Patient Protection and Affordable Care Act: State Action Newsletter

June 1, 2012

Vermont Outlines Details for its Exchange in Law      

On May 16, Vermont Governor Shumlin signed HB 559 into law. Among its many provisions, the new law defines details and outlines certain functions of the Vermont Health Benefit Exchange, which was established by law in 2011.

Other states that passed laws in 2011 to establish an exchange, including Maryland, Oregon and Washington, also have adopted legislation this year on the details of their exchanges. Vermont’s legislation has a unique provision that does not allow plans to be offered outside of the exchange starting in 2014. This means that individuals and small businesses can select only from health benefit plans offered through the exchange. The law combines the individual and small group markets into one for the exchange and defines “qualified employers” as those with fewer than 50 employees until 2016, 100 or fewer in 2016 and all employers beginning 2017.

Other notable exchange provisions include allowing dental plans to be offered along with health plans. While the law passed last year required exchange plans to provide at least a silver level of coverage, the act instead requires a minimum bronze level of coverage, but requires the Exchange to notify prospective purchasers of bronze plans of the potential for significant out-of-pocket costs in addition to the premium.  The act prohibits insurers from including agents' and brokers' fees in insurance rates for plans offered through the exchange, and while the act contemplates a future role for agents and brokers, the exchange will still have to address some specific issues such as procedures for compensation and a mechanism to pay them.

      In addition, the act also addresses some broad state reform related to health insurance and providers. For example, it grants additional regulatory authority to the Green Mountain Care Board, an independent board created in 2011. It also prohibits health insurers and pharmacy benefit managers from imposing an annual limit on prescription drug benefits and establishes an annual out-of-pocket maximum for prescription drugs of $1,200 for an individual and $2,400 for a family, which is indexed for future years. 

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Massachusetts Tries Reform with Cost Controls

On the sixth anniversary of their groundbreaking near-universal health law, Massachusetts legislative and executive branch officials acted favorably on a plan to establish broad-based health cost containment provisions. Their goal is to bring overall health care spending, including both the public and private sector, into line with the increase in the “gross state product” (currently 3.6 percent annually) by 2016 and beyond.

The Senate passed a bill (S.2270) on May 17 that would allow overall health costs to grow only half a percentage point more than the rate of growth of the state economy until 2016, and then equal to it until 2027. The House passed a similar bill (H.4127) that has tighter spending benchmarks by half a percentage point. The bills face more negotiation between the two chambers before further action.

Utah has a similar law, but it addresses only Medicaid spending. If enacted, the Massachusetts plan would apply to the state’s existing health exchange and individual insurance coverage mandate, which includes all but the smallest health providers.

The Massachusetts plan also would create a new Division of Health Care Cost and Quality, require a performance improvement plan from providers who exceed the annual spending benchmark, and require a model wellness guide for payers, employers and consumers that includes financial incentives and discounts available to employees under the PPACA. The bill also would expand use and licensing of Accountable Care Organizations.

Skeptics, such as the Pioneer Institute in Boston, say the bills have “unrealistic cost estimates and many surcharges, fees and penalties.” Governor Deval Patrick said he is confident that health care cost increases can be slowed to no more than the annual growth of the Massachusetts economy “without harming the hospitals and doctors that make up the state’s dominant industry.” An online pro and con debate hosted by Public Radio provides more details.

Study Looks at PPACA’s Potential Effect on the California Economy

A new analysis of the likely economic impacts of the Patient Protection and Affordable Care Act on California finds that overall, the law will be an economic boom to the state—creating nearly 100,000 new jobs and increasing total economic activity by $4.4 billion. The report, by the Bay Area Council Economic Institute, looks at factors in the PPACA that will create jobs and increase growth, as well as those that are likely to impair economic growth.

While results suggest that when fully implemented, the federal health law will have a net positive effect on the California economy, the impact varies considerably by region. More than half of the new jobs, for example, are expected to be generated in southern California, although the highest rate of job creation will likely occur in the Sacramento Valley, around the state capitol (at a rate of 1.3 percent, compared with 0.6 percent growth statewide). The Bay Area and San Diego County will also see modest upticks in new jobs. 

The report also predicts that the regional economy in southern California will likely expand by $3 billion because of health reform; economic output in the Sacramento Valley and in San Diego County is also expected to grow. In the Bay Area, however, the economy will likely shrink by about $410 million; the San Joaquin Valley will also experience modest contraction in total output.

Workplace Wellness Programs

In the never-ending quest to control health care costs, the PPACA is giving employers—who foot a large portion of the bill for insurance premiums nationwide—more flexibility to offer their employees incentives to get and stay healthy. The act allows employers to offer financial incentives to employees who participate in workplace wellness programs. These financial incentives—reduced premiums, co-pays, deductibles, gym memberships, weight management classes, and tobacco cessation programs, etc.—may total as much as 30 percent of an employee’s health benefit costs, beginning in 2014.

Federal health reform also allocates $200 million in future grant funding through 2015 for small businesses to create worksite wellness programs.

The workplace wellness concept is not new, but it is becoming more comprehensive as employers struggle to rein in health care costs. Research, which appeared in the February 2010 edition of Health Affairs, showed that medical costs decreased by $3.27 for every dollar spent on wellness programs. In addition, these programs reduce employee absenteeism, turnover and overall health care costs.

In a May 2012 Health Affairs brief, surveys indicated that a majority of employers who offer insurance also have some kind of wellness program. The brief also found that nearly half of 600 U.S. companies surveyed said they have financial penalties for employees who opt-out of wellness programs.

State governments are participating in the workplace wellness trend, both as large employers and as insurance regulators. In 2011, at least 16 state legislatures enacted wellness

legislation addressing a variety of topics. For example:

• Maine created a state tax credit for employers offering a certified wellness program.
• Indiana, North Carolina and Texas authorized the use of wellness incentives for some public employees.
• Florida, Kentucky, Ohio and Oklahoma authorized incentives to encourage participation. Employees who are unable to participate for medical reasons must still be eligible for incentives.