought by New Mexico Health Connections (NMHC) resulted in the brief suspension of about $10.4 billion in 2017 risk adjustment payments. The suspension occurred after Judge James O. Browning set aside the part of the risk adjustment methodology that uses a statewide average premium from 2014 to 2018. He later denied a request from the federal government to reconsider and overturn this ruling.

The federal government then appealed the decision to the Tenth Circuit. In mid-February, the Tenth Circuit directed the parties to address whether the court has jurisdiction to review Judge Browning’s order and judgment. The court is interested in whether the judgment is ripe for review since Judge Browning vacated part of the risk adjustment methodology and remanded the case to HHS. The cases cited by the Tenth Circuit’s clerk suggest that courts have answered this question differently: some have treated remand to an agency as a final decision (meaning it is appealable) while others have not.

The federal government filed a revised opening brief on March 22, with a request for oral argument. The government reiterates the reasons why it adopted a statewide average premium and a budget-neutral risk adjustment program and argues that NMHC waived its objections because these issues were not raised during the rulemaking process. The government also takes issue with the district court’s decision to vacate parts of the rule entirely (as opposed to limiting its ruling to NMHC or New Mexico). The government believes vacatur was inappropriate, did not reflect a balance of equities or the public interest, and was nationally disruptive to the risk adjustment program.

This point was echoed in an amicus brief from America’s Health Insurance Plans and the Blue Cross Blue Shield Association, noting that vacating the entire rule was “not only inequitable, but also unworkable” and “needlessly and retrospectively pull[ed] the rug out from under health plans that have relied on the final risk adjustment rules.” The brief highlights the impracticalities of adjusting the risk adjustment methodology (and thus the billions of dollars in risk adjustment transfers and medical loss ratios) for 2014 to 2016. They encourage the court to remand the risk adjustment regulations to HHS, without vacating them, to allow the agency to provide an additional explanation for its methodology for the 2014 to 2016 benefit years. These organizations filed a similar statement with the district court after HHS unexpectedly froze risk adjustment payments for 2017.

NMHC filed its opening brief on April 22, taking issue again with HHS’ use of a statewide average premium and arguing that the district court’s remedy—to vacate part of the risk adjustment methodology—was appropriate. The federal government’s reply brief was due on May 13 but it requested and received an extension to June 3.

Second Challenge

Separately, HHS issued new final rules to justify its risk adjustment methodology for 2017 and 2018. In August 2018, NMHC filed a new lawsuit challenging the final rule on the 2017 risk adjustment methodology. This means there are currently two lawsuits pending against the federal government brought by NMHC over the risk adjustment program. In late January, the parties asked Judge Browning to stay the second lawsuit while the original lawsuit is on appeal to the Tenth Circuit.

Association Health Plans

In July 2018, a coalition of 12 Democratic attorneys general filed a lawsuit challenging the final rule to expand access to association health plans (AHPs). Judge John D. Bates of the District of Columbia ruled in March 2019 that the rule violated federal law and was “clearly an end-run around the ACA.” The court set aside the rule’s provisions related to working owners and commonality of interest and remanded the rule back to the Department of Labor (DOL) to determine how the regulation’s severability provision affected the remainder of the rule.

The Trump administration appealed the ruling to the Court of Appeals for the District of Columbia (D.C. Circuit) where a panel of judges will consider the legal questions anew. The DOL also issued guidance that lays out its enforcement stance for already-in-existence AHPs, directs AHPs to pay claims, and prohibits AHPs from marketing to or enrolling new members.

On May 9, the federal government asked the D.C. Circuit for an expedited appeal in light of the fact that some consumers have already enrolled in AHPs. The DOL estimates that there are tens of thousands of enrollees in AHPs, many of whose plans will end between September and December 2019. Although the guidance and enforcement stance noted above are designed to mitigate disruption for enrollees, the administration urged a swift appeal. The D.C. Circuit granted this request. The government’s opening brief is due on May 31; the plaintiffs will file their opening brief on July 15. Final briefs will be due August 8. Oral argument has not yet been scheduled.

Short-Term Plans

Litigation continues over a separate final rule that expanded access to short-term plans. In September 2018, a coalition of consumer advocates and safety-net health plans sued over the new rule, arguing that it is contrary to Congress’s intent in adopting the ACA and should be invalidated. In November 2018, the plaintiffs withdrew their request for a preliminary injunction, and the case proceeded to the merits. The parties traded briefs throughout February and March, and amicus briefs were filed in support of the plaintiffs by patient advocates, AARP, and a range of medical associations.

Judge Richard J. Leon of federal district court in D.C. held oral argument on May 21. Media reports suggest that Judge Leon expressed continued skepticism of the plaintiffs’ arguments and whether (and the degree to which) they are harmed by the final rule. The court questioned enrollment data presented by the safety net health insurers and suggested that more time is needed to assess the impact of the new rule. Judge Leon also focused on why Congress had not acted to curb enrollment in short-term plans after the ACA if they were so harmful. He hopes to issue his decision this summer.





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