health care reform implementation and enforcement: the patient protection and affordable care act
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Health Care Reform
Implementation and
Enforcement: The Patient Protection and
Affordable Care Act (ACA)
and The Role of State
Attorneys General
Robert M. Greenleaf, Esq.
Staff Counsel
Updated June 18, 2013
The National State Attorneys General Program at Columbia Law School
The National State Attorneys General Program at Columbia Law School is a legal
research, education and policy center that examines the implications of the jurisprudence
of state attorneys general. Working closely with attorneys general, academics and other
members of the legal community, the Program is active in the development and
dissemination of legal information that state prosecutors are able to use in the carrying
out of their civil and criminal responsibilities.
The Patient Protection and Affordable Care Act (ACA) and
The Role of State Attorneys General
A LETTER FROM DIRECTOR TIERNEY ............................................................................................... I
I. THE FEDERAL PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA) OF 2010 ........ 1
II. ATTORNEY GENERAL PREPARATION FOR THE ACA ................................................................ 4
A) PARTICIPATION IN WORKING GROUPS ................................................................................................... 4
B) ADVICE ON STATE FLEXIBILITY ............................................................................................................. 5
C) CONTRACT REVIEW – PROCUREMENT .................................................................................................... 7
1) Outside Counsel ................................................................................................................................ 8
III. WHAT THE ACA MEANS FOR STATES ........................................................................................ 10
A) INSURANCE MARKET REFORMS ........................................................................................................... 10
1. Overview of the Creation of Health Insurance Exchanges .............................................................. 10
2. Federal and Partnership Health Insurance Exchange .................................................................... 16
3. Other Insurance Market Reforms .................................................................................................... 17
IV. HEALTH CARE MARKETPLACE CHANGES: THE IMPACT OF THE ACA ........................... 24
A) ACCOUNTABLE CARE ORGANIZATIONS (ACOS) (MEDICARE SHARED SAVINGS PROGRAM) ............... 25
B) ROLE OF THE ATTORNEY GENERAL IN ACO’S AND HEALTH ANTITRUST ............................................. 26
V. MEDICAID AND INSURANCE EXPANSION: THE IMPACT ON THE WORK OF
ATTORNEYS GENERAL ........................................................................................................................ 27
A) MEDICAID ............................................................................................................................................ 28
B) MEDICAID EXPANSION ......................................................................................................................... 29
C) MEDICAID FRAUD ................................................................................................................................ 31
VI. AREAS OF RESPONSIBILITY FOR ATTORNEYS GENERAL .................................................... 31
A) CONSUMER PROTECTION ..................................................................................................................... 31
1) Patient Privacy - HIPAA Compliance ............................................................................................. 32
2) Insurance ......................................................................................................................................... 33
3) Summary of Benefits and Coverage Explanation Requirements ..................................................... 34
4) Wellness Program Issues ................................................................................................................. 35
5) Disparities in Coverage Issue ......................................................................................................... 35
6) Low Annual Limits ........................................................................................................................... 35
7) Navigators ....................................................................................................................................... 36
B) CHARITIES AND NON-PROFIT OVERSIGHT ............................................................................................ 37
C) ANTITRUST AUTHORITY ....................................................................................................................... 37
D) CRIMINAL JURISDICTION ...................................................................................................................... 39
E) OCCUPATIONAL LICENSING .................................................................................................................. 39
F) DEFENSIVE ISSUES ................................................................................................................................ 40
1) Failure of State to Adopt Required Provisions of Law .................................................................... 40
VII. CONCLUSION .................................................................................................................................. 41
i
To: All Attorneys General and Staff
From: James E. Tierney, Director of the National State Attorney General Program,
Columbia Law School
Date: June 15, 2013
Dear Attorney General and Staff,
The Health Initiative at the National State Attorneys General Program
(www.stateag.org) at Columbia Law School serves as the only ongoing resource
specifically designed to assist the attorneys general and their staffs of all states and
territories in responding to the rapid and fundamental changes occurring in the delivery
of health care in the United States.
The Patient Protection and Affordable Care Act of 2010 (“ACA”) has placed
additional duties on state government and attorneys general in the planning,
implementation, administration, and enforcement of the Act. Coupled with the extensive
health care jurisdiction long held by attorneys general, attorneys general need to be aware
of the ACA regardless of whether a state is implementing all, part or none of its
provisions. This Initiative is designed to assist attorneys general in these efforts.
Healthcare is especially challenging to attorneys general because state legal
decisions cut across the existing organizational structures within the office of an attorney
general. Attorney general offices are comprised of separate divisions that may have little
or no daily interaction, are often significantly understaffed, and have specialists in state
statutes that now may be inconsistent with the way healthcare is now being regulated and
delivered under the ACA.
Regardless of whether a state is implementing the ACA, the shifting world of
state regulation of health care is such that it is important for at least one attorney on every
staff to have a working knowledge of the ACA and how it impacts state government. It is
also essential to understand that the ACA allows federal officials to alter major aspects of
the law so that well counseled states would be able to construct their health care systems
to meet local needs and conditions.
Three further points:
1. The ACA largely relies on market forces to affect major changes in healthcare.
Health care economics is rapidly changing and this will challenge attorneys
general in their consumer protection and antitrust roles.
ii
2. With millions of new participants in the healthcare system, challenges already
being faced by Medicaid Fraud units will only increase.
3. With over 70% of the hospital beds in the United States in non-profit
institutions, the special role attorneys general have in assuring that non-profit
institutions operate effectively will only increase.
The pages that follow provide background on the law and important issues facing
attorneys general in healthcare. It is important that each attorney general take a “big
picture” approach to health care either by convening a special health care task force to
bring together the various parts of the office or by appointing a senior policy deputy who
reports to the Attorney General and Chief Deputy in order to coordinate all parts of
rendering legal advice to client agencies and the public.
The sections begin with an overview of the ACA in a way that reflects the
jurisdiction of most attorneys general. This Initiative seeks to put the ACA in “AG
speak” and each section contains footnotes and other references to more detailed statutory
and policy information as well as media reports that discuss changes as they occur.
This memo will be continually updated as the Columbia Law School Attorney
General Program works to provide the best possible tools to all attorneys general in
addressing this important issue.
Please do not hesitate to contact the Initiative at (212) 851-1061 or by email
Sincerely,
James E. Tierney
Director, National State Attorneys General
Program
Columbia Law School
1
I. The Federal Patient Protection and Affordable Care Act (ACA) of 2010: A Primer for
Attorneys General The Federal Patient Protection and Affordable Care Act (ACA) of 2010 significantly
changes the way health care is financed and delivered in the United States.1 Its stated goal is to
assure quality, expand affordable health coverage to most of the uninsured, create new market
places in each state to help individuals and small businesses acquire health insurance coverage,
require insurance reform and transparency that simplifies buying health insurance, all while
reducing the overall costs of the care that is provided.2
The law requires most individuals to have coverage and provides substantial subsidies to
help them afford it.3 States may expand Medicaid, initially with full federal funding, to cover
those to 138 percent of the federal poverty level ($15,856 for an individual and $31,321 for a
family of four at 2013 levels).4 Tax credits are available to individuals up to 400 percent of the
federal poverty level (roughly $92,000 for family of four) who purchase insurance in the newly
created marketplaces called American Health Benefit Exchanges (Exchanges). These exchanges
will exist in each state and operated by the state, federal government, or a federal-state
partnership offering a choice of qualified health plans (QHP).5 Small employers will buy through
Small Business Health Options Exchanges (SHOP) and be eligible for tax credits.6 These
separate exchanges are expected to evolve into single, state-wide exchanges over time.
1 See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), available at
http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf; A more complete summary of the
ACA can be found at the Kaiser Family Foundation website, www.kff.org.
2 The Supreme Court granted petitions for certiorari on three issues: whether the individual insurance mandate is
constitutional, whether the individual insurance mandate is severable from the ACA, and whether the Medicaid
expansion is constitutional. The Court also instructed parties to brief and argue whether the Anti-Injunction Act
bars private individuals and states from challenging the ACA. The Court ruled that individual mandate was
constitutional under the taxing power of Congress, but was not a tax for purposes of the Anti-Injunction Act. The
Court also ruled that the Medicaid expansion provisions were not constitutional. Florida v. U.S. Dep’t of Health &
Human Serv., 648 F.3d 1235 (11th
Cir. 2011), cert. granted, (U.S. Nov. 14, 2011) (No. 11-400); U.S. Dep’t of
Health & Human Serv., 648 F.3d 1235 (11th
Cir. 2011), cert. granted, (U.S. Nov. 14, 2011) (No. 11-398); Nat’l
Fed’n of Indep. Bus. v. Sebelius, 648 F.3d 1235 (11th
Cir. 2011), cert. granted, (U.S. Nov. 14, 2011) (11-393);
Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. ___ (2012), available at
http://www.law.columbia.edu/null?&exclusive=filemgr.download&file_id=621772&rtcontentdisposition=filename
%3DSupreme%20Court%20Ruling.pdf.
3 §§ 1401 - 1402, 124 Stat. 213 - 224; § 1501, 124 Stat. 242 - 249.
4 § 2001, 124 Stat. 271 - 279; Dep’t of Health & Human Serv., Off. Of the Ass’t Sec’y for Plan. & Evaluation, 2013
Poverty Guidelines http://aspe.hhs.gov/poverty/13poverty.cfm (last visited May 31, 2013).
5 § 1311(b), 124 Stat. 173 - 174; §§ 1401 - 1402, 124 Stat. 213 - 224.
6 § 1421, 124 Stat. 238.
2
The ACA builds on the employer-based system and is premised on large employers,
defined as employers with 50 or more employees, continuing to offer health care coverage to
their employees. If employees are eligible for tax credits, employers will be subject to a fee to
help pay for the costs of coverage in the exchange. Small employers are exempt from this
requirement. The law includes numerous demonstration programs to restructure the delivery
system and reform payment methods for health services to improve the efficiency and
effectiveness of care overall.
Opponents of the ACA see the Act as a bureaucratic extension of the federal government
into the lives of all Americans. Opponents also predict that the ACA will increase health care
costs, unduly burden businesses and government, and hold back economic growth. The
continued opposition to the ACA is generating numerous state legislative attempts to block all or
part of ACA implementation that could be subject to Opinion requests to attorneys general.7
State attorneys general have always had extensive jurisdiction over the delivery of health
care states and the ACA expands upon that jurisdiction in ways that warrant immediate attention.
The National State Attorneys General Program at Columbia Law School, with a grant
from the Ford Foundation, has created this resource for state attorneys general and their staffs as
they address the ramifications of the ACA for their states.
This memorandum will be updated regularly in order to assure offices of attorney general
of accurate and practical information.
Major Areas of Attorney General Responsibility
This memorandum has identified three major areas of responsibilities for attorneys
general with respect to the ACA. First, there is the responsibility for implementation of the ACA
provisions already in effect. Second, there is planning for potential defensive obligations that
will arise ahead of open enrollment in October of 2013 and running the exchanges in 2014.
Litigation challenges can arise from the decisions made by the state to comply (or not comply)
with the Act’s requirements. Third, there are the affirmative responsibilities to ensure that health
care is delivered competitively, effectively, and without fraud or misrepresentation.
Traditional areas of attorney general expertise that will need to understand the ACA and
its implications are:
- Opinions
- Advising state agencies on compliance
- Waiver issues
- State procurement responsibilities
7 See H.B.3101, S.C., available at http://www.scstatehouse.gov/sess120_2013-2014/bills/3101.htm; Adam Beem,
Obamacare Nullification Bill on SC Senate Agenda, The State (Jun. 3, 2013), available at
http://www.thestate.com/2013/06/03/2800482/obamacare-nullification-bill-on.html for a discussion of efforts to
efforts in South Carolina to allow the attorney general to prosecute businesses that implement the ACA.
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- General state defensive litigation
- Consumer protection
- Charitable and not-for-profit oversight
- Antitrust enforcement
- Professional Licensing
- Insurance issues
- Criminal jurisdiction
- Medicaid compliance and defense
- Review of the retention of outside counsel and consultants
- Changes in fraud and abuse in Medicaid
Recommendation: The sweeping changes that are occurring in our country’s health care delivery, in part
because of the ACA, do not follow the existing organizational structure of any office of attorney
general. This fact raises the very real possibility that legal advice rendered by assistant attorneys
general in one decision may be inconsistent with others in the office and with the view of the
attorney general.
It is therefore strongly advised that each office designate a senior person who reports
directly to the Attorney General and the Chief Deputy to have overall familiarity with the
provisions of the ACA.
It is also wise for the staff in any part of an attorney general office that deals with health
care read and understand the intersections between the ACA and their unique area of
responsibility within the attorney general’s office.
This recommendation is as important for states who are not implementing provisions of
the ACA as it is for those that are implementing. The ACA is the law of the land and its impact
on all state government will require ACA knowledge in every AG office.
4
II. Attorney General Preparation for the ACA
Attorneys general are playing a significant role in the implementation of the ACA.
A) Participation in Working Groups
The law and the federal Health and Human Services Department (HHS) are passing much
of the planning, creation, implementation, and enforcement of the ACA to state government.
Although the federal government is providing extensive regulatory guidance, state officials retain
a great deal of latitude in statutory interpretation and policy formulation.
While recognizing that attorneys general have their own unique relationships with the
executive and legislative branches, it is important to understand the legal implications of the
implementation process that is happening in each state and how best to fit into that process.
Since 2010, most states created a governor-appointed taskforce or workgroup with
members from all executive state agencies, including state insurance departments/divisions and
state health departments.8 In most cases, the taskforce or workgroup developed or carried out a
work plan and made policy decisions about how the ACA will be implemented in that state. The
decisions made by the taskforce or workgroup are considered an executive work product that
typically needs approval by the Governor’s Office to proceed.
Some states also created a legislative committee to oversee the implementation of the
ACA and particularly the creation of a state health insurance exchange.9 That group is usually
made up of state legislators as well as representatives from the executive, usually those state
agencies that have the biggest role in implementing the ACA, e.g., the state Medicaid unit, the
insurance division/agency, and the state department of health. In many states, the executive and
legislative groups are augmented by key stakeholders, including the public, consumers, and the
healthcare industry in their conversations and in making decisions.10
While some work groups have finished their initial tasks and turned implementation over
to state agencies, others have continued to meet.11
These deliberations have had significant legal
ramifications and it is important that representatives from the attorney general’s office be aware
of the decisions that have been made.
8 See National Conference of State Legislatures: Health Reform State Implementation Entities,
http://www.ncsl.org/?TabId=21995.
9 See Id.
10 See § 1311(d)(6), 124 Stat. 178.
11 National Conference of State Legislatures, supra note 8.
5
B) Advice on State Flexibility
Unlike the tradition of federal mandates, the ACA provides numerous opportunities for
state government to accomplish the ACA’s goals creatively by seeking alterations from HHS
through federal regulations, agreements, or by utilizing programs in the ACA.12
State agencies
will turn to the assistant attorneys general assigned to them for guidance. It is therefore vital that
attorneys general understand the unique scope of waivers and accommodations that fall short of
formal waivers that are possible in the implementation of the ACA as well as other ways that the
states can work with HHS to meet the needs of their citizens.
Informal Waivers or Accommodations:
Because the ACA remains controversial, there appears to be no likelihood that its
provisions will be amended in the immediate future by the United States Congress. HHS and
other agencies have therefore responded by granting state-specific accommodations and
exercising waiver authority under the ACA.13
In other words, the lack of Congressional
guidance has resulted in federal officials interpreting the ACA in such a way as to give them
great latitude in altering requirements and deadlines as states work to deal with health care
changes and the new federal law.14
The willingness of federal officials to exercise such discretion puts any number of
provisions of the ACA “on the table” for states who seek creative ways to meet the goals of the
ACA. Attorneys general in advising their Governors and state agencies should therefore be
familiar not only with the provisions of the ACA and the waiver possibilities, but also understand
what alternatives other states are pursuing.
While states are constructing reforms that are tailored to their needs, attorneys general
may be called upon to advise on the flexibility in the ACA. There are a limited number of
12
See National Conference of State Legislatures, Patient Protection and Affordable Care Act State Action
Newsletter (Feb. 22, 2013), available at http://www.ncsl.org/documents/health/ACANews50.pdf for a discussion of
State Innovation Model Awards to six states in order to “test multi-payer payment and service delivery models on a
broader scale within their state.”
13 See Kyle Cheney and Jason Millman, Arkansas to Use Federal Funds for Exchange, Politico (Feb. 28, 2013),
http://www.politico.com/story/2013/02/arkansas-to-use-federal-funds-for-exchange-88196.html for a discussion of
an agreement between HHS and Arkansas Governor Beebe to use Medicaid expansion funds to purchase private
insurance for newly eligible; see also Letter from Gary Cohen, Director, Cent. For Consumer Info. & Insurance
Oversight, to Gary Herbert, Governor, Utah (May 10, 2013) (on file with author), available at
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/utah-marketplace-letter-5-10-2013-
508.pdf for an agreement between HHS and Utah allowing Utah to run a SHOP exchange while the Federal
Government will run the individual insurance exchange.
14 See Robert Pear, States Will Be Given Extra Time to Set Up Health Insurance Exchanges, N.Y. Times (Jan. 14,
2013) available at http://www.nytimes.com/2013/01/15/us/states-will-be-given-extra-time-to-set-up-health-
insurance-exchanges.html?_r=1& for a report on Secretary Sebelius extending the deadline for states to respond to
establishing state based insurance exchanges.
6
official waivers provided for in the ACA, but importantly HHS has granted alterations to the
implementation process where there is ambiguity or in efforts to eliminate impediments to
implementation.15
States may petition HHS for waivers as they seek to implement the ACA.16
States will be seeking waivers to implement alternative models allowing the states to experiment
with unique models.17
In the past two years states have also sought waivers from the medical loss ratio (MLR)
rule, which requires that each insurer must spend at least 80 percent or 85 percent of the
premium dollars it collects on claims costs and quality-improving activities, and thus no more
than 20 percent or 15 percent of the premium dollar on administrative expenses and profit.18
Seventeen states have requested MLR Adjustment waivers and seven have been granted.19
Formal Waivers:
Waivers to Medicaid provisions are governed by several sections in the Social Security
Act, which was not created by the ACA.20
States have been using this waiver flexibility for
some time, with 34 states currently having Section 1115 waivers in effect.21
The Secretary of
15
See Letter from Gary Cohen, Director, Cent. For Consumer Info. & Insurance Oversight, to Gary Herbert,
Governor, Utah (May 10, 2013) (on file with author), available at http://www.cms.gov/CCIIO/Resources/Fact-
Sheets-and-FAQs/Downloads/utah-marketplace-letter-5-10-2013-508.pdf for an agreement between HHS and Utah
allowing Utah to run a SHOP exchange while the Federal Government will run the individual insurance exchange.
16 Waivers that are provided for in the ACA include: Medical Loss Ratio (MLR) Waiver: HHS Final Rule, 45 CFR
part 158; Regulatory Impact Analysis, Technical Appendix, MLR Regulation (OCIIO-9998-IFC); Medical Loss
Ratio; Annual Limit Waiver References: Internal Revenue Service, the Employee Benefits Security Administration,
and the Health and Human Services Department, Interim Final Rule, 75 FR 37188; Annual Limits; Accountable
Care Organization (ACO) Antitrust Waiver: Centers for Medicare and Medicaid Services Final Rule, 42 C.F.R. pt.
425; Shared Savings Program, 42 USC Section 1395 JJJ; Final Statement of Antitrust Enforcement Policy
Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 FR 67026;
Press Release: Department of Justice/Federal Trade Commission Issue Final Statement on Antitrust Policy
Enforcement Regarding Accountable Care Organizations (October 20, 2011); United States Department of Justice:
“Accountable Care Organizations”, http://www.npr.org/2011/04/01/132937232/accountable-care-organizations-
explained.
17 See Unified Green Mountain Care, http://hcr.vermont.gov/timeline/gmc; Laura K. Grubb, Lessons from Vermont's
Health Care Reform, 368 New Eng. J. Med. 1276 (2013), available at
http://www.nejm.org/doi/full/10.1056/NEJMp1212974.
18 Robert Pears, Health Law Waivers Draw Kudos, and Criticism, N.Y. Times (Mar. 19, 2011),
http://www.nytimes.com/2011/03/20/health/policy/20health.html?pagewanted=all
19 Kaiser Family Foundation, State Health Facts: Medical Loss Ratio Adjustments, http://kff.org/health-reform/state-
indicator/medical-loss-ratio-adjustments/ (last visited Jun. 10, 2013).
20 The Social Security Act, Pub.L. 74–271, 49 Stat. 620 (1935) § 1115; § 1915.
21 Families USA, How the Affordable Care Act Makes the Section 1115 Waiver Process More Transparent: An
Advocates Guide (April 2012), http://www.familiesusa2.org/assets/pdfs/medicaid/Section-1115-Waiver-Process.pdf.
7
HHS may grant waivers to certain requirements allowing flexibility for states provided the new
health benefits or delivery comports with the goals of Medicaid.
Attorneys general must also be familiar with Section 1332 of the ACA, entitled “Waiver
for State Innovation,” and the final rule issued by HHS that allows states flexibility in
establishing unique health care systems to meet the needs of individual states.22
Although State
Innovation waivers will not be effective until 2017, the administration has indicated it supports
legislation to move the effective date to 2014.23
With the approval of HHS, waivers may be granted for a period of five years at a time
and allow states to not meet the requirements as stated in the ACA regarding insurance
exchanges, minimum coverage requirements of qualified health plans (QHP), and individual
insurance coverage requirement.24
Waivers may be granted only where the Secretary finds that
the state proposed plan will provide coverage that is as comprehensive and as affordable to a
comparable number of state residents as is provided for under the ACA and will not increase the
Federal deficit.25
The final rule on state innovation waivers outlines the process and requirements for a
waiver application, public notice, periodic review, and post-award evaluations.26
C) Contract Review – Procurement
Nothing in the ACA relieves the duty of attorney general offices to review contracts
entered into by state agencies. Because the ACA places significant new responsibilities on state
government, many vendors are currently seeking contracts with state government to carry out
ACA responsibilities. Many of these duties require a high degree of technical sophistication
22
Patient Protection and Affordable Care Act, § 1332, 124 Stat. 203 – 206; Application, Review, and Reporting
Process for Waivers for State Innovation 77 Fed. Reg. 11700 (Feb. 27, 2012) (to be codified at 45 C.F.R. pt. 155),
available at http://www.gpo.gov/fdsys/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
23 Healthcare.gov, The Affordable Care Act: Supporting State Innovation,
http://www.healthcare.gov/news/factsheets/2012/02/state-innovation02222012a.html (last visited Jun. 5, 2013).
24 § 1332, 124 Stat. 203 – 206
25 Id.; see David J. Barron and Todd D. Rakoff, In Defense of Big Waiver, 113 Colum. L. Rev. 265, 281-84 (2013).
26 Application, Review, and Reporting Process for Waivers for State Innovation , 77 Fed. Reg. at 11700; “…an
application must include: The provisions of law that the state seeks to waive; An explanation of how the proposed
waiver will meet the goals related to coverage expansion, affordability, comprehensiveness of coverage, and costs;
An implementation timeline; A budget plan that does not increase the federal deficit, with supporting information;
Actuarial certifications and economic analysis to support the state’s estimates that the proposed waiver will comply
with the comprehensive coverage requirement, the affordability requirement, and the scope of coverage requirement;
And analyses of the waiver’s potential impact on provisions that are not waived, access to health care services when
residents leave the state, and deterring waste, fraud, and abuse”
http://www.healthcare.gov/news/factsheets/2012/02/state-innovation02222012a.html
8
including combining technological expertise with at least some knowledge of actuarial issues,
health care marketing practices and health care contracting.
An example is the creation of online portals for Health Insurance Exchanges through
which uninsured can enroll in Medicare/Medicaid or purchase insurance. These exchanges will
require significant technological expertise to provide a seamless and securely integrated system.
In order to meet deadlines of open enrollment October 1, 2013 and to be operational by January
1, 2014, states are contracting outside help information technology specialists to aid in design
and implementation of insurance exchanges and web portals.27
Although the exchanges
themselves may look differently from state to state, their function and design will all require the
same elements on the websites. As of May 2013, the federal government has awarded over $138
million in early innovator grants to develop the information technology infrastructure for
exchanges.28
Attorneys general need to also review contracts that result from the expansion of
Medicaid. With an expansion in the rolls of Medicaid eligible and states receiving federal
funding to update eligibility systems, states will be seeking outside assistance in updating their
systems.29
Contracts in all of these areas are very complex. State agency officials who are under
pressure to execute the ACA may underestimate this complexity and, moreover, not insist on
appropriate enforcement mechanisms should contractors default. Attorneys general have
significant experience in the area of contract enforcement and should bring it to the fore in
counseling agency clients.
1) Outside Counsel
The complexity of changes in the delivery of health care and the implementation of the
ACA has spawned a number of private law firms that market themselves to state government as
experts or "legal consultants."30
Varying widely in expertise, cost and depth, the retention of law
firms by state agencies generally requires the approval of state attorneys general just as would
27
Andrew Stein, State Signs Last Major IT Contracts for Health Benefits Exchange, VTDigger.org (May 2, 2013),
http://vtdigger.org/2013/05/02/state-signs-last-major-it-contracts-for-health-benefits-exchange/.
28 Kaiser Family Foundation, State Health Facts (last visited May 20, 2013), http://kff.org/health-reform/state-
indicator/early-innovator-grants/.
29 See Associated Press, Attorney General Investigating Medicaid Contract, The Times-Picayune (Mar. 23, 2013),
available at http://www.nola.com/politics/index.ssf/2013/03/attorney_general_investigating.html for a news article
discussing Louisiana Attorney General Caldwell’s investigation into a $200 million Medicaid contract.
30 Leavitt Partners, http://leavittpartners.com/ (last visited Jun. 5, 2013); Public Consulting Group,
http://www.publicconsultinggroup.com/ (last visited Jun. 5, 2013); Social Interest Solutions,
https://www.socialinterest.org/solutions/solutions/exchanges (last visited Jun. 5, 2013); Nixon Peabody: Health Care
Reform, http://www.nixonpeabody.com/health_care_reform (last visited Jun. 5, 2013).
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the retention of any outside counsel.31
In addition to general contract review, attorneys general
have a particular responsibility to review contracts for legal services by the agencies that they
represent.32
Attorneys general should carefully scrutinize requests from their Governor or state
agencies in the retention of private counsel for ACA implementation. Prior to approval it is
important to compare experiences with other states as to cost and quality and to carefully assess
capacity with existing attorney general personnel to address the same issues.
Recommendation: Attorneys general should be a part of either or both the state
executive and legislative working groups. Such involvement by the attorneys general will enable
state agencies to interpret and implement the law correctly, and protect consumers, both
individuals and small businesses, particularly with respect to insurance practices.
Involvement by the attorney general in early planning will improve the defensive capacity
of the state in potential challenges to state action or inaction. For example, as a result of activity
by some governors, there are likely to be legal issues regarding the authority of the executive to
act without legislative authority, either in establishing the exchange, expanding Medicaid, or in
complying with the ACA without legislative action.33
In addition, the federal government could
potentially take affirmative steps, including litigation and potential loss of federal Medicaid
funds against states that fail to comply with provisions of the ACA, thus requiring the attorney
general’s counsel and representation.34
There are also potential affirmative actions for those attorneys general who may wish to
advocate provisions of the ACA that protect consumers. The expansion of health coverage to
younger Americans, by virtue of the ACA’s provision allowing young people to stay on their
parents’ coverage and the ACA’s prohibition against denial of coverage for pre-existing illness
for children, have already made a major difference in health insurance coverage for young
Americans.35
Attorneys general may choose to consider action against insurers who fail to
comply with the consumer protection provisions of the ACA, or against other entities that may
violate other provisions of the ACA that impact consumers.
31
Tex. Gov’t Code Ann. § 402.0212(f) (2012).
32 Id.
33 Ala. Exec. Order No. 2011-17 (Jun. 2, 2011), available at
http://governor.alabama.gov/news/news_detail.aspx?ID=5164; Ga. Exec. Order No. 06.02.11.01 (Jun. 2, 2011),
available at http://www.georgia.gov/vgn/images/portal/cit_1210/21/41/17217485106_02_11_01.pdf; Ind. Exec.
Order No. 11-01 (Jan. 3, 2011), available at http://www.in.gov/gov/files/EO_11-01.pdf; Minn. Exec. Order No. 11-
30 (Oct. 31, 2011), available at http://mn.gov/governor/images/EO-11-30.pdf; R.I. Exec. Order No. 11-09 (Sep. 19,
2011), available at http://www.governor.ri.gov/documents/executiveorders/2011/Executive_Order_11-09.pdf.
34 § 2722. 2723. 42 U.S.C. 300gg–22. ENFORCEMENT. (penalty against insurers) for failure to comply with
insurance provisions
35 § 1001, 124 Stat. 132; § 1201, 124 Stat. 154.
10
III. What the ACA Means for States
This memo focuses on three major areas that will likely change within each state as a
result of the ACA: (1) reforms to the insurance market; (2) changes to the healthcare
marketplace; and (3) the expansion of Medicaid to a far greater portion of each state’s
population. This memo briefly discusses each of these three areas. In addition, the memo
includes a discussion of concrete areas of attorney general jurisdiction that are implicated by the
ACA, and actions that attorneys general may want to consider as they deal with the Act.
Because there are far more responsibilities than those identified, this memo cites many
resources that have been developed to aid in understanding the ACA’s application to different
fields and includes them on the program website.36
A) Insurance Market Reforms
There are a wide range of insurance marketplace reforms in the ACA, many of which
require a state’s legislative enactment or regulatory oversight. The key ones are identified
below.
1. Overview of the Creation of Health Insurance Exchanges
Consumers and small businesses have always been challenged in attempting to purchase
health insurance for themselves or for their employees. Difficult to understand insurance
language and a bewildering array of options currently make it very difficult for consumers to
select the right health insurance and effectively make price comparisons almost impossible.
One of the goals of the exchanges is to move toward standardization of insurance
products so that consumers and employers will be better able to do comparison shopping of
policies best for them. The ACA addresses this issue by urging, but not requiring, each state to
create a state run exchange for the purchase of health insurance.37
If a state does not create such
an exchange, the Act expressly requires that the federal government do so.38
This goal is found in Section 1311(b) and section 1321(b) of the Affordable Care Act that
provides that each State has the opportunity to establish a “one portal” insurance exchange that
facilitates the standardization of health insurance by allowing the exchange board to define and
36
Health Care Reform, National State Attorneys General Program,
http://www.law.columbia.edu/center_program/ag/policy/health/resources/healthreform (last visited Jun. 17, 2013)
37 § 1311(b), 124 Stat. 173 - 174.
38 § 1321, 124 Stat. 186 - 187.
11
certify Qualified Health Plans (QHP) that meet requirements as specified in the Affordable Care
Act. Alternatively, the ACA authorizes the creation of Federal/State partnership exchanges, to
allow state flexibility in determining the specific details of the exchange within that state. If a
state does not create such an exchange, the Act expressly requires that the federal government do
so.39
The exchanges will be state-based governmental or quasi-governmental agencies or non-
profit entities where individuals and small businesses will be able to purchase private health
insurance.40
States may create a separate exchange for individuals and one for small businesses,
may merge them, or may form regional alliances.41
The nature of this structure may have a significant impact on an attorney general who has
a statutory mandate to provide legal representation to state agencies but not to quasi-
governmental agencies. This is a matter for each state to decide and could be subject to a Formal
Opinion of an attorney general.
The benefits of an exchange are: (1) insurance companies will compete for business by
offering products that meet the same set of rules and standards; (2) consumers and small
businesses will be able to easily compare these products, QHPs, and eligible individuals will
receive tax credits by purchasing through the exchange; (3) small business owners will be able to
offer their employees health insurance that meets their needs; and 4) some businesses will be
eligible for a two year tax credit for coverage purchased for employees.42
The single web portal for the state or federal exchanges is a significant innovation. It
allows a consumer to access health insurance information and eligibility status for any type of
insurance -- private, Medicaid and the Children’s Health Insurance Program (CHIP), as well as
the State Small Business Health Options Program (SHOP).43
In other words, all consumers will
enter through the same portal to purchase insurance, and there must be a seamless system which
does not segregate consumers by type of coverage.
State-sponsored exchanges, including the creation of SHOP Exchanges, must be
operational by January 1, 2014 with open enrollment beginning October 1, 2013.44
States are
39
§ 1321, 124 Stat. 186 - 187.
40 § 1311(d), 124 Stat. 176 - 178.
41 § 1311(b), 124 Stat. 173 - 174; § 1311(f), 124 Stat. 179.
42 Tracy Jan, US Won’t Mirror Mass. on Health Exchanges, Boston Globe, May 20, 2013,
http://www.bostonglobe.com/news/nation/2013/05/19/health-insurance-exchanges-will-lack-some-key-features-
designed-protect-consumers/TnXNTKagxQXPszZgMQvSEI/story.html; Robert Pears, Health Law Is Fostering
Competition, U.S. Says, N.Y. Times, May 31, 2013, at A13, available at df
http://www.nytimes.com/2013/05/31/health/health-law-is-fostering-competition-administration-says.html?_r=0 .
43 § 1103 124 Stat. 146; § 1311(d)(4)(C), 124 Stat. 176
44 § 1311(b)(1), 124 Stat. 173.
12
supposed to have insurance regulations in compliance with ACA and Medicaid eligibility
systems ready to coordinate with the exchanges. States that are creating exchanges were to have
submitted plans for HHS approval by January, 2013, so they could seek HHS approval and begin
to build and market health insurance products.
Although changing constantly, as of June 2013, seventeen states opted for a state-based
exchange, seven for partnership exchanges, and twenty-seven for federally run exchanges.45
State Insurance Departments:
Each state’s insurance commission is already deeply involved in the decision making
process regarding exchanges. The National Association of Insurance Commissioners (NAIC)
has developed substantial information on this process and is a good resource for attorneys
general.46
If a state exchange will not be operational by January 1, 2014, the HHS Secretary will
establish and operate an exchange in the State and implement all regulatory requirements.47
In another scenario already occurring in some states, a Governor may implement the
exchange (or possibly other sections of the ACA) by means of Executive Order, as opposed to
legislative action.48
Whatever the motives, legal questions will inevitably arise regarding the Governor’s
authority to act by Executive Order, and whether the Order, even if lawful, meets the ACA
requirements.
Recommendation:
Offices of attorney general vary widely in their jurisdiction over the offering of
insurance. Some provide day-to-day counsel to insurance commissioners and some only provide
litigation support. Some have consumer protection jurisdiction over insurance and some do not.
Some have the capacity to challenge insurance rates administratively or in court and some do
not.49
45
Kaiser Family Foundation, State Decisions on Health Insurance Exchanges and the Medicaid Expansion,
http://kff.org/health-reform/state-indicator/state-decisions-for-creating-health-insurance-exchanges-and-expanding-
medicaid/ (last visited Jun. 17, 2013).
46 See National Association of Insurance Commissioners, http://www.naic.org/ (last visited Jun. 6, 2013).
47 § 1321, 124 Stat. 186 - 187.
48 See R. I. Exec. Order No. 11-09 (Sept. 19, 2011); N. Y. Exec. Order No. 42 (April 12, 2012); IN Exec. Order No.
11-01 (Jan. 3, 2011); KY Exec. Order No. 2012-587 (July 17, 2012).
49 Press Release, Maryland Attorney General’s Office, AG Gansler Tells Maryland Insurance Regulators: "Freeze
the Rates" (Jun. 4, 2013), available at http://www.oag.state.md.us/Press/2013/060413.html.
13
Regardless of existing jurisdiction or whether a state is proceeding with a state or federal
exchange, all attorneys general should have a senior staff person assigned to monitor the
operations of the exchanges. In addition to assuring legal compliance by working closely with
insurance commissioners, it is also important that attorneys general are able to answer questions
from consumers once the exchanges are operational.
In addition to the actual representation of the insurance department, attorneys general
have substantial experience in informing consumers about complex areas of state law. Consumer
Protection divisions in attorney general offices should work closely with their insurance
department to make sure that the information is presented in a “consumer friendly” manner and
in languages that reflect the demographics of any particular state beyond the requirement that
health plans statement of benefits be translated to languages in counties where ten percent of the
population are only literate in non-English languages.50
a. Exchange Governance
Under the ACA, an exchange can have a separate governing board for the individual and
SHOP exchanges, can combine as a single governing board, or be governed as a state agency.
The proposed HHS Rule states that a majority of voting governing board members must have
experience related to health care financing or delivery, or related to public health/policy.51
An exchange must have conflict of interest, ethics and transparency policies. Board
members must disclose any potential conflicts of interest. Exchange board meetings must be
open to the public and comply with State Open Meetings Acts, which includes a time for public
comment.52
All of these requirements potentially involve the jurisdiction of attorneys general.
Depending on the nature of the state’s exchange legislation, attorneys general should
review the exchange’s structure for full compliance with state law. If the exchange is a state
agency, the attorney general should be sure that it meets all of the usual personnel and
operational rules of the rest of state government. If an exchange is governed by a non-profit
organization, it is important to know that its governance falls with the purview of the attorney
general.
b. Qualified Health Plans (QHP)
50
45 C.F.R. § 147.136(e); see Covered California, http://www.coveredca.com/ (last visited Jun. 6, 2013); New
York Health Benefits Exchange, Information for Individuals and Families, http://healthbenefitexchange.ny.gov/info-
for-you/individuals-families (last visited Jun. 4, 2013).
51 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, 76 Fed. Reg.
41866 (proposed July 15, 2011) (to be codified at 45 C.F.R. pts. 155 and 156) available at
http://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17610.pdf.
52 Id.
14
An essential goal of the ACA is to standardize health insurance offerings. Without that
standardization, consumers and employers would not be able to compare products in a way that
meets their healthcare needs. For that reason, an exchange must offer plans that are deemed to
be “qualified health plans” (QHP) as defined by the Act.53
Each QHP must comply with a number of requirements most notably existing and new
state licensure/insurance regulations.54
The ACA requires that a QHP have a standard benefit
design, which includes the mandated essential health benefit coverage and cost sharing
mechanisms, grievance and appeal procedures, and specific termination of coverage procedures,
quality standards and risk-adjustment requirements.55
The complete details of the QHP
requirements have not yet been established.56
A QHP must set rates for one benefit and plan year and cannot change the rates mid-year.
A QHP must also submit a list of data and information to the exchange, the State, HHS, and the
public (including claims payment, financial disclosures, data on enrollment, data on
disenrollment, data on the number of claims denied, data or rating practices, information on cost-
sharing and information on enrollee rights). 57
A QHP must also follow state health insurance marketing and advertising laws that,
depending on the state may involve attorney general enforcement.58
A QHP cannot engage in
marketing or advertising practices that discourage enrollment of individuals with special or
significant healthcare needs. In addition, there is a clear prohibition of unfair or deceptive
marketing or advertising practices to assure that enrollees are not being given improper
information. This is an area where the consumer protection divisions have substantial experience
and can be of assistance to the insurance departments or in some states will have direct
jurisdiction.
53
§ 1301, 124 Stat. 162 - 163.
54 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, at 41923.
55 The ACA requires the Secretary of the Department for Health and Human Services to “define essential health
benefits” for health plans. § 1302(b), 124 Stat. 163. The benefits must “include at least the following general
categories and the items and services covered within the categories: ambulatory patient services; emergency
services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including
behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory
services; preventive and wellness services and chronic disease management; and pediatric services, including oral
and vision care.'' Id. The benefits must be “equal to the scope of benefits provided under a typical employer plan.”
Id. The Secretary of the Department of Labor was tasked conduct a survey of employer-sponsored coverage to
determine the benefits typically covered by employers.” Id. The Labor Department released its survey on Aril 15,
2011. U.S. DEP’T OF LAB., SELECTED MEDICAL BENEFITS: A REPORT FROM THE DEPARTMENT OF LABOR TO THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES, available at http://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf.
56
Ctr. for Consumer Info. & Ins. Oversight, Essential Health Benefits Bulletin (Dec. 16, 2011), available at
http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf.
57 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, at 41923.
58 Id.
15
Finally, a QHP must have an adequate network of providers that includes community
providers and providers working in designated underserved communities.59
Exchanges have responsibility for determining which plans can be offered through the
exchange and are therefore eligible for subsidies. In addition the ACA anticipates-but does not
compel-exchanges to be active purchasers and requires them to hold plans in the exchange
accountable for numerous standards including rate justification, standards of network adequacy
and quality. These functions are related to existing functions conducted by insurance
departments. How they are implemented may cause tensions between exchanges and insurance
departments that may benefit from the involvement of the attorney general.
c. SHOP Exchange
By January of 2014 each state must have a Small Business Health Option Program
(SHOP) exchange that will either be separate or combined with the individual health exchange
allowing small businesses to offer qualified health plans from a variety of insurance providers to
their employees similar to larger businesses.60
SHOP exchanges will only be open to business
with fewer than 100 employees, but states may limit the exchange to business with fewer than 50
employees. Until 2016, plans offered in the SHOP exchange must cover all essential health
benefits and will be offered in four “tiers” of coverage. Premiums on SHOP plans will be based
on age and smoking history. A SHOP qualified health plan is only allowed to change rates at a
uniform time (monthly, quarterly, or annually).61
A SHOP qualified health plan cannot change
rates for an employer during a plan year.62
d. Individual and Small Business Tax Credits
Beginning in 2014, a tax credit will be available for qualified individual purchasers who
are not eligible for Medicaid and earn up to 400 percent of the Federal Poverty Level (FPL) that
will cover the difference between household income and the second-lowest cost plan offered in
the exchange.63
Based on 2013 rates, that includes households that earn up to $45,960 for an
individual and $94,200 for a family of four.64
In addition, individuals earning between 100 and
400 percent of the FPL enrolled in qualified health plans are eligible for cost sharing assistance.65
59 Id.
60 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, at 41885.
61 Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, at 41887.
62 Id.
63 The plan must be the second lowest cost "silver" level plan to be eligible for the tax credit. § 1401, 124 Stat. 213 -
220.
64 2013 Poverty Guidelines, supra note 4.
65 § 1402, 124 Stat. 220 - 224
16
For small businesses, some tax credits are currently available. For small businesses that
qualify, tax credits are provided up to 35 percent of the business’ share of employee premiums.66
Employers are eligible if they employ fewer than 25 full time employees, the average annual
salary is less than $50,000, and the employer covers 50 percent or more of coverage costs.67
For
two years, beginning in 2014, employers that purchase insurance through the SHOP exchange
will be eligible for a maximum tax credit of 50 percent of their share of employee coverage
costs.68
Eligible tax-exempt employers can receive credits for 25 percent of the employer’s share
of premium costs through 2013 and 35 percent of these premium costs for two years starting in
2014.69
2. Federal and Partnership Health Insurance Exchange
Some states have chosen not to establish their own exchange that would be operational by
January 1, 2014.70
As of June 2013, seventeen states opted for a state-based exchange, seven for
partnership exchanges, and twenty-seven for federally run exchanges.71
Because a state has opted for a federal or partnership exchange does not necessarily mean
that attorney general offices in those states do not need to be aware of the insurance exchange
provisions. States that do not create exchanges will default to federally run insurance exchanges
and consumers will undoubtedly call offices of attorneys general for information and
assistance.72
State insurance commissioners will retain their jurisdiction over providers to assure
compliance with state insurance laws. Another alternative authorized by the ACA is the creation
of Federal/State partnership exchanges that allow state flexibility in determining the specific
details of the exchange within that state.73
As with state established exchanges, purchasing health insurance on a federal or
partnership exchange will be through a single web portal where a consumer can go to access
health insurance information and eligibility status for any type of insurance -- private, Medicaid
and the Children’s Health Insurance Program (CHIP), as well as the State Small Business Health
66
§ 1421, 124 Stat. 237 - 242, 241
67 Id., at 238
68 Id.
69 Id.
70 § 1311(b)(1), 124 Stat. 173.
71 Kaiser Family Foundation, supra note 45.
72 § 1321, 124 Stat. 186 - 187.
73 § 1311(b)(1), 124 Stat. 173; 45 CFR 155.105, Establishment of Exchanges and Qualified Health Plans; Exchange
Standards for Employers, 77 Fed. Reg. 18310, 18446 (Mar. 27, 2012).
17
Options Program (SHOP).74
In other words, all consumers will enter through the same portal to
purchase insurance, and there must be a seamless system which does not segregate consumers by
type of coverage.
HHS is actively engaged in establishing federal exchanges. In so doing, the federal
government will also assume liability, responsibility for audits and oversight. Since March of
2013, the Federal government began hosting national and state specific conference calls for
stakeholders to further coordinate implementation.75
In addition to preparation for a federal exchange, HHS has also has proposed several
levels of shared responsibility with states as an alternative model to the purely federal exchange.
Under this alternative model, the exchange would meet all ACA standards, but selected functions
of the exchange would be operated by a state. 76
Attorneys general may well be engaged in these
intergovernmental discussions of liability and responsibility, should a federal or shared
federal/state exchange be developed.
3. Other Insurance Market Reforms
a. Guaranteed Coverage
One of the most important aspects of the ACA is that all health plans must permit a
consumer to enroll regardless of health status, age, gender or other factors that might affect their
utilization of health services. This is commonly referred to as the “guaranteed issue” provision.77
This section is of extraordinary importance for millions of citizens under 65 who are currently
uninsured and have serious, preexisting health problems.
Although it requires the non-discriminatory issuance of insurance, the guaranteed issue
does not limit how much a health plan can charge once a consumer is enrolled, except in an
exchange where premium and cost sharing is limited for those eligible.78
Another important aspect of the ACA that has already been in effect for two years is the
ACA requirement that insurers no longer deny or exclude health insurance coverage for children
because of a pre-existing condition, including a disability. Starting in January of 2014, this
protection will be extended to the larger population. Health plans will not be allowed to deny
74
§ 1103 124 Stat. 146; § 1311(d)(4)(C), 124 Stat. 176
75 Health Insurance Marketplace Stakeholder Engagement Open Door Forum, Ctr. For Medicare & Medicaid Serv.,
http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/ODF_HealthInsuranceMarketplace.html
(last visited May 2, 2013).
76 See Dep’t Health & Human Serv., Exchanges: A Proposed New Federal-State Partnership; State Exchange
Grantee Meeting, (2011), available at
http://cciio.cms.gov/resources/files/overview_of_exchange_models_and_options_for_states.pdf.
77
§ 1201, 124 Stat. 156.
78 § 1201, 124 Stat. 156-161.
18
coverage or charge more in premium to anyone (including adults) because of a pre-existing
condition.79
b. Reinsurance Program80
The purpose of the reinsurance program is to protect health plans from cost overruns
from high cost enrollees by spreading risks across a broader base.
The program will be operated mainly by state insurance departments beginning in 2014
and ending in 2016, although HHS will establish one if the state does not.81
The reinsurance
program will assess charges against health plans and third-party administrators of group health
plans and pay out funds collected to non-grandfathered individual health plans to cover high-risk
individuals.82
Because an exchange could be inundated by individuals with high-cost conditions who
were formerly uninsured or covered through the state or federal high-risk pools, the reinsurance
program is intended to provide economic stability to plans by stabilizing an individual’s
coverage until the exchange can pick up a substantial number of healthy enrollees. Each state
that runs an exchange must run a reinsurance program. Most often, it is anticipated that a state
will contract with a nonprofit reinsurance entity to operate the program, primarily collecting and
distributing collected funds.
A national contribution rate will be set by HHS that will give states guidance on
distributing funds to health plans. Payments for the reinsurance program will be made to health
plans with high cost enrollees based on a percentage of the cost of the high cost claims for
essential health care services that exceed an established cost of the reinsurance cap. The HHS
Proposed Rule outlines how funds will be allocated from a reinsurance fund based on a
percentage of the total premium volume of health plans and total medical costs of self-insured
plans.83
79
§ 1201, 124 Stat. 154 - 155.
80 §1341, 124 Stat. 208-211.
81 Currently only Maryland and Connecticut have chosen not to establish their own program. See McDermott, Will,
& Emery, Finalized ACA Regulations on Transitional Reinsurance Program Premiums and Potential Effects for
Employer-Sponsored Group Health Plans (Mar 6, 2013), http://www.mwe.com/Finalized-ACA-Regulations-on-
Transitional-Reinsurance-Program-Premiums-and-Potential-Effects-for-Employer-Sponsored-Group-Health-Plans-
03-06-2013/.
82 See supra text accompanying note 8.
83 Patient Protection and Affordable Care Act; Standards Related to Reinsurance, Risk Corridors and Risk
Adjustment, 75 Fed. Reg. 41930 (July 15, 2010) (to be codified at 45 C.F.R. pt. 153), available at
http://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17609.pdf.
19
c. Community Rating
"Community rating" requires plans to set premium rates within a market area based on
specific factors enumerated in the ACA – age, family composition, geographic area, and tobacco
use. The laws must be enacted at the state level and are therefore the subject of the attention of
state attorneys general.84
The ACA sets limits on how much premiums can vary by these factors. In states where
state law currently does not require community rating or guaranteed issue, or where definitions
are different than the new federal law, the attorney general may need to advise the state on the
necessary steps to ensure compliance with the ACA, or prepare to defend the state against
challenges for its refusal or failure to amend existing insurance law or regulations.
The ACA provides that “the Secretary (of HHS) shall enforce (these) provisions” if a
state fails to do so but it does not spell out the actions the Secretary can or will take with respect
to states which do not adopt these reforms.85
Attorneys general may need to prepare for
defensive litigation, either by consumers or possibly by the federal government, to compel the
issuance of insurance policies under the terms described in the Act.
d. Grandfathered Plans
Section 1251 of the ACA provides that certain insurance plans are “grandfathered” and
are exempt from certain provisions of the bill.86
The goal of grandfathering existing plans was to
provide a smooth transition from existing insurance coverage to coverage that conforms to the
ACA with minimal disruption.
Fewer plans will be grandfathered as 2014 approaches. Under the grandfathering
provisions, most plans that existed on March 23, 2010, the date the law was enacted, are exempt
from some of the law’s consumer protections. For example, grandfathered plans that are exempt
do not have to provide certain recommended preventive services at no additional charge to
consumers, or offer protections if a consumer appeals a claim or is denied coverage. Individual
health plans do not have to phase out annual dollar limits on key benefits, or eliminate pre-
existing condition exclusions for children under 19 years of age.
Grandfathered policies need not comply with the ACA provision requiring insurers to
have a Medical Loss Ratio (MLR) of at least 80 percent. But grandfathered plans cannot (1)
eliminate coverage for a specific condition; (2) increase the co-insurance percentage; (3) increase
the co-payment amount by more than the greater of $5 or medical Consumer Price Index (CPI)
plus 15 percent; (4) or increase deductibles by more than medical CPI plus 15 percent.
84 § 1201, 124 Stat. 155
85 42 U.S.C. 300gg-22; § 2722 9(a) (2)
86 § 1251, 124 Stat. 161 - 162.
20
On the other hand, all health plans, whether grandfathered or not, must (1) provide no
lifetime limits on coverage; (2) provide no rescissions of coverage when someone is sick and
may have previously made an unintended mistake on an application; (3) extend parents’
coverage to young adults 26 and younger; (4) provide no coverage exclusions for children with
pre-existing conditions, and (5) provide no restrictions on annual limits. A health plan can lose
its grandfathered status if it significantly reduces benefits or raises costs or charges made to
consumers.87
In general, most large group/employer health plans will be considered grandfathered by
the ACA. Those that are grandfathered may not change benefits once a state or federal exchange
is implemented in a state. Presumably this would provide the opportunity for small employers
and individuals to change health plans once a state or federal exchange is implemented because it
was anticipated that the exchange would create more affordable and consumer-oriented options
for both.
Working with their insurance commissioners or acting independently, some attorney
generals may wish to bring actions against any insurer selling policies as grandfathered that do
not meet the grandfather tests, and to ask HHS or a court to order that any such policies comply
with the ACA provisions that non-grandfathered policies must comply with, including the
medical loss ratio provision described in more detail below.
e. Rate Review
The ACA requires that insurance companies provide disclosure and allow review of
unreasonable health insurance premium increases. The Centers for Medicare and Medicaid
Services (CMS) has issued a final rule to implement this provision.88
The new rule gives CMS (and HHS) and states the authority to review “unreasonable
health insurance premiums” to determine whether or not the rate increase was justified. Under
the ACA, neither CMS/HHS nor states can reject a proposed rate increase, but the act does give
both entities the authority: (1) to ask for background and information on the rate increase before
implementation of the rate increase; (2) to review the rate increase; and (3) to disclose the rate
increase to the public.89
It is important for attorneys general to be aware of these rules due to the potential for
jurisdictional issues to arise from rate review because both state and federal governments have
jurisdiction.
87
Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered
Health Plan Under the Patient Protection and Affordable Care Act, 75 Fed. Reg. 34,538, (June 17, 2010) (to be
codified at 26 C.F.R. pts. 54 and 602; 29 C.F.R. pt. 2590; and 45 C.F.R. pt. 147).
88 Rate Increase Disclosure and Review, 76 Fed. Reg. 29964, (May 23, 2011) (to be codified at 45 C.F.R. pt. 154),
available at http://www.gpo.gov/fdsys/pkg/FR-2011-05-23/pdf/2011-12631.pdf.
89 See § 1003, 124 Stat. 139-140.
21
Under the ACA:
Since September 1, 2011, insurers seeking rate increases of 10 percent or more for non-
grandfathered plans in the individual and small group markets are required to publicly
disclose the proposed increases and the justifications for them. Such increases will be
reviewed by either the state department of insurance or federally at HHS to determine
whether they are reasonable.90
Since September 1, 2012, the 10 percent threshold will be replaced with a state-specific
threshold, using data that reflects insurance and health care cost trends particular to the
state.91
HHS will work with states in developing thresholds.
States with effective rate review systems will conduct the reviews, but if a state lacks the
resources or authority to conduct actuarial reviews, HHS would conduct them.
If a state or HHS finds the premium rate increase to be unreasonable, the insurer can
withdraw the increase, propose a lower increase or implement the proposed unreasonable
increase but submit a new and final justification to HHS.
The rule requires the federal and/or state review process of a premium rate increase to
provide an opportunity for public comment. State attorneys general who enforce their state’s
administrative procedures act and open meetings laws will need to be mindful of these
provisions.
The rule states that some of the information submitted by an insurer to justify the
premium rate increase is public information and not confidential or protected health or financial
information. This is a key issue for attorneys general who oversee and enforce state inspection
of Public Records Acts and HIPAA.
Although the ACA presumes that state reviews would be conducted by insurance
commissioners, it is silent as to whether other state agencies such as the attorney general could
be involved in a rate review. The internal jurisdiction of rate challenges remains to be
determined by each state.92
f. Medical Loss Ratio (“MLR”) Rule
90
Rate Increase Disclosure and Review, at 29967; National Conference of State Legislatures, State Approval of
Health Insurance Rate Increases, http://www.ncsl.org/issues-research/health/health-insurance-rate-approval-
disapproval.aspx (last visited Jun. 5, 2013).
91 Press Release, Maryland Attorney General’s Office, AG Gansler Tells Maryland Insurance Regulators: "Freeze
the Rates" (Jun. 4, 2013), available at http://www.oag.state.md.us/Press/2013/060413.html.
92 Id.; Superintendent of Insurance v. Attorney General, 558 A.2d 1197 (Me. 1989).
22
One of the most important changes in the ACA is the drive for insurers to be more
efficient.
The ACA now requires that each insurer must spend at least 80 percent or 85 percent of
the premium dollars it collects on claims costs and quality-improving activities, and thus no
more than 20 percent or 15 percent of the premium dollar on administrative expenses and profit.
Since 2011, insurance companies that issue policies to individual, small employers and
large employers were required to report to the states and HHS the following information in each
state they do business: total earned premiums, total reimbursement for clinical services, total
spending on activities to improve quality; and total spending on all other non-claims costs
excluding federal and state taxes and fees. In addition, there is a requirement that at least 80
percent of the health insurance premium for plans in the individual and small group market that
is collected by the insurance company be spent on health care and not administrative costs.93
In
the large group market, the requirement is 85 percent.94
Insurers must report their MLRs on a
form they submit to the states and HHS. If an insurer does not attain an 80 percent or 85 percent
MLR, it must refund money to its policyholders to the extent necessary to bring its MLR up to
that level.95
Working with their state insurance commissioners or independently, state attorneys
generals should carefully monitor insurers doing business in their states – whether in a state of
federal run exchange – to make sure that they properly calculate their MLRs.
g. Risk Adjustment and Risk Corridors
Insurers obviously have an economic incentive to insure the healthiest classes of people
and to avoid those most at risk. This is called “adverse selection” and the ACA creates
mechanism to minimize the risk of adverse selection.96
The ACA provides for several mechanisms to minimize the risk of adverse selection,
which can occur when insurance companies are unable to prepare for and accurately underwrite
the costs of health insurance. The reason the program includes health plans inside and outside of
the exchange is that HHS seeks to discourage "cherry picking" and to provide incentives for
health plans to cover higher risk populations of people.
93
Health Insurance Issuers Implementing Medical Loss Ratio (MLR) Requirements Under the Patient Protection
and Affordable Care Act, 75 Fed. Reg. 74864 , 74926 (Dec. 1, 2010) (to be codified at 45 C.F.R. pt. 158), available
at http://edocket.access.gpo.gov/2010/pdf/2010-29596.pdf.
94 Id.
95 See Chad Terhune, Blue Shield, Anthem Owe Small Firms Millions of Dollars in Rebates, L.A. Times, Jun. 4,
2013, available at http://www.latimes.com/business/la-fi-health-insure-rebates-20130604,0,3390682.story?track=rss
for a news article describing the amount of money refunded to policy holders in California.
96 Nat’l Ass’n of Ins. Commissioners, Adverse Selection Issues and Health Insurance Exchanges Under the
Affordable Care Act 2 (2011), available at http://www.naic.org/store/free/ASE-OP.pdf.
23
The "Risk Adjustment" program is intended to amortize risk across insurance plans as the
new exchanges are set up; essentially, the program moves funds from health plans than have
lower than average risk enrollees to health plans that insure higher than average risk enrollees.97
This program begins in 2014 and will run indefinitely. It applies to health plans and
insurers in the small group and individual markets, inside or outside the exchange, but not to
self-insured ERISA plans, large group plans or grandfathered plans. HHS will develop a risk
adjustment methodology but states can use their own if they are certified by HHS. States must
spend some time determining when to collect funds from low-risk plans and apply them to high
risk plans. So far HHS has proposed several methods states can use to calculate charges and
payments. Health plans are also required to collect and send claims and encounter data to states
on a monthly basis.98
In addition, the ACA provides for "Risk Corridors", managed and operated by HHS to
operate from 2014 to 2016. Under the program, HHS will collect funds from qualified health
plans with better than expected experience and distribute them to qualified health plans that have
worse than expected experience. The purpose of this program is to stabilize qualified health
plans risk during the early years of the exchange until health plans are more able to predict their
risk.99
Although these important responsibilities are to be carried out by insurance
commissioners, it is important that attorneys general be familiar with them in order to render
timely advice to commissioners and to be ready for litigation if necessary.
h. Consumer Operated and Oriented Plan (CO-OP) Program
Under section 1322(a) of the ACA, CMS was directed to establish the Consumer
Operated and Oriented Plan (CO-OP) program to further the development of member-governed,
non-profit health insurance plans for the individual and small group markets. CO-OPs were
intended to have a strong consumer focus as all members of the CO-OP’s Board of Directors
must be elected by a majority vote of the other Board members. CO-OPs will be operational
beginning in July of 2013. Loan funds were appropriated to aid in the start-up and capitalization
of these companies, however funding for CO-OPs that had not been approved prior to January
2013 was cut as part of the sequester.100
97 Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014, 78 Fed.
Reg. 15410 (Mar. 11, 2013) (to be codified at 45 CFR pts. 153, 155, 156, 157 and 158), available at
http://www.gpo.gov/fdsys/pkg/FR-2013-03-11/pdf/2013-04902.pdf.
98 §1343, 124 Stat. 212-213.
99 §1342, 124 Stat. 211-212.
100 See Allison Bell, More States License CO-OPs, Life Health Pro (April 15, 2013),
http://www.lifehealthpro.com/2013/04/15/more-states-license-co-
ops?eNL=516ef14a150ba0b123000046&utm_source=HCRW&utm_medium=eNL&utm_campaign=LifeHealthPro
24
Attorneys General may have particular interest in the establishment of CO-OPs in their
state because they are a newly-authorized non-profit model of health care insurer. They will be
subject to the attorney general’s oversight of non-profit organizations.101
In addition, they will
be required to meet all of a state’s health insurance requirements and thereafter will be able to
participate in a state’s exchange. In light of anticipated competition for consumers by health
insurers once exchanges.
IV. Health Care Marketplace Changes: The Impact of the ACA
Recent years have shown significant shifts in the way that health care is delivered in the
United States. As health care costs rise – now at 17% of the Gross National Product -
purchasers (insurers, government and individuals) are pushing to restrain cost increases.102
The
ACA supports insurance rate stability as one of its main goals.
The ACA addresses ever-increasing health care costs by creating incentives to improve
clinical integration among health care providers. Beyond these incentives, the ACA depends on
market mechanisms to order and keep competitive health care markets. This means that both
federal enforcers and state attorneys general will be on the front lines to assure that these markets
operate competitively and free of unfair or deceptive practices.
The ACA and subsequent rules have addressed and encouraged both consolidation that
does not violate antitrust laws and outcome based care that will accentuate the consolidation
trend.103
The sweeping antitrust jurisdiction possessed by all attorneys general therefore requires
attorneys general to understand the ACA authorized structures defined as Accountable Care
Organizations (ACO).
_eNLs&_LID=68934110&t=individual-health&page=2, for a news article discussing 10 CO-OPs that had been
established across the country.
101 See Charities Law Project, National State Attorneys General at Columbia Law School,
http://www.law.columbia.edu/center_program/ag/policy/CharitiesProj.
102 The World Bank, Data: Health Expenditure, Total, http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS (last
visited Jun. 18, 2013)
103 For example, the DOJ/FTC guidelines distinguish between pro-competitive ACO’s and anti-competitive ACO’s.
In addition, CMS regulations endorse the importance of competition among ACO’s as an important ordering
principle. This is buttressed by automatic sharing of all ACO applications with federal antitrust agencies. Statement
of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared
Savings Program, 76 Fed. Reg. 67026 (Oct. 28, 2011), available at
http://www.ftc.gov/os/fedreg/2011/10/111020aco.pdf.
25
A) Accountable Care Organizations (ACOs) (Medicare Shared Savings Program)
Although the ACA has several programs that seek to incentivize coordination of care to
Medicare and other healthcare beneficiaries, the one most relevant to the jurisdiction of attorneys
general is the creation of Accountable Care Organizations (ACO).
The purpose of ACOs is to provide and deliver a high quality of care to patients by
clinically integrating the work of individual health care providers and health care institutions.104
The idea is to shift profit incentives for providers away from fee for service and toward keeping
patient populations healthy.105
The issue of whether to allow consolidations and mergers is of
immediate importance to attorneys general due to their extensive antitrust authority.106
The last ten years have seen the consolidation of both insurers and healthcare providers as
both buyers and sellers of healthcare services become larger in search of both efficiencies and
leverage in negotiations. A key premise of ACO creation is clinical integration of providers,
which, if not monitored, can generate competition concerns.
There is debate over the relative merits of clinical integration, particularly in the form of
large wholly owned health systems, and competitive values. The ACA seeks to thoughtfully
accommodate the values of clinical integration and competitions. However, as noted in a major
rule-making concerning ACO’s, CMS wrote that “[n]othing in this final rule shall be construed
to modify, or supersede the applicability of any of the Federal antitrust laws.”107
Indeed, CMS
endorsed the importance of competition in accelerating “advancements in quality and
efficiency.”108
Nonetheless, clinical integration can raise challenging antitrust issues. To provide
additional clarity in this area, the U.S. Department of Justice and the Federal Trade Commission
104
See Richard Carver, Cornerstone Health Care Signs Partnership with Blue Cross Blue Shield of N.C., Winston-
Salem Journal (Apr. 18, 2013), http://www.journalnow.com/business/business_news/local/article_43a51228-a8a0-
11e2-8b4e-001a4bcf6878.html, for a news article discussing an insurer merger affecting 116 practitioners.
105 See Annie Lowrey, A Health Provider Strives to Keep Beds Empty, N.Y. Times (Apr. 23, 2013),
http://www.nytimes.com/2013/04/24/business/accountable-care-helping-hospitals-keep-medical-costs-
down.html?pagewanted=all&_r=0, for a news article discussing payment motivators apparent in ACOs.
106 See Taylor Burke and Sara Rosenbaum, Accountable Care Organizations: Implications for Antitrust Policy, 19
BNA Health Law Rep. 1 (2010), available at
http://sphhs.gwu.edu/departments/healthpolicy/dhp_publications/pub_uploads/dhpPublication_63870111-5056-
9D20-3D7C6E2050141586.pdf, for an examination of the antitrust implications of health providers joining to form
a single delivery organizations.
107 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 67802,
67841 (Nov. 2, 2011) (to be codified at 45 C.F.R. pt. 425), available at http://www.gpo.gov/fdsys/pkg/FR-2011-11-
02/pdf/2011-27461.pdf
108 Id.
26
(FTC) have issued a policy statement that describes the conditions under which the agencies do
not view an ACO as anticompetitive and will not seek to challenge it.109
This federal policy
creates a “safe harbor” for health consolidations, but state attorneys general have independent
antitrust authority and are not bound by these policies.
ACOs can be created in the public and private sector and can include both for-profit and
non-profit entities. CMS has created multiple types of ACO models including the Pioneer ACO
Model (for entities that were early ACO adopters), the Advanced Payment ACO Model
(focusing on ACOs in rural areas), and the Medicare Shared Savings Program.110
Medicare covers roughly 21% of health spending, under the Medicare Shared Savings
Program there are financial incentives for an ACO that are intended to reduce growth in
healthcare costs while meeting performance standards and quality of care guidelines.111
Some
portion of savings obtained through the ACO model can be passed back to the provider, under
the CMS rule.112
B) Role of the Attorney General in ACO’s and health antitrust
All state attorneys general have antitrust jurisdiction and must face consolidation issues
whether or not their state has taken steps to implement the ACA.113
Entities involved in
providing health care will need to find out whether their attorney general is adhering to the “safe
harbor” guidelines set out by USDOJ and the FTC.
It is highly likely that some ACOs will not meet the conditions set forth in the federal
Policy Statement and will engage in unprotected anticompetitive activity. Attorneys general
should monitor all ACO activities and work closely with USDOJ and the FTC as violations
could result in monetary relief on behalf of direct purchasers of the ACO's services.
109
Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the
Medicare Shared Savings Program, 76 Fed. Reg. 67026 (Oct. 28, 2011), available at
http://www.ftc.gov/os/fedreg/2011/10/111020aco.pdf.
110 Centers for Medicare & Medicaid Serv., Accountable Care Org., http://www.cms.gov/Medicare/Medicare-Fee-
for-Service-Payment/ACO/index.html?redirect=/aco/ (last visited May 7, 2013).
111 § 3022, 124 Stat. 395 – 399; Centers for Medicare & Medicaid Serv., National Health Expenditure Data: Fact
Sheet, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/NHE-Fact-Sheet.html (last visited Jun. 18, 2013).
112 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 67802
(Nov. 2, 2011) (to be codified at 45 C.F.R. pt. 425), available at http://www.gpo.gov/fdsys/pkg/FR-2011-11-
02/pdf/2011-27461.pdf.
113 Hart–Scott–Rodino Antitrust Improvements Act of 1976, Public Law 94-435, 15 U.S.C. § 18a (1976); Antitrust
Project, National State Attorneys General Program,
http://www.law.columbia.edu/center_program/ag/policy/antitrust.
27
As of January 2013, there are 428 ACO’s in 48 states across the nation.114
Many are very
large and are multistate in nature where hospital affiliation crosses state lines.115
It is important that all attorneys general, even those in states that are not implementing
provisions of the ACA, be aware of ACO’s since they will directly impact state antitrust
authority and on how and at what cost health care is provided in their state.
V. Medicaid and Insurance Expansion: The Impact on the Work of Attorneys General
Although states will respond differently to the Medicaid expansion issue, there is no
question that millions of Americans will soon begin to access Medicaid or become insured due to
the existence of the ACA and the operations and tax credits on the exchange.116
Many of these
citizens will be insured for the first time and will need assistance accessing health care providers
in ways other than going to the local hospital emergency room.
The impact of greater coverage is not yet clear, but there can be no reasonable doubt that
it will create significant changes in health delivery even in non-Medicaid expansion states.
There is concern that the ACA may put additional pressure on the limited supplies of doctors,
particularly primary care providers. This, in turn, may put pressure on state licensing agencies to
expand the scope of practice of mid-level providers such as nurse-practitioners and physicians
assistants.
The ACA is silent on the issue of professional licensing, which remains a matter of state
regulation where most attorneys general play an agency representation role.117
The increase of federal money into health care will attract new providers emboldened to
create new delivery structures. It is likely that expansion will reduce the amount of
uncompensated or charity care provided by hospitals. The staff of all attorneys general should
monitor these changes as they have the potential to impact on differing divisions with an office.
114
David Muhlestein, Health Affairs Blog, Continued Growth Of Public And Private Accountable Care
Organizations (Feb. 19, 2013), http://healthaffairs.org/blog/2013/02/19/continued-growth-of-public-and-private-
accountable-care-organizations/ (last visited May 7, 2013).
115 Id.
116 Centers for Medicare & Medicaid Serv., National Health Expenditure Projections 2011-2021, (Jun. 6, 2012)
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf.
117 Ark. Code Ann. § 17-95-303(3) (2010), Cal. Bus. & Prof. Code § 202.5 (2010), R.I. Gen. Laws § 5-37-1.4(2)
(2010), Mass. Gen. Laws. ch. 13, § 10 (2011), Vt. Stat. Ann. tit. 26, §1351(c)(1) (2011). Ind. Code § 25-1-7 (2010)
available at http://www.in.gov/pla/files/Microsoft_Word_-_Medical_Licensing_Board.2010.pdf.
28
A) Medicaid
Section 2001 of the ACA required all states to expand Medicaid coverage and that failure
to do so would result in loss of all federal funds supporting the entire state Medicaid program.
This mandatory expansion provision was determined by the Supreme Court to be
unconstitutional.118
HHS has determined that the Court’s ruling does not affect other provisions
regarding Medicaid expansion in the ACA.119
Although the federal funding remains available,
state governments are responding in a variety of ways to expansion.120
Those states that do expand Medicaid are required by 2014 to deem eligible for Medicaid
coverage adults under the age of 65 with incomes up to 138 percent of the federal poverty level
($15,856 for an individual and $31,321 for a family of four at 2013 levels), thus greatly
expanding the pool of Medicaid beneficiaries.121
If the expansion were fully implemented, it is estimated that an additional 16 million
citizens would join the 50 million Americans currently on Medicaid.
In addition, in 2014, the ACA mandated Medicaid income eligibility for children 6 to 19
years of age increases from 100 percent to 138 percent of the federal poverty level. Finally,
from 2014 to 2016, the federal matching share paid to cover the cost of state Medicaid (FMAP)
to states will be 100 percent of the cost of covering newly eligible individuals; thus states will
receive significant additional funding for incremental expansion of their Medicaid population.122
FMAP percentages to states will decline after 2016 and all states will be required to pay 10
percent of costs of those newly eligible, a much higher federal match than the current
program.123
118
National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012), available at
http://www.law.columbia.edu/null?&exclusive=filemgr.download&file_id=621772&rtcontentdisposition=filename
%3DSupreme%20Court%20Ruling.pdf.
119 See Letter from Cindy Mann, Director, Centers for Medicare & Medicaid Services, to Mary Mayhew,
Commissioner, Maine Dep’t of Health and Human Services (May 24, 2013) (on file with author), available at
http://www.maine.gov/tools/whatsnew/attach.php?id=531948&an=1;Letter from Kathleen Sebelius, Secretary, U.S.
Dep’t of Health & Human Serv., to Paul LePage, Governor, Maine (Apr. 30, 2013) (on file with author), available
at
http://www.law.columbia.edu/null?&exclusive=filemgr.download&file_id=612683&rtcontentdisposition=filename
%3DSecretary%20Sebelius%20Response%20Letter%20to%20Governor%20LePage%20re%20Medicaid%2004301
3....pdf ; Maintenance of efforts requirement http://www.maine.gov/dhhs/Maine-SPA-Disapproval-12-010.pdf.
120 Where the States Stand, The Advisory Board Company,
http://dl.ebmcdn.net/~advisoryboard/infographics/Where-the-States-Stand65/story.html (last visited May 7, 2013).
121 § 2001, 124 Stat. 271 – 272; Dep’t of Health & Human Serv., Off. Of the Ass’t Sec’y for Plan. & Evaluation,
2013 Poverty Guidelines http://aspe.hhs.gov/poverty/13poverty.cfm (last visited May 31, 2013).
122 § 2001, 124 Stat. 272 - 273.
123 Id.
29
Under the ACA’s requirements, states would expand Medicaid eligibility further through
the filing of a new state plan amendment. In addition, eligibility rules for both Medicaid and the
Children’s Health Insurance Program (CHIP) will become simple income-based rules, and new
systems will be required by CMS to make the processing of applications easier, more
standardized, and coordinated with the exchange.124
Attorneys general should be aware of the fiscal consequences of the decision whether or
not to expand eligibility as provided for in the ACA.125
This is an area where HHS is developing
differing accommodations with various states and the situation is changing daily.126
The coordination challenges between the exchanges and the expansion are significant. A
majority of states have opted to expand Medicaid and some additional states are pursuing
alternative arrangements with HHS.127
Because these matters are generally overseen by different
sections of an attorney general office, it is particularly important for senior staff to coordinate the
legal advice given to state agencies and the public.
B) Medicaid Expansion
Medicaid expansion in each state is optional, but given the current incentive presented by
the ACA, a majority of states are taking part.128
The primary responsibility for the administration of each state’s Medicaid program
resides with the state Medicaid director and the state agency responsible for the Medicaid
program.129
Medicaid directors will need to rely on their counsel, who are often assistant
attorneys general, in managing the expansion and the resulting changes and requests for waivers
and in appearing in any defensive litigation arising from agency decisions.
Attorneys general should work closely with their state Medicaid agency to ensure the
state plan amendment specifics meet the federal requirements to maximize coverage and draw
down federal funds. They are also in the position to encourage public support for the expansion
124
§ 2002, 124 Stat. 279 - 282.
125 Supra text accompanying note 2.
126 See Where the States Stand, supra note 120.
127 See David Ramsey, UPDATE: Medicaid Game-Changer, Arkansas Times (Feb. 26, 2013)
http://www.arktimes.com/ArkansasBlog/archives/2013/02/26/medicaid-game-changer-feds-approve-putting-entire-
expansion-population-on-exchange for a news article discussing Governor Beebe’s efforts to provide private health
insurance for newly eligible.
128See Where the States Stand, supra note 120.
129 National Association of Medicaid Directors, http://medicaiddirectors.org/ (last visited Jun. 4, 2013).
30
either directly or through advocacy groups. It is a priority that attorneys general work with the
state Medicaid agency to ensure seamless transition within expanded coverage provisions.
Attorneys general who provide counsel to Medicaid directors will want to understand the
fiscal and programmatic implications of the Medicaid expansion in their state. For example, the
ACA provides that states may not reduce Medicaid eligibility below pre-ACA levels, although
there are exceptions being granted through agreements with HHS.130
Attorneys general should
be familiar these waivers and the standards that HHS is using to grant them as they will have
significant impact on state budgets.131
They also will need to understand the fiscal impact of
additional federal dollars flowing to their states as the number of uninsured individuals who
become eligible for Medicaid under the Act grows.
Significant overhaul of state computer eligibility systems is required by the Act to meet
its simplification goals and to coordinate with exchanges. Issues may arise around procurement
and the timeliness of these changes.
Exchanges:
Exchanges are required to be accessible to Medicaid recipients. Both the nature of the
Medicaid population and the expansion of those eligible in many states, makes assuring that the
exchanges work for a diverse Medicaid population, a significant challenge. Outreach that is
being funded by the federal government to these communities is being taken in states that are
dedicated to implementing the ACA. These efforts should be monitored as outside vendors
unfamiliar with state practices may be taking the lead.132
Coordination among assistant attorneys general assigned to different agencies has the
potential to cut through administrative road blocks that always in times of great change.
Defensive Issues:
Defensively, attorneys general are likely to be required to defend against federal or
advocacy group action if either seeks penalties or give-backs from the states for errors or
violations of the ACA Medicaid requirements or exchange shortcomings, should that occur. It is
130
Supra note 119.
131 See § 1331, 124 Stat. 199-203; § 1332, 124 Stat. 203-206
132 See Nicole Lewis, Minnesota Taps IBM For Health Insurance Exchange, Information Week (Jul. 20, 2012),
http://www.informationweek.com/healthcare/admin-systems/minnesota-taps-ibm-for-health-insurance/240004532;
Business Wire, MAXIMUS to Operate Maryland's Health Benefit Exchange Services and Command Center
Operations, Daily Finance (Jun. 14, 2013), http://www.dailyfinance.com/2013/06/14/maximus-to-operate-
marylands-health-benefit-exchan/; Amanda White, States Running Out of Time on Health Insurance Exchanges,
Wash. Post (Jun. 17, 2013) http://www.washingtonpost.com/business/capitalbusiness/states-running-out-of-time-on-
health-insurance-exchanges/2013/06/14/2c8e5158-d203-11e2-8cbe-1bcbee06f8f8_story.html for news articles
discussing secured vendors contracting with states to run health insurance exchanges.
31
important for key staff to understand the Act’s requirements and the anticipated challenges a
state may face as the Medicaid expansion issues are considered.
C) Medicaid Fraud
There is no question that Medicaid expansion will result in opportunities for fraudulent
behavior.
Attorneys general each have a Medicaid Fraud Units (MFU) that is primarily responsible
for the detection, investigation and prosecution of Medicaid Fraud.133
By federal law, these units
are organized separately from the offices of Medicaid Directors. Because of their funding, they
are often separate from the ordinary organizational overview of senior attorney general staff.
To meet the demand caused by the growth in Medicaid, the ACA provides for increase
Medicaid fraud tools and funding to combat potential violations.134
This increased funding is of
immediate budgetary importance to attorneys general.
It is essential that Medicaid Fraud units be familiar with the new ACA rules and the new
Medicaid payment suspension provisions in the ACA. They should also be cognizant of
provisions requiring improved technology to help fight fraud, enhanced screening and other
enrollment requirements for Medicaid providers and suppliers, provisions for improved
coordination for fraud prevention efforts, the sharing of data to fight fraud and the ability to
obtain tools to target high-risk entities. 135
VI. Areas of Responsibility for Attorneys General
A) Consumer Protection
Consumer protection by attorneys general relies on the combination of prosecution and
education in order to assure that unfair and deceptive practices do not occur in the marketplace.
These efforts, often bolstered by the existence of a private right of action, are marked by state
court jurisdiction granted under state Unfair and Deceptive Practices Acts (UDAP) and are
designed to punish the transgressor and to generate both penalties and reimbursement for
consumers.
133
National Association of Medicaid Fraud Control Units, http://www.namfcu.net/ (last visited Jun. 10, 2013).
134 § 6401, 124 Stat. 753; State Medicaid Fraud Control Units; Data Mining, 78 Fed. Reg. 29055 (May 17, 2013) (to
be codified at 42 CFR Part 1007) available at http://oig.hhs.gov/fraud/medicaid-fraud-control-units-
mfcu/regulations_statutes/fr-2013-11735.pdf.
135 See § 1411(h) 124 Stat. 230-231; § 6402, 124 Stat. 753-763; § 6403, 124 Stat. 765; § 6604, 124 Stat. 780; and §
10606 stat 1006-1008.
32
Health care, even prior to the enactment of the ACA, has been an area ripe for consumer
protection. This jurisdiction has created a proud culture of success and substantial attention for
state attorneys general. In the last thirty years, attorneys general have investigated numerous
allegations of fraud in the delivery of health care and been engaged is significant consumer
education efforts.
The entire face of consumer protection is changing as technology and an integrated
national economy has proven a double-edged sword by empowering both consumers and those
who would commit fraud.
Although much has changed, some things do not.
Years of consumer protection experience make clear that consumer fraud is most likely to
increase when an industry undergoes significant change that attracts new entrants, large amounts
of money, vulnerable populations and low or fractured regulation.
All of these indices exist now in health care.
All state attorneys general have significant responsibilities for consumer protection. New
entrants in an increasingly depersonalized delivery environment guarantees that illegal consumer
practices will increase. Attorney general consumer protection authority is not changed by the
ACA, but the changes in the health care delivery system and the ACA accentuates those
responsibilities.136
1) Patient Privacy - HIPAA Compliance
State attorneys general are mentioned in the ACA only to give attorneys general the
express authority to enforce the federal patient privacy statute Health Insurance Portability and
Accountability Act of 1996 (HIPAA).137
Other than granting this authority, the ACA does not change anything in HIPAA that
protects the privacy of health records.138
State attorneys general are already using their new
enforcement authority under HIPAA in conjuncture with state laws already available to them.139
136
See Pennsylvania Attorney General, Health Care Section,
http://www.attorneygeneral.gov/consumers.aspx?id=395 (last visited Jun. 18, 2013); Illinois Attorney General,
Protecting Consumers, http://www.illinoisattorneygeneral.gov/consumers/healthcare.html (last visited Jun. 18, 2013)
to see examples of the broad nature of consumer protection oversight in states.
137 § 13410(e), 123 Stat. 274 – 275.
138 § 13410(e), 123 Stat. 274 – 275.
139 Press Release, Conn. Att’y Gen. Off., Attorney General Announces Health Net Settlement Involving Massive
Security Breach Compromising Private Medical and Financial Info (July 6, 2010) (on file with author) available at
http://www.ct.gov/ag/cwp/view.asp?A=2341&Q=462754; Press Release, Mass. Att’y Gen. Off., South Shore
Hospital to Pay $750,000 to Settle Data Breach Allegations (May 26, 2010) (on file with author), available at
33
Under the newly adopted Health Information Technology for Economic and Clinical
Health Act (HITECH), HHS will now pursue audits of covered entities for HIPAA violations,
and fines, penalties and reporting requirements are much more stringent.140
ACA exchanges must comply with HIPAA privacy protection rules. In addition some
states have passed new legislation that mirrors HIPAA or goes beyond to provide stricter
requirements for covered entities and it is in this area where attorneys general are already
receiving requests and filing enforcement actions.141
Exchange staff will be handling protected health information, especially because the
exchange must have a single web portal and application to determine eligibility, and then will
enroll an individual or small business into a QHP. There will also be multiple data transmissions
of projected health information. The relationship between exchanges and HIPAA is one that
could be subject to requests for a formal attorney general Opinions.
2) Insurance
Attorneys general can make a significant contribution by sharing their consumer
protection expertise with state Insurance Commissioners as they set up the state process for
insurers to disclose premium costs and rate increases, and then support their commissioners to
ensure that health insurers are meeting all regulatory requirements.
Attorneys general may also seek to weigh in publicly in cases where a rate increase
appears unjustified or exceptionally large, or may consider using their consumer protection
jurisdiction to determine whether they have the ability to challenge unreasonably high rate
increases on standard consumer protection grounds, particularly if there is evidence of deceptive
http://www.mass.gov/ago/news-and-updates/press-releases/2012/2012-05-24-south-shore-hospital-data-breach-
settlement.html; Press Release, Minn. Att’y Gen. Off., Attorney General Swanson Sues Accretive Health for Patient
Privacy Violations (Jan. 19, 2012) (on file with author), available at
http://www.ag.state.mn.us/Consumer/PressRelease/120119AccretiveHealth.asp; Press Release, Minn. Att’y Gen.
Off., Attorney General Swanson Says Accretive Will Cease Operations in the State of Minnesota Under Settlement
of Federal Lawsuit (July 31, 2012) (on file with author), available at
http://www.ag.state.mn.us/Consumer/PressRelease/07312012AccretiveCeaseOperations.asp; Press Release, Vt.
Att’y Gen. Off., Attorney General Settles Security Breach Allegations Against Health Insurer (Jan. 18, 2011) (on
file with author), available at http://www.atg.state.vt.us/news/attorney-general-settles-security-breach-allegations-
against-health-insurer.php.
140 Health Information Technology for Economic and Clinical Health (HITECH) Act, Title XIII of Division A and
Title IV of Division B of the American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. No. 111-5, §
13410(a), 123 Stat. 115, 271 - 272 (Feb. 17, 2009).
141 In 2012 Texas amended its privacy protections with House Bill 300. The goal of the amendment was to mirror
and expand upon HITECH. Included in that amendment were new responsibilities and powers to the attorney
general including an annual report to be submitted to the legislature containing the number and types of complaints
received by the attorney general and other state agencies and any enforcement actions taken, Tex. Health & Safety
Code Ann. 181.104.
34
business practices.142
State attorneys general also may wish to file comments opposing state
petitions to permit insurers to allocate more of their premium dollars to administrative expenses
and profit than would be permitted by the Medical Loss Ratio as discussed earlier.
Taken together, the consumer divisions of attorney general offices should affirmatively
monitor the insurance reforms that are occurring in their state.
3) Summary of Benefits and Coverage Explanation Requirements
A set of HHS Rules require group health plans and other insurers offering group and
individual health insurance coverage to provide a summary of benefits and coverage explanation
to all applicants, enrollees and policyholders.143
The summary of benefits and coverage
explanation must accurately describe the benefits and coverage being offered under a health plan.
Health plans will be categorized under four levels: Bronze, Silver, Gold, and Platinum
based on “actuarial value.”144
HHS requires new uniform and standard definitions of insurance
coverage and medical terms used in describing the insurance coverage. In addition, health plans
must clearly and accurately describe and give examples of the types of coverage and the cost
associated with that coverage available to a consumer.
The National Association of Insurance Commissioners (NAIC) has drafted a sample and
standard summary of benefits and coverage explanation for health plans to use. The purpose of
the Rule is to give consumers a better, simpler and more standard way of understanding benefits
and coverage, which in turn will allow them to better comparison shop when purchasing health
insurance.145
The Rule applies to individual plans and insured and self-insured group plans
regardless of being grandfathered by the ACA. Sanctions will be imposed if a health plan fails to
create the required summary of benefits and coverage and if the health plan fails to provide the
summary to a consumer in the required time period set by the Rule.
Attorneys general have significant experience in communicating with consumers and
warning and protecting them from a wide variety of “scams.” As the ACA is implemented, there
is no question that the entire area will increase in consumer fraud. Attorneys general should
work with their Insurance Commissioners or independently to ensure that disclosures to
142
Reed Abelson, Health Insurers Raise Some Rates by Double Digits, N. Y. Times (Jan. 5, 2013), available at
http://www.nytimes.com/2013/01/06/business/despite-new-health-law-some-see-sharp-rise-in-premiums.html.
143 § 1001, 124 Stat. 132 - 135; Summary of Benefits and Coverage and the Uniform Glossary, 77 Fed. Reg. 8668
(Feb. 14, 2012) (to be codified at 26 CFR pt. 54 and 602; 29 CFR pt. 2590; 45 CFR pt. 147), available at
http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/pdf/2012-3228.pdf#page=2.
144 Actuarial value is a percentage of total average costs covered under each plan. Bronze is 60%, Silver 70%, Gold
80%, and Platinum is 90% . American Cancer Society, Plan Levels/Standardization of Coverage,
http://www.acscan.org/pdf/healthcare/implementation/background/PlanLevelsStandardizationofCoverage.pdf
145 Summary of Benefits and Coverage and the Uniform Glossary, 77 Fed. Reg. 8668.
35
consumers are accurate, adequate, and understandable to their state’s increasingly diverse
populations in light of state and federal law. This is an area where the “bully pulpit” afforded an
attorney general could have a significant impact in protecting consumers.
4) Wellness Program Issues
Sections 2705(j)-(n) of the Public Health Service Act (PHSA), enacted in section 1201
of the ACA, substantially codify in statute the language of a pre-ACA regulation allowing
insurers to raise or lower their rates by up to 20 percent based on an individual’s compliance
with a “wellness” program.146
That language authorizes insurers to vary rates based on
compliance with a wellness program only if the program “is not a subterfuge for discriminating
based on a health status factor.” It is possible that insurers may establish wellness programs that
are surrogates for health status, thus violating the statute. Attorneys general may wish to seek to
enjoin such programs to the extent they violate state statutes prohibiting unfair or deceptive acts
or practice and, potentially seeking monetary relief on behalf of policyholders who were
surcharged based on wellness programs that are surrogates for health status.
5) Disparities in Coverage Issue
Another potential consumer protection issue stems from provisions in the ACA that
prohibit employers from offering insurance plans to their highly paid executives that they do not
offer to their rank and file employees.147
Prior to the enactment of the ACA, section 105 of the
Internal Revenue Code already prohibited such discrimination by employers offering self-insured
coverage; section 2716 of the PHSA extends this rule so that it also applies to insured coverage.
Attorneys general may wish to work with state Insurance Commissioners to determine if this
activity exists in their state and seek to enforce this section.
6) Low Annual Limits
Insurance commissioners and HHS will be reviewing the practices of insurers who sell
policies with extremely low annual limits who fail to obtain the required waivers for limits below
the federal requirements. Section 2711 of the PHSA, enacted in sec. 1001 of the ACA, prohibits
lifetime limits in health insurance policies effective Sept. 23, 2010, and prohibits annual limits
effective in 2014.148
It permits the Secretary to establish a minimum annual limit that policies
issued before 2014 must provide, and provides that in setting that minimum “the Secretary shall
ensure that access to needed services is made available with a minimal impact on premiums.”
HHS has promulgated a regulation that sets the minimum annual limit at $750,000 for
2011, at $1.25 million for 2012, and at $2 million for 2013, while also providing that these
required minimums may be waived if complying with them “would result in a significant
decrease in access to benefits or a significant increase in premiums.”149
HHS has also
146
§ 1201, 124 Stat. 154 - 160.
147 § 1001, 124 Stat. 135.
148 § 1001, 124 Stat. 131.
149 Patient Protection and Affordable Care Act: Preexisting Condition Exclusions, Lifetime and Annual Limits,
Rescissions, and Patient Protections, 75 Fed. Reg. 37191 (Jun. 28, 2010), available at
36
established a process through guidance pursuant to which any insurer selling a policy with limits
of less than $750,000 may seek a waiver from the $750,000 minimum annual limit established in
the regulation. Most insurers selling policies with extremely low annual limits have applied for
and been granted such waivers. Some insurers selling such policies, however, have not applied
for a waiver, and thus are violating the statute.
As in all matters dealing with insurance, state attorneys general should consider working
with insurance commissioners in seeking to enjoin the sale of such policies.
7) Navigators
The ACA requires that exchanges utilize “navigators” to assist consumers with obtaining
insurance through the exchange. The navigator is intended to be an impartial guide to help
consumers understand their choices and responsibilities. Although the ACA does authorize
agents and brokers to serve as navigators, it does not allow them to be paid by insurance
companies “in connection with the enrollment of any qualified individuals or employees of a
qualified employer in a qualified health plan.”150
Attorneys general may wish to seek injunctions prohibiting paid agents from acting as
navigators or indirectly acting to circumvent this limitation.
Recommendation for Consumer Protection in the area of insurance:
The consumer protection divisions within the offices of attorneys general are uniquely
situated to be a first line of defense for consumers in health fraud. Because consumer divisions
often have “hot lines” and work closely with consumer advocacy groups, they often are the first
to hear about the kind of fast moving scams that occur during times of change. Integrating
consumer divisions into decisions being made about health care delivery and ACA
implementation is an important part of the responsibilities of an attorney general.
Specifically, in order to ensure that state insurance products are sold in compliance with
the law and that the regulations provide protection to the insured in each state, state attorneys
general should work closely with their state Insurance Commissioners during planning and
implementation of the Act.
In particular, attorneys general may seek to ensure that the exchanges are structured to
facilitate competition by, for example, standardizing policies and conducting a competitive
bidding process, and not allowing further entrenchment of carriers that already have dominant
market power.
https://www.federalregister.gov/articles/2010/06/28/2010-15278/patient-protection-and-affordable-care-act-
preexisting-condition-exclusions-lifetime-and-annual.
150 § 1311, 124 Stat. 181.
37
B) Charities and Non-Profit Oversight
Under traditional common law authority, most attorneys general have the responsibility
to supervise not-for-profit entities including those involved in health care delivery. The ACA
includes significant new incentives for mergers and provider collaborations, almost all of which
will involve not-for-profit entities. In many states, the primary responsibility for this review will
continue to fall on state attorneys general.151
The ACA imposes several new obligations on tax exempt non-profit hospitals that
intersect with traditional charitable oversight functions of attorneys general. In some states,
these new obligations may supersede state laws regarding non-profit hospital requirements.
The ACA created the new section 501(r) of the Internal Revenue Code requiring that
non-profit hospitals 1) conduct a community health needs assessment every three years; 2)
establish a financial assistance policy and policy related to emergency medical care with details
about the basis for charges; 3) limit charges for medically necessary care to persons eligible for
assistance pursuant to their hospital’s financial assistance policy and 4) a requirement that
hospitals forego extraordinary collection actions against some individuals who may be eligible
for financial assistance.152
The ACA also expands the charitable oversight functions of attorneys general by
authorizing the creation of new non-profit entities subject to state non-profit laws or an expanded
role and growth of nonprofit health clinics.153
For example, under the ACA, attorneys general
will need to consider charitable oversight over any newly authorized CO-OPs that are intended to
be alternative not-for-profit insurance plans that provide better coordination of care, while
keeping some competition in the marketplace.154
The CO-OPs are created as non-profit entities
and must be majority controlled by consumers.155
As non-profit entities, they are subject to the
attorney general’s oversight and adherence to state law. These CO-OPs may face predatory
pricing practices by competitive for-profit insurance companies within the exchange, which may
require consumer protection activity by attorneys general.
C) Antitrust Authority
151
See National State Attorneys General Charities Law Project,
http://www.law.columbia.edu/center_program/ag/policy/CharitiesProj, for extensive information of the role of
attorneys general vis-à-vis nonprofit organizations,
152 § 9007, 124 Stat. 855-859
153 Sherri Buri McDonald, Nonprofits, Health Clinics See Bigger Roles, The Register-Guard (May 15, 2013),
available at http://www.registerguard.com/rg/news/local/29867006-75/health-care-oregon-clinics-county.html.csp.
154 § 1322, 124 Stat. 187 - 192.
155 Id.
38
Attorneys general have extensive independent antitrust authority under state and federal
statutes. The broad authority of state attorneys general in antitrust operates within the broader
mandate of ACA implementation.156
Federal health authorities in issuing regulations under the
ACA have made clear that antitrust laws remain fully operational in addressing competitive
problems that may be associated with the creation of ACO’s.157
The challenge of balancing market forces and incentives in the ACA to consolidate, while
protecting the public from anticompetitive activity in the market, has fallen to regulators across
the country.158
Institutions or parties who are potentially aggrieved by consolidations and
mergers will seek the attorney general’s intervention even in non-ACA implementation states,
and it is likely that review under state and federal antitrust laws will be necessary.159
Under the provisions of the ACA, the USDOJ and FTC will facilitate the creation of
ACOs by giving providers clear and practical guidance to form a new, innovative and integrated
healthcare delivery model which will be deemed not to violate federal antitrust laws.160
The
USDOJ and the FTC have in effect created “safe harbors” for health consolidation. Although the
Joint Statement does not reference state antitrust laws and state attorneys general, it is clear that
156
On January 6, 2012 the Governor of Kentucky, Steve Beshear, followed the recommendation of Kentucky
Attorney General, Jack Conway, by rejecting a proposed hospital merger that would have created the largest health
service provider in the state. That recommendation was based on a report conducted by the attorney general and
release on December 30, 2011. Press Release, Governor of the Commonwealth of Kentucky, Gov. Beshear’s
Statement Regarding University Hospital’s Revised Merger Proposal (Jan. 6, 2012) (on file with author) available at
http://migration.kentucky.gov/Newsroom/governor/20120109hospmergerstatement.htm; Press Release, Office of the
Attorney General of Kentucky, Statement from Attorney General Jack Conway (Dec. 20, 2011) (on file with author)
available at http://migration.kentucky.gov/Newsroom/ag/hospitalmergerstatement.htm.
157 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed.Reg. 67,802,
67,841 (Nov. 2, 2011) (to be codified at 42 CFR Part 425), available at http://www.gpo.gov/fdsys/pkg/FR-2011-11-
02/pdf/2011-27461.pdf.
158 In particular with respect to the purchase of a large independent practice group by the dominant hospital in his
state, Idaho Attorney General Lawrence Wasden joined the FTC in challenging the transaction in U.S. District
Court. Complaint, FTC v. St. Luke’s Health Systems, No. 12-cv-00560 (D. Idaho Mar. 26, 2013), available at
http://www.ftc.gov/os/caselist/1210069/130312stlukescmpt.pdf; see Molly Gamble, 5 FTC Challenges to Hospital
Mergers: Key Concepts for Today's Antitrust Environment, Becker’s Hospital Review (Apr. 1, 2013),
http://www.beckershospitalreview.com/legal-regulatory-issues/5-ftc-challenges-to-hospital-mergers-key-concepts-
for-todays-antitrust-environment.html.
159 See Mike Dennison, State Not Yet Sold on Blue Cross Merger Plan, Helena Independent Record (Apr. 17, 2013),
http://helenair.com/news/local/state-not-yet-sold-on-blue-cross-merger-plan/article_9723d884-a725-11e2-b139-
001a4bcf887a.html, for a news article concerning a Blue Cross merger plan in Montana.
160 WILLIAM S. BERNSTEIN ET AL., MANATT HEALTH SOLUTIONS, ACCOUNTABLE CARE ORGANIZATIONS IN
CALIFORNIA: PROGRAMMATIC AND LEGAL CONSIDERATIONS 8 (2011), available at
http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/A/PDF%20ACOProgrammaticLegalConsiderat
ions.pdf.
39
these conceptual “safe harbors” are relevant to state antitrust enforcement decisions as each state
assesses the possible anti-competitive effects of specific transactions or activities in their state.161
Their role in enforcing antitrust laws in the formation of ACOs, or in the review of other
healthcare mergers or consolidations, will require greater discussion. It is important that state
antitrust enforcers cooperate closely with other staff within attorney general offices in other
divisions and with state antitrust lawyers in other states in order to assure consistent
implementation.162
D) Criminal Jurisdiction
Some state attorneys general have criminal authority for enforcement of some provisions
of the ACA, particularly those that limit insurance company action in violation of the statute (or
state statutes) or which deceive or mislead consumers. There is also language to help prevent
Medicare and Medicaid fraud.163
If the attorney general possesses broad criminal authority, it is likely there will be
substantial demand for action, based on non-compliance or violation of the state’s criminal laws.
E) Occupational Licensing
Although not directly affected by ACA, occupational licensing and oversight will be
impacted as health delivery changes. An increase in an insured population will result in a greater
demand for certain practitioners, particularly primary care providers.164
Pricing pressures are
resulting in providers increasingly experimenting with delivering care in non-traditional settings
by employees with various professional licensing. Because the boundaries of various health
professions often overlap and because the pressures from third party payors to decrease costs will
increase, friction between licensing boards represented by attorneys general is almost inevitable
and deserves attention by senior attorney general staff within the larger context of each state’s
health care delivery.
161
See id. at 17-18.
162 Complaint, FTC v. St. Luke’s Health System, No. 12-cv-00560-BLW-REB (D. Idaho filed Mar. 26, 2013); Also
employers and payers are collaborating about payment reform…might there be price setting issues ( which I hope
they do but what might be issues/need for oversight?
163 § 6401, 124 Stat. 753.
164 See Deloitte Consulting, The Commonwealth of Kentucky Health Care Workforce Capacity Report (May 2013),
available at
http://healthbenefitexchange.ky.gov/Documents/KY%20Healthcare%20Workforce%20Capacity%20Report%20FIN
AL%205_28_13.pdf for analysis of the shortage of primary care physicians in Kentucky.
40
To promote primary care, included in the ACA are incentives for clinicians to engage in
primary care. Doctors, nurse practitioners, and physician assistants who see Medicare patients
and whose practice is composed of 60% primary care are eligible to receive a 10% payment
bonus.165
The increased consolidation due to market forces and ACO/CO-OP programs could also
affect licensing.
F) Defensive Issues
1) Failure of State to Adopt Required Provisions of Law
The ACA will require significant modifications in many state’s laws and regulations
governing the commercial insurance market. State insurance commissioners and legislators must
work with other state officials to assure that their insurance regulations in the entire individual
and small group markets comply with federal law. An exchange can operate only when those
laws are consistent with the requirements of the ACA.
Although the ACA provides that the federal government will operate the exchange if a
state fails to provide one, the law is silent on failure to adopt other ACA requirements. For
example, what will happen if a state does not adopt required pro-consumer reforms to the private
insurance market? Will the federal government be able to modify state insurance markets when it
operates an exchange? If not, how will state citizens eligible for tax credits under the ACA
access them through a federal exchange? Attorneys general may want to affirmatively ensure
that these issues are on the table while their states debate insurance marketplace reforms and
provide guidance regarding the implications if they are not adopted.
Attorneys general are also likely to be directly involved if their state fails to comply with
the ACA’s requirements to establish an exchange in compliance with the federal requirements.
Under the Act’s provisions, if the exchange is not established, HHS will either operate the
exchange within the state, or allow states to propose a shared model of governance between
states and HHS.166
The details of both processes have not yet been clarified. In the event the
exchange is not established in time, or is not in compliance with the requirements, the attorney
general is likely to be representing the state in defensive litigation.
Little has been written about the impact of state failures to adopt guaranteed issue or
community rating, as required under the ACA. It is reasonable to assume, given the current
climate, that some state legislatures simply will not comply with the law’s requirements and that
the federal government or individual plaintiffs will commence legal action against states for their
failure to comply with federal law. In addition, in some states, it is likely that governors or
insurance commissioners will seek to apply the new requirements through administrative
165
§ 5501(a), 124 STAT. 652-65;4 Example: http://www.fsmb.org/
166 § 1321(c), 124 Stat. 186 - 187.
41
process, and that their power to do so is likely to be challenged. Attorney general staff should be
cognizant of executive action seeking to comply with the ACA that may or may not meet the
state’s own requirements or process.
VII. Conclusion
The ACA is a complex, lengthy statute which includes multiple new provisions that
require state compliance. Although the statute rarely mentions state attorneys general
specifically, there is no question there will be substantial involvement by attorneys general, both
in planning and implementation, over the next several years. This introductory memo is not
intended to be inclusive or complete, but simply provides offices with review of the key areas
that are likely to require greater knowledge and understanding.
For further information, visit our website at www.stateag.org or contact the Health Law Initiative
at the National State Attorneys General Program at Columbia Law School: (212) 851-1061.