News & Insights


February 20, 2017

Health Headlines – February 20, 2017

CMS Issues Proposed Changes to ACA Healthcare Exchanges – On February 15, 2017, CMS issued a proposed rule which the Trump administration contends will reform and stabilize the individual and small group health insurance market exchanges created pursuant to the Affordable Care Act (ACA).  The proposed rule would make changes relating to the open enrollment period, special enrollment periods, guaranteed availability standards, network adequacy rules, essential community provider requirements, and actuarial value requirements. 

CMS Acting Administrator, Dr. Patrick Conway, indicated the proposed reforms are intended to help protect individuals enrolled in the individual and small group health insurance markets while future repeal and replace reforms are debated.  CMS further states that the proposed revisions are in response to the recent exit of several issuers from the healthcare exchanges and the increasing rates for consumers purchasing plans through the exchanges.  Comments on the proposed rule are due on March 7, 2017.

The proposed changes include the following:

Shortening of Open Enrollment Period

CMS proposes shortening the individual market annual open enrollment period to better align it with open enrollment periods for Medicare and employer-based coverage.  Accordingly, for the 2018 coverage year, CMS proposes an open enrollment period of November 17, 2017 to December 15, 2017.  

CMS indicates that it intends to conduct extensive outreach to ensure that all consumers are aware of the change and have the opportunity to enroll in coverage within the shorter timeframe.

Changes to Special Enrollment Pre-Enrollment Verification Process

The proposed rule expands the pre-enrollment verification of eligibility process for individuals who newly enroll through special enrollment periods using the platform.  CMS notes that special enrollment periods are a longstanding feature of employer-sponsored coverage and exist to ensure that people who lose healthcare coverage during the year or experience a qualifying event, such as marriage or the birth or adoption of a child, have the opportunity to enroll in new coverage or make changes to existing coverage.

CMS’s past practice, in many cases, was to permit individuals seeking coverage through special enrollment periods on the exchanges to self-attest to their eligibility for special enrollment periods and to enroll in coverage without further verification of their eligibility or without submitting proof of prior coverage.  CMS seeks to change the pre-enrollment verification process in an effort to prevent potential abuse by individuals who seek to enroll in coverage through a special enrollment period only after realizing a need for healthcare services.

The expanded pre-enrollment verification process would begin in June 2017 and would require HHS to conduct pre-enrollment verification of eligibility for exchange coverage for all categories of special enrollment periods for all new consumers in all States served by the platform.

CMS noted that the impact these additional verification measures may have on the overall risk pool is complex.  Potentially, healthier, less motivated individuals may be deterred from enrolling due to the additional barriers, which could negatively impact the risk pool.  Accordingly, CMS is seeking comment on, among other things, whether it should retain a small percentage of enrollees outside the pre-enrollment verification process to study the impact on the risk pool of these additional measures.  

Changes to Guaranteed Availability Requirements

CMS also proposes to change guaranteed availability requirements to allow issuers to collect premiums for prior unpaid coverage before enrolling an individual in the next year’s plan with the same issuer.  Said differently, this change would generally permit an issuer to require a policyholder whose coverage was terminated for non-payment of premiums to pay past due premiums owed to that issuer in order to resume coverage from the issuer.  As a result of this change, CMS hopes to discourage individuals from only paying premiums when in need of healthcare services and to reduce potential gaming of the system. 

Increase in Flexibility for Actuarial Value Variations for Bronze, Gold, and Platinum Plans

CMS proposes to increase the de minimis range for actuarial values used to determine the metal levels of coverage for bronze, gold, and platinum plans.  This proposed change is intended to provide issuers greater flexibility in designing new plans and to provide additional options for issuers to keep cost sharing the same from year to year.  CMS is not proposing modifications to the de minimis range for the silver plan variations.

Deference to States in Determining Network Adequacy

Under the proposed rule, States would play a greater role in determining network adequacy.  To be certified as a Qualified Health Plan (QHP), health and dental plan issuers must maintain a network that is sufficient in the number and types of providers, including providers that specialize in mental health and substance abuse services, to assure that all services are accessible without unreasonable delay.

Under the proposed rule, CMS would rely on the State’s review of network adequacy in States with the authority and means to assess issuer network adequacy.

Changes to QHP Certification Calendar

CMS intends to release a revised proposed timeline for the QHP certification and rate review process for plan year 2018.  The revised timeline would provide issuers with additional time to implement proposed changes that are finalized prior to the 2018 coverage year.

CMS’s press release is available here.  Additionally, the proposed rule is available here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527,

House Republicans Release Obamacare Repeal and Replace Policy Brief; Senate Finance Committee Holds Hearing on Verma CMS Nomination -- On February 16, 2017, House Republicans released a policy brief on how to repeal and replace the Affordable Care Act (ACA).  The brief builds upon the ideas outlined in the 2016 “A Better Way” proposal and promises action on repeal and replace when the House returns from its Presidents’ Day recess, with House committees expected to mark up the bill quickly.    

House Republicans plan to pursue healthcare reform through three tracks:  legislation to repeal and replace the ACA through the budget reconciliation process; regulatory relief; and reform legislation through regular procedural order.  While the policy brief does not outline how the plan would be paid for, it outlines some of the components of their ACA repeal and replace approach:

Reform Medicaid:  The proposal would repeal the ACA Medicaid expansion.  To provide a transition period, States that expanded their Medicaid programs would be eligible to receive the enhanced Federal payments for “a limited period of time,” after which the Federal match would return to the traditional rate.  States that did not expand their Medicaid programs under the ACA would be eligible to receive “temporary resources for safety net providers” during this same “limited period of time.” 

At a future date, States would be allowed to draw from a total Federal Medicaid allotment based upon its Federal medical assistance percentage (FMAP).  This total Federal allotment would be calculated by multiplying the State’s per capita allotment for key beneficiary categories of aged, blind and disabled, children, and adults by the number of enrollees in each category.  Calculation of these numbers is particularly controversial among Republican-led States that expanded Medicaid and could see a significant reduction in the Medicaid allotments as a result of the decision to repeal ACA Medicaid expansion altogether.  Per capita allotments would be calculated from Medicaid spending on that particular category in a base year, indexed to inflation.   States could choose whether to receive federal funding as a block grant or a global waiver. 

Disproportionate Share Hospital (DSH) cuts enacted under the ACA would be repealed. 

Encourage State Innovation Grants:  States would be encouraged to utilize these grants to help lower health care costs including premiums and deductibles for “some of their most vulnerable patients.”   States would have the flexibility to use these funds for some of the high risk pools functioning prior to enactment of the ACA. 

Expand and Enhance Health Savings Accounts (HSAs):  The House Republican proposal would increase the maximum HSA contribution limit, allow spouses to make additional contributions, allow an individual to establish and use an HSA within 60 days of being covered by a high-deductible health plan, and allow HSA funds to be used for over-the-counter health products.  

Replace ACA Subsidies with Portable, Refundable Monthly Tax Credits:  For individuals not covered by employer or government provided insurance, House Republicans propose to provide individuals with advanceable, refundable monthly tax credits, indexed to age and adjusted by family size, to help purchase insurance. The “advanceability” will ensure that Americans who need assistance paying monthly premiums will have access to this credit when they need help and will not have to wait to receive this credit until filing their taxes the following year.  The credit would be available for dependent children up to age 26.  Individuals could use these credits to purchase any State-approved eligible health care plan, including catastrophic coverage.  The credit could not be used for plans that  provide abortion coverage.

ACA subsidies would be provided to individuals during the transition to tax credits.  The House Republican proposal would eliminate immediately the penalty taxes for the individual mandate and the employer mandate and would provide relief from ACA taxes, including those collected from medical device manufacturers, brand-name prescription drugs, and health insurers.

Also on February 16, 2017, the Senate Finance Committee held a hearing on the nomination of Seema Verma to be Administrator of CMS.  Ms. Verma is a healthcare consultant who has worked on Medicaid programs, including the Healthy Indiana 2.0 waiver granted under then-Governor Mike Pence.  During the hearing, Senators asked about Medicaid expansion and the potential for block grants.  Ms. Verma responded that anything that might improve health outcomes should be on the table and emphasized the need for innovation in health care delivery. 

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600, 

Fourth Circuit Declines to Review Issue of Statistical Sampling Use in FCA Case -- On February 14, 2017, the U.S. Court of Appeals for the Fourth Circuit issued a long-awaited opinion in the case U.S. ex rel. Michaels v. Agape Senior Community, Inc. et al. (case number 15-2145 and 15-2147).  In this FCA case, the district court had ruled that the use of statistical sampling by the relators to prove FCA liability or damages was improper under the circumstances.  On interlocutory appeal, the case was poised to be the first ruling from a Federal appeals court on the issue of the use of statistical sampling in FCA cases.  However, the Fourth Circuit declined to review the statistical sampling issue, stating that it was not a pure question of law, and therefore interlocutory appeal had been “improvidently granted” by the court. Thus, the issue of the use of statistical sampling in FCA cases remains governed by currently-split opinions from Federal district courts. 

As we reported in the October 15, 2015 issue of Health Headlines, in Agape, two whistleblowers sued several elder care facilities, alleging that the facilities fraudulently billed Medicare and other Federal health care programs for services that were not actually provided or that were provided to patients who were not eligible for the services.  During discovery, the parties clashed over the issue of whether the relators should be able to prove liability or damages by using statistical sampling.  In June 2015, the district court held that statistical sampling should not be allowed in the case, since (i) the evidence (i.e., medical records) was available for review, and (ii) the medical necessity determination for each patient in the case involved a “highly fact-intensive inquiry involving medical testimony after a thorough review of the detailed medical chart.”  In reaching its conclusion, the district court acknowledged that “the cases are legion on each side of the issue [of statistical sampling use in FCA cases], and ultimately it is [the court’s] responsibility to determine the fairest course of action based upon the facts presented.” 

While the Fourth Circuit initially agreed to hear this issue on interlocutory appeal, it became evident during oral arguments that the court was reviewing whether the issue was appropriately reviewable.  As we reported in the March 8, 2016 issue of Health Headlines, the Government argued against the court’s review of the statistical sampling question.  Ultimately, the court therefore sided with the Government that this issue was not appropriately reviewable on interlocutory appeal.    

The Fourth Circuit’s opinion is available here.  The district court’s opinion is available here.  

Reporters, Igor Gorlach, Houston, +1 713 276 7326, and Adam Robison, Houston, +1 713 276 7306, 

White House “Regulatory Freeze” Delays Implementation of Bundled Payment Models -- In the February 17, 2017 Federal Register, CMS announced that it will delay implementation of several bundled payment initiatives until March 21, 2017.  The Advancing Care Coordination Through Episode Payment Models (EPMs), Cardiac Rehabilitation (CR) Incentive Payment Model, and changes to the Comprehensive Care for Joint Replacement (CJR) Model were set to go into effect on February 18, 2017.  CMS stated that the delay was required under a White House memorandum issued on January 20, which calls for regulations already published in the Federal Register, but which have not taken effect, must be postponed for 60 days for further review. 

King & Spalding previously covered the implementation of the bundled payment models here. The EPMs would require that a discharging hospital be responsible for the cost and quality of an “episode” of care from admission through 90 days post-discharge in the context of acute myocardial infarction, coronary artery bypass graft and surgical hip/femur fracture treatment.  The heart attack and bypass surgery models were to be implemented in 98 metropolitan statistical areas (MSAs), while the hip/femur fracture model was to be implemented in the 67 MSAs where the CJR Model is currently proceeding. 

The CR Model would give hospitals in 90 MSAs retrospective incentive payments for patient utilization of cardiac rehabilitation services 90 days post-discharge following hospitalization treatment for an acute myocardial infarction or coronary artery bypass graft surgery. 

Lastly, the CJR Model was to expand to include hip and femur fractures and be modified to be more consistent with other payment models.

White House Chief of Staff Reince Priebus issued a memorandum to the heads of all executive departments and agencies calling for, with limited exception, a “regulatory freeze pending review.”  The notice requires that no new regulations be sent to the Office of the Federal Register “until a department or agency head appointed or designated by the President . . . reviews and approves the regulations.”  For regulations already submitted, but that have not yet been published in the Federal Register, agencies must “immediately withdraw” them and proceed with the review described above.  As is the case for the bundled payment model, published but not-yet-effective regulations are delayed by 60 days, with instructions to agencies to “consider proposing for notice and comment a rule to delay the effective date for regulations beyond that 60-day period.”

The final rule delaying the effective date is available here. The prior final rule, meant to implement the above provisions, was published on January 3, 2017 and is available here. Mr. Priebus’ memorandum is available here.

Reporter, Elizabeth Swayne, Washington, D.C., +1 202 383 8932, 

Cigna Attempts to Cancel Merger with, and Sues, Anthem -- On February 14, 2017, Cigna Corp. (Cigna) announced it would drop its $54 billion merger with Anthem, Inc. (Anthem) and filed an action against Anthem in the Delaware Chancery Court for a declaratory judgment that Cigna had legally terminated the agreement, and that Anthem could not extend the termination date for the transaction.  Cigna also seeks the $1.85 billion reverse termination fee specified in the merger agreement and approximately $13 billion in damages, which include, among other things, the alleged premium that the company’s shareholders did not receive, due to the failed merger.  In response, Anthem issued a statement that it had already extended its merger agreement with Cigna through April 30, 2017 and that Cigna did not have the right to terminate the agreement under the terms of the deal. 

Cigna’s action is the latest in a number of developments in the DOJ’s challenges to the Anthem/Cigna and Aetna/Humana transactions.  On February 8, 2017, the United States District Court for the District of Columbia granted the Department of Justice, Antitrust Division’s request for an injunction blocking Anthem’s proposed $54 billion acquisition of Cigna.  This decision came just weeks after the D.C. district court granted the DOJ’s request for an injunction to block Aetna Inc.’s (Aetna) proposed acquisition of Humana Inc. (Humana) for $37 billion. 

For an analysis and implications of the Anthem/Cigna decision, see King & Spalding’s Client Alert, available here.  In addition, for a full analysis of the Aetna/Humana decision, see King & Spalding’s article, as published in Law360, available here.

Reporter, John Carroll, Washington, D.C., +1 202 626 2993,

Also In The News

King & Spalding to Host Roundtable on EMTALA and the Rise of Freestanding Emergency Departments – Join us on Tuesday, February 28 at 1:00 PM - 2:30 PM ET, for a webinar-only roundtable titled “Now Presenting in the ED: An EMTALA Update and Discussion of the Rise of the Freestanding ED.”  The Roundtable will get you up to speed on highlights of the new OIG EMTALA rule; EMTALA considerations for urgent care clinics and freestanding EDs; the business and regulatory challenges specific to freestanding EDs; and other payment and compliance considerations for ED services, including the Medicare provider-based regulation and CMS survey guidelines.  CLE credit will be applied for in CA, GA, NY, TX, and, if needed, NC and VA. Register here

King & Spalding to Host 26th Annual Health Law & Policy Forum – Join us on Monday, March 20, 2017, 8:00 AM – 5:30 PM ET, for the 26th Annual Health & Law Policy Forum at the St. Regis Hotel, in Atlanta, Georgia. Keynote speaker Jeffrey Toobin, a senior analyst for CNN and a staff writer for The New Yorker, will discuss the Supreme Court and how it may impact health policy in the new administration. As in previous years, Forum sessions will cover a variety of health law and policy topics.  Attendance is $95 per person (lunch included). Capacity is limited. Register here.

Save the Date: King & Spalding Reception at HCCA Compliance Institute – Please join Sara Kay Wheeler, Immediate Past President of the Health Care Compliance Association (HCCA), and the King & Spalding team at a reception during the 21st annual HCCA Compliance Institute. The reception will be held at the Gaylord National Resort & Convention Center in National Harbor, Maryland, on Sunday, March 26, 2017, from 6:00-8:30 p.m. Register here.

Save the Date: 2017 Cybersecurity & Privacy Summit – On Monday, April 24, 2017, King & Spalding will host its 2017 Cybersecurity & Privacy Summit via webinar and in person in Atlanta, Georgia. The Summit will cover the latest developments and strategies for data protection. Additional details to follow.