HHS Senior Advisor Clarifies Affordable Care Act Regulations

As a senior advisor with the U.S. Department of Health and Human Services, Jay Angoff works with state and local governments on implementation of the federal Affordable Care Act. Angoff also is the acting director of the department’s Kansas City regional office, which covers Missouri, Nebraska, Kansas, and Iowa. Angoff served as Missouri insurance commissioner from 1993 to 1998 and was once a board member for the Missouri Consolidated Health Care Plan, which provides health insurance coverage to most current and retired state workers.

The following questions and answers come from a discussion with Angoff in his downtown Kansas City office on March 13. The interview came a day after the department released final health-reform regulations governing the establishment of health insurance exchanges, which are intended to offer a range of affordable health insurance options to consumers and small businesses. Angoff also spoke just two weeks before the U.S. Supreme Court is scheduled to take up challenges to the constitutionality of the Affordable Care Act. Six hours of oral arguments are scheduled over three days, beginning March 26. The court is expected to issue a decision before the close of its current term in June.

The questions and answers have been edited for length and clarity.

One item of interest in the new regulations is the role “navigators” will play in helping guide consumers through the insurance exchanges. Is this a role that safety-net providers could fill?

Sure, there are categories set out in the statute (https://www.healthcare.gov/law/resources/authorities/patient-protection.pdf) of organizations that can be navigators and the purpose is to help reach people who are tough to reach. The purpose is to have affinity groups, groups that already have constituencies, go out and find these people who ordinarily might not involve themselves.

How would you say the new regulations move the ball down the court in implementing the Affordable Care Act?

It makes it real clear that the states have a lot of flexibility.

One key area is whether the exchange is going to be strong or weak — is it going to maximize the bargaining power that it has on behalf of consumers or is it going be more passive? For example, in the mid-90s, Missouri actually set up an exchange for state workers, and what Missouri did was to standardize the benefit package and take bids from each of the carriers. And it really worked. It really drove down price. Now, that is a very strong exchange; that is an exchange that really uses its bargaining power.

You can also have an exchange that doesn’t really use its bargaining power and simply allows the carriers to sell and set their own prices, does not do any competitive bidding, does not do any negotiation, and that is another type of exchange. And under the regulations, a state also has the discretion to choose that type of an exchange.

The regulation also makes it clear that the exchanges will be a one-stop shop for verifying eligibility for a lot of programs and subsidies. This seems like it will help reduce some administrative work for safety-net providers, correct?

To the extent that someone is eligible for a subsidy, that will be all done online and the consumer simply pays the difference between the subsidy and the price, and the subsidy amount goes to the carrier. Checking Medicaid eligibility, checking employment status, it’s all done online, because there will be electronic connections with the agencies to verify all that data.

It’s a boon for community health centers, and for other providers, not just because it allows them to reduce, substantially in many cases, their administrative costs, but it gets more people into the insurance system. The estimates are that there are going to be over 30 million new people insured, either under private insurance or Medicaid.

There is some sentiment among lawmakers in Missouri, Kansas and elsewhere around the country that they should hold off on implementing the Affordable Care Act until the Supreme Court rules. Does it make sense to wait, or should they keep going?

That’s not my call. We at HHS have certain statutory obligations and will carry them out and the states obviously have their own decisions. And I do think that after the court rules, things will be a lot clearer, and some states that maybe have not been moving that fast, assuming the court does rule to uphold the law, or substantially uphold the law, those states may well decide that it’s in their interest to move faster.

The deadlines in the Affordable Care Act are pretty aggressive. By Jan. 1, 2013, HHS must determine whether or not a state has the ability to establish its own exchange, and by Jan. 1, 2014 the exchanges must be up and running.

There has been a lot of discussion about the exchanges. Are there any other regulations or deadlines that have been under the radar that providers should be aware of?

I don’t think this is under the radar, but it’s a very important regulation and it’s something that affects providers. It’s the medical-loss-ratio rule — the rule that requires insurers to spend 80 cents of the premium dollar on health care and quality improvement activities. Therefore, no more than 20 cents of the premium dollar can go towards profits and administrative expenses, and we think that is a very important rule because it will inherently mean that the money that goes through the health insurance system, 80 percent of that is going to be spent on health care.

How is that regulation working so far?

If you read Wall Street analysts who follow this, they are reporting insurers are reducing their rate increases or in some cases actually reducing their rates. Because in order to comply with the medical-loss-ratio rule, an insurer must do one of three things: If its loss ratio is below 80, it has got to reduce the denominator, which means take in less premium. Or, it’s got to increase the numerator, which means provide more generous benefits.

The medical-loss-ratio rule does not just say companies have got to spend 80 cents of every premium dollar on health care or quality improvement expenses, it goes further and says, if a company does not do that, then it must refund money to its policy holders to the extent necessary for it to meet that 80 percent standard.

Have there been refunds around the country?

Not yet, but there will be, because 2011 is the first year where it applies. So yes, there will be refunds.

The department is still crunching the numbers from last year?

Yes. HHS does it, but I don’t know when the first refund orders will go out

One of the biggest unmet needs in our area is dental care for low-income individuals, particularly in the rural areas. What, if anything, can the regional office do to help with this issue?

The exchanges don’t come online until 2014, but I think they are going to be a benefit to the patient, to the consumer. Let’s take kids in rural areas. They are now going to have the benefit of the bargaining power of everyone in the state, or at least everyone in the region in the state. The exchange will give them bargaining power and at the same time, because there is a minimum essential benefits package, people will get care, which today many policies don’t cover.

You have been on the job only for a couple weeks, but can you give me an idea of some of the broad priorities you have for the region?

Obviously, a big priority of HHS both in Washington, D.C., and in the regions is the implementation of the Affordable Care Act. Earlier, you said some states are moving faster than others. That is true. But I think you should also be aware that, on the day-to-day implementation level, things sometimes are very different than some of the rhetoric you would read in the paper might lead you to believe.

So for example, under the Affordable Care Act, high-risk pools had to be established within each state within 90 days of the enactment of the bill and that deadline was complied with. Even in states that were suing us, at the nuts-and-bolts level, the people in the states and the people at HHS worked very well together in making sure these things were implemented and I think you are going to see the same thing, particularly after the Supreme Court decision.

We have touched on a lot of key issues within the Affordable Care Act. Any other components you think are particularly important to highlight?

We have not talked about the rate-review regulation, which is particularly important in Missouri. Missouri is one of that handful of states in which insurance companies don’t even have to file their rates with the commissioner. And what the rate-review regulations says is that if a company proposes to raise its rates by 10 percent or more, it must be filed with the state, if the state has an effective rate-review system, or with HHS, if it doesn’t.

So with Missouri being a state that does not have an effective rate review system, the companies will file with HHS, and then HHS will make a determination as to whether or not that proposed increase is reasonable. It doesn’t give HHS or the states the authority to disapprove rates that they don’t already have, and HHS has none, and continues to have none.

On the other hand, it does say that either the state or HHS shall determine whether a proposed rate increase is reasonable. And if it finds the proposed rate increase to be unreasonable, it will post that finding and supporting documentation on its website, and the company must do the same. And so simply because of that authority, we think companies will very carefully scrutinize their underlying data in determining the extent, if any, to raise rates.

That regulation is in effect and HHS has found certain proposed rate increases to be unreasonable.

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