Colorado Receives $43 Million HHS Grant to Continue Building Exchange

Colorado was one of five states selected to receive a Level 1 funding grant this week from the Department of Health and Human Services.  The Level One Exchange Establishment Grant is a one-year grant designed to help states develop their health insurance exchanges.  Colorado applied for and received a $43 million grant which will "support planning activities, including the initial acquisition of technology services to begin building the online shopping portal."  This is Colorado's second Level 1 grant; it first received an award of $17.9 million in February 2012. 


Vermont Moves One Step to Closer to a Single-Payer System

All eyes turned to Vermont today as Governor Peter Schumlin signed into law a bill creating a board to oversee the planning and development of a state-sponsored insurance plan, Green Mountain Care.  With the stroke of a pen, Vermont  became the first state to move significantly toward a single-payer insurance system.  One hurdle standing in Vermont's way is the need to secure a waiver from PPACA, which won't be available until 2017 under current law.  Although there appears to be support for moving that deadline up to 2014, it remains to be seen how strong that support really is.  

Proposed Regs for ACOs Leave Many Questions Unanswered

On March 31, 2011 the Centers for Medicare & Medicaid Services (“CMS”) released the much-anticipated proposed regulations for the creation of Accountable Care Organizations (“ACOs”), which were published in the Federal Register on April 7. ACOs are a key component of the Patient Protection and Affordable Care Act (“PPACA”) and are referenced in PPACA as part of the Medicare Shared Savings Program. Section 3022 of the Patient Protection and Affordable Care Act, Pub. L. 111-148 (Mar. 23, 2010), codified at 42 U.S.C. 1395jjj. Following the launch of the ACO program on January 1, 2012, CMS expects 5 million Medicare beneficiaries to eventually receive care through an ACO. 

ACOs are coordinated healthcare delivery systems in which provider reimbursements are tied to quality measures and overall reductions in the cost of healthcare. In theory, ACOs will be able to maximize value by using a patient-centered team approach to care. In the ACO model, providers regularly communicate and collaborate on various aspects of patient care, ensuring continuity and consistency in care delivery. This approach stands in stark contrast to many current delivery models in which providers operate in silos, often creating disjointed or uncoordinated patient care. 

Structurally, an ACO will consist of a group of healthcare providers – physicians, physician groups, hospitals, and other suppliers of health services or provisions – contracting with each other and with CMS to provide comprehensive care for patients. While providers will still receive Medicare fee-for-service payments, the ACO will share in any savings it achieves for the Medicare program. At the same time, however, ACOs would be liable for any losses to Medicare. This “blended” reimbursement model eliminates incentives for overutilization inherent in a traditional fee-for-service system, yet also disincentivizes underutilization because some fee-for-service reimbursement remains.

What did the proposed regulations establish?

Broadly, the proposed regulations establish the ground rules for ACOs, although there are still many unknowns. Once formed, ACOs are subject to CMS approval and will be required to enter into a three-year contract. Among the many threshold requirements set forth are the following: each ACO must have at least 5,000 Medicare beneficiaries; ACOs must agree to datasharing provisions with CMS; and ACOs must have 50 percent of their primary care physicians using Electronic Health Records in compliance with the HITECH Act. ACOs must also have systems in place to track 65 quality metrics across five domains: patient care experience, care coordination, patient safety, preventative health, and at-risk population health. 


In exchange for an ACO’s commitment to these provisions, the ACO can select one of two reimbursement “tracks.” In Track 1, the ACO will share in savings only for the first and second year of their CMS contract; in the third year, the ACO will share in both savings and losses. In Track 2, the ACO will share in savings and losses for the duration of the contract. For ACOs in either track, in order for savings to accrue, the ACO must achieve between 2.0 and 3.9 percent savings below the CMS-established benchmark. Each ACO’s precise savings target will be established by CMS on a sliding scale related to ACO size.  


What is still to-be-determined? 


Although the proposed regulations answer many questions regarding ACOs, there is still a significant amount of uncertainty regarding their functionality. In particular, stakeholders are anxious about how ACO provisions will work in the context of tax law, anti-trust law, Stark Law, the Anti-Kickback Statute (“AKS”), and other fraud and abuse law. 


Thus far, CMS has proposed several waivers, exceptions, and safe harbors to deal with the panoply of healthcare laws implicated by ACO formation, financial arrangements, and reimbursement schemes. Although CMS acknowledges that to-date “no clear consensus has emerged on the scope of the waivers necessary to carry out the Medicare Shared Savings Program,” CMS has proposed to waive application of Stark and AKS insofar as the law applies to disbursements and distribution of shared savings within the ACO membership and the arrangement is otherwise compliant with the law or falls within an existing exception. CMS is actively seeking comment in regarding other types of waivers not yet contemplated in the proposed regulations. Specifically, CMS is interested in public perspectives on waivers that may be necessary to achieve compliance in the formation of an ACO, in pursuit of the ongoing goals of the ACO, in contracting with outside entities, and in distributing payments received from private payers.


To further inform public comment and the final regulations, CMS has engaged the Department of Justice (“DOJ”), the Federal Trade Commission (“FTC”), and the Internal Revenue Service (“IRS”) to issue guidance regarding their respective areas of enforcement. Although additional information is forthcoming, the DOJ and FTC have issued a joint statement addressing proposed anti-trust enforcement measures, and the IRS has released a notice regarding implications of the tax code for ACOs.




ACOs have the potential to transform healthcare delivery, and they are a key component in the federal government’s renewed focus on quality of care. However, in order for ACOs to achieve their potential, CMS must ensure ACO implementation is consistent with the policies and objectives of other laws targeting the healthcare industry. Absent increased predictability and certainty regarding application of these laws in the ACO context, healthcare providers and entities will be reluctant to engage in ACO transactions. 

CMS Introduces Innovation Center

The Centers for Medicare and Medicaid Services ("CMS") announced today the creation of its Center for Medicare and Medicaid Innovation (the "Innovation Center").  The Innovation Center was established in the health care reform law, the Patient Protection and Affordable Care Act.  CMS explains that the purpose of the Innovation Center is "to explore new approaches to the way we pay for and deliver care to patients so that we have better results both in terms of the quality of care and the affordability of coverage."  At first, the Innovation Center will focus on the following three key areas: (1) improving care for patients, making it more efficient, effective and safer; (2) developing new models of care to ensure health care providers work together to coordinate care for patients; and (3) fighting public health problems such as obesity and smoking at the community level.

CMS has also unveiled a website in conjunction with the Innovation Center.  CMS describes the website as not only a way to obtain information from CMS about various innovative approaches to health care, but also as a way in which people from a variety of backgrounds can share their knowledge with one another.  At the moment, the website contains little information, but we expect it will expand considerably over the coming months.  For a link to the Innovation Center's blog, click here.

A Big Day in Health Care Reform

Today marks six months from the date that the Patient Protection and Affordable Care Act was enacted.  Several key provisions of the law become effective today, September 23, 2010, including:

  • Expansion of coverage for dependents up to 26 years old. 
  • Elimination of annual or lifetime dollar limits to the amount of money spent on health care services.
  • Prohibition of denials of coverage to children under 19 years old for preexisting conditions.
  • Coverage for all preventative services with no co-pays.
  • Free preventative care (for all new plans).

These changes take effect immediately for any new policies bought after today.  For those with existing policies, however, the changes will take effect either during the next open enrollment period (for employer-based plans) or at the time a policy is renewed (for individually-purchased plans).  

To read more about these changes, CNN has posted this article and the government's new health care reform website has posted this article.


CDPHE Awarded $300,000 For Public Health Improvement

In an effort to strengthen the nation's public health infrastructure, the Centers for Disease Control and Prevention has awarded $42.5 million in funding to public health groups as part of the National Public Health Improvement Program.  Funding is courtesy of the Prevention and Public Health Fund created by the Affordable Care Act.  The only award in Colorado went to the Colorado State Department of Public Health and Environment ("CDPHE"), which received $300,000 to develop a "performance management" program for evaluating the effectiveness of the agency.  All award recipients must designate or hire someone to oversee the performance management program and participate in a national network of performance improvement professionals. 

HHS Launches New Website -

There is a brand new resource for navigating health care reform - a website managed by HHS called  According to the website, it is "designed to help you take control over your health care and make the choices that are right for you."  Currently, the content is focused on four primary areas:  finding health insurance options, learning about preventative health care, comparing hospital quality, and learning more about the Affordable Care Act.  Admittedly a work in progress, HHS welcomes user comments to improve the site and make it more useful for the public.  This coming October, look for the website to include private health insurance pricing information. 

Grandfathered Health Plans: New Interim Regulations

Last week the United States Departments of Treasury, Labor and Health and Human Services issued Interim Final Rules providing guidance on “grandfathered health plans” under health care reform. The Patient Protection and Affordable Care Act (“PPACA”) set different standards for grandfathered health plans than for those plans not grandfathered. According to these regulations, health plans that existed on March 23, 2010 will be significantly restricted in the changes they can make to copayments, deductibles and benefits covered if the plans want to maintain grandfathered status and avoid the new requirements of PPACA.

Most plans will fail to qualify for grandfathered status over the next three years, according to the Departments’ analysis in the Interim Final Rules. The greatest impact will be on small employers with between 3 and 99 employees. The Departments estimate that between 49% and 80% of small employer plans will relinquish their grandfathered status by 2013. In addition, the Departments estimate that between 34% and 64% of large employer plans will relinquish their grandfathered status by 2013.

The Basics of Grandfathered Health Plans


Section 1251 of PPACA provides that the statute should not be construed to require an individual to terminate coverage under an individual or group health plan in which the person was enrolled at the time of PPACA’s enactment on March 23, 2010 (the “Enactment Date”). PPACA further provides that the statute’s reforms will not apply to these “grandfathered” plans unless specifically stated. For example, the prohibition on rescissions and the extension of dependent coverage until age 26 apply even to grandfathered health plans.


The Interim Final Rules explain that grandfathered plans include those group or individual health plans in which an individual or an individual and the individual’s family members were enrolled as of the Enactment Date. A grandfathered health plan does not cease to be grandfathered merely because one or more (or even all) individuals enrolled on the Enactment Date cease to be covered, so long as the group plan has continuously covered at least one person at all times since the Enactment Date. In addition, new employees and existing employees newly enrolled and their families may enroll in a grandfathered health plan after the Enactment Date and the coverage remains grandfathered. 


Subject to special rules for collectively bargained plans, health plans sold to new entities or individuals after the Enactment Date will not be grandfathered, even if those plans were offered in the group or individual market before the Enactment Date.  Accordingly, insurers that want to maintain grandfathered plans must keep existing plans separate from new plans, which will not be eligible for grandfathered health plan protection. 


Changes Allowed without Forfeiting Grandfathered Status

There are only a few ways in which health plans can change without losing their grandfathered status, including the following:

  • Changes to premiums;
  • Increases to benefits;
  • Changes to comply with federal or state legal requirements; and
  • Changes to voluntarily comply with PPACA requirements.

In addition, a plan maintains its grandfathered status even if changes were made that were effective after the Enactment Date so long as the changes were agreed to by contract or a filing with the state insurance department on or before the Enactment Date. Moreover, changes adopted prior to the release date of the Interim Final Rules on June 17, 2010 will not result in a plan’s loss of grandfathered status, so long as such changes are revoked or modified effective as of the first day of the first plan year beginning on or after September 23, 2010. The preamble to the Interim Final Rules give health plans and insurance issuers some leniency here, stating that regulators may not enforce changes made in good faith compliance with these grandfather requirements prior to June 17, 2010 (the official release date of the Interim Final Rules) if the changes only modestly exceed those changes permitted under the regulations.

Disclosure and Documentation Requirements

Grandfathered health plans must disclose to their enrollees in plan materials that they are grandfathered. The regulations request comments as to the particular language that plans should use for this disclosure. In addition, insurers must maintain records documenting the terms of the grandfathered plan that were in effect on the Enactment Date and any other necessary supporting documentation to demonstrate the plan’s grandfathered status.

How Plans Will Lose Their Grandfathered Status

There are many ways a health care plan will lose its grandfathered status, including the following:

  • Eliminating all or substantially all benefits to diagnose or treat a particular condition;
  • Increasing any percentage of coinsurance;
  • Increasing a fixed-amount cost-sharing requirement, other than a copayment (e.g., a deductible or out-of-pocket limit), if the total percentage increase in the cost-sharing requirement is greater than the “maximum percentage increase” (defined in the statute as medical inflation plus 15 percentage points);
  • Increasing a fixed-amount copayment, if the total increase in the copayment exceeds the greater of either: (1) the “maximum percentage increase”; or (2) $5 increased by medical inflation since the Enactment Date;
  • Decreasing employer contribution, whether based on the cost of coverage or on a formula, by more than 5 percent below the contribution rate in place on the Enactment Date;
  • Imposing new or reduced annual limits; or
  • Engaging in a merger, acquisition or similar restructuring with the primary purpose of covering new individuals under a grandfathered plan, the goal being to prevent grandfather status from being bought and sold as a commodity.

Notably, if an employer that enters into a new policy or insurance contract, the new health plan is not grandfathered. However, if a self-insured plan changes its administrator, the plan keeps its grandfathered status. Collectively bargained plans keep their grandfathered status until the expiration of the last of the collective bargaining agreements for the grandfathered plan expires.

What Should You Do Next?

Employers should determine whether, given the restrictions imposed by these regulations, maintaining their current health plan offerings as a grandfathered plan or forfeiting grandfathered status. In addition, employers, health plans and plan issuers may want to consider submitting comments in response to this Interim Final Rule by August 16, 2010 (60 days from the release of the regulations).

Colorado Begins to Implement National Health Care Reform

Colorado Governor Bill Ritter has begun implementing health care reform in Colorado.  By executive order, he has created a new task force called the Interagency Health Reform Implementing Board to oversee this process and has appointed his health care policy expert, Lorez Meinhold, to the newly created position of Director of Health Reform Implementation.  On a roll, he also has signed four bills into law that his press release states are designed to "enhance the state's nationally recognized health reform initiatives." 

Health Care and Education Affordability Reconciliation Act of 2010

Here's the text of the 153 page House Bill called the Heath Care Education and Affordability Reconciliation Act of 2010.  We'll be reading it too and posting our thoughts on how it affects you and your business.

House Passes Health Care Reform

No longer a question of will it pass, here are links to a variety of articles discussing this issue:

Wall Street Journal

New York Times

Los Angeles Times

Denver Post

National Public Radio


Reform Update - Full Text of America's Healthy Future Act of 2009

In case you are looking for a little light reading, the Senate Committee on Finance has released the full text of their proposed bill for healthcare reform - all 1504 pages - as well as its Committee Report.   

Congress Proposes Health Care Reform Bills

On July 14, House Democrats unveiled a comprehensive health care reform bill, referred to as America's Affordable Health Choices Act of 2009, a 1000+ page document that radically changes the way Americans obtain health insurance and the current approaches for reimbursement to providers, as well as adding new taxes to help fund the program.  The 10-year cost to implement this bill has been estimated at over $1Trillion.  The draft bill will now go to three House Committees for review and mark-ups.  A summary and discussion of the draft bill's major provisions has been posted.  The Energy and Commerce Committee, chaired by Rep. Waxman, is also posting regular updates on its mark-up activities.

On the 15th, the Senate Health, Education, Labor and Pensions (HELP) Committee released its version of the Affordable Health Choices Act, only 650 pages, with its summary of the key provisions.  While somewhat shorter than the House draft, it also is a comprehensive overhaul of all aspects of the present health care payment and delivery system.  The Senate Finance Committee, chaired by Senator Baucus, is expected to release its proposed bill within a few days. 

Opposition to the various bills began to be expressed immediately from all across the political spectrum, and from members of both parties.  The most widespread concerns focus on the costs of the reforms and the government control over all aspects of health care.  It looks doubtful for any serious developments occurring by the August recess of Congress as had been sought by the President.

It's going to be an interesting Summer.