Summary of The Fair Care Act of 2019

February 25, 2019
Blog Post

 

The Fair Care Act: H.R. 1332

Section-by-Section Summary

 

TITLE I: Private Sector Health Insurance Reforms

 

Subtitle A—Commercial Health Insurance Provisions

 

Section 101.  Invisible High-Risk Pool Reinsurance Program

 

This section begins implementing a reinsurance program using an invisible high-risk pool approach.  It authorizes to be appropriated to the Department of Health and Human Services $200B over ten years ($20B annually) for establishment of such a program.  States shall participate in a nationwide, federally-operated pool, or choose to receive a block grant composed of an appropriately portioned amount determined by the Secretary to run separate pools.

 

Insurance companies in states that participate in the federal program will designate policies for placement in the pool.  They may place individual policies as well as family policies into the pool, but they cannot separate one individual from a family policy for placement in the pool.  When an insurance company places a policy in the pool, that policy takes on a “high-risk” designation.  Policyholders need not be notified of a high-risk designation.

 

From insurers’ perspective, two features of high-risk plans separate them from the rest.  First, insurers retain only 10% of the monthly premiums paid high-risk policies.  The remaining 90% shall be submitted to the fund sustaining the pool.  In return, insurers are responsible only for the first $10,000 in annual medical costs incurred by individuals on high-risk policies.  Subsequent costs are payable at the Medicare rate, and are reimbursed by the fund sustaining the pool.  For services not covered by Medicare, the Secretary may establish an appropriate dollar amount.

 

In addition to the annual $20B federal investment and the premium dollars from designated policies, funding for the pool will come from a new $4 fee attached to certain insurance policies.

 

Section 102.  Age Band Rating

 

26-year-olds consume one-fifth of the health care, on average, that 64-year-olds consume. As a result, prior to the enactment of the Affordable Care Act, insurers frequently charged younger enrollees one-fifth of what they charged their oldest enrollees. The ACA limited this discount to one-third, rather than one-fifth, effectively doubling premiums for younger Americans. This section restores the 5:1 ratio, reducing premiums for young people. Because this change encourages a healthier risk pool in the individual market, it will also lower premiums for older enrollees.

Section 103.  Employer Mandate

 

Since implementation of the Affordable Care Act, certain employers have been required to provide health insurance as an employee benefit or pay a penalty. This section reduces the penalty imposed on employers who do not provide minimum essential coverage to zero.

 

Section 104.  Employer Reports on Benefits

 

Even without an employer mandate, health insurance will likely remain a common employee benefit.  This section requires employers who provide such a benefit for 100 or more employees to provide certain information to those beneficiaries.  On an annual basis, each beneficiary will be informed of the amount the employer paid for their coverage for that plan year, as well as any previous plan years in which the employer paid for their coverage.

 

Section 105.  Waivers for State Innovation

 

Section 1332 of the Affordable Care Act established a process by which states may apply for waiver of certain ACA requirements. This section increases the flexibility of those waivers.  Specifically, it allows governors to pursue waivers without legislature approval, allows states seeking a waiver approved elsewhere to obtain expedited approval; increases the default length of a waiver from five years to six; and alters the standard for approval of changes related to health coverage and cost sharing from “at least as affordable” to “of comparable affordability.”

 

Section 106.  Flexibility for State-Operated Exchanges

 

Currently, state-operated exchanges must hold open enrollment for insurance plans on an annual basis.  This section allows states, under a waiver, to decrease uncertainty in the marketplace by instead holding open enrollment periods every 24 or 36 months.

 

Section 107.  Enrollment During Certain Periods

 

Currently, insurers may enroll individuals in exchange plans only during established periods—annual open enrollment or special periods arising under certain circumstances.  This section allows insurers to enroll individuals in exchange plans outside of open enrollment periods if they wish, and to charge late enrollment penalties for doing so.

 

Section 108.  Short-Term Limited Duration Insurance

 

This section codifies current regulatory options related to short-term limited duration insurance (STLD) policies.  It enforces a 12-month option for such plans and provides they will remain untouched by Affordable Care Act requirements such as Essential Health Benefits (EHB) coverage and specified enrollment periods.

 

Section 109.  Coverage Across State Lines

 

Though coverage crossing state lines is not currently prohibited, it is often neglected due to challenges associated with contract negotiations and conflicting state laws.  This section authorizes to be appropriated $10 million to the Center for Medicare and Medicaid Innovation (CMMI) to fund grants aimed at increasing competition among insurers in different states.  Applicants must demonstrate plans for “new research or pilot programs dedicated to pursuing viable methods of enrolling individuals in health insurance programs that cross State lines.”

 

Section 110.  Applicability of Antitrust Law

 

Under the Affordable Care Act, certain organizations were exempted from federal antitrust laws, allowing them to engage in anti-competitive practices.  This section reverses that practice, amending the McCarran-Ferguson Act to declare that federal law may not exempt those in the business of health insurance or dental insurance from federal antitrust laws.

 

Section 111.  Federal Employee Health Benefits

 

Millions of federal employees responsible for creating and enforcing federal laws receive health insurance benefits negotiated by the Federal Employee Health Benefits Program (FEHBP).  The Affordable Care Act took eligibility for the program from Members of Congress, instead offering financial assistance only for plans offered on exchanges.  This section expands on the idea that federal employees should experience government-run exchanges, eliminating FEHBP eligibility for most of them. It does not interfere with the federal government contribution to insurance premiums, just requires employees wishing to receive this benefit to engage in the exchanges.

 

Section 112.  Cost Sharing Reductions

 

Reacting to the lack of federal funding for Cost Sharing Reduction (CSR) payments beginning in 2017, insurers have drastically increased the premiums associated with silver-level exchange plans.  This section seeks to stabilize and attract more individuals to the exchanges by first authorizing to be appropriated funding to reinstate CSR payments. Furthermore, it directs the Secretary of Health and Human Services to, beginning in 2022, approve 1332 waiver applications under which applicant states would receive amounts fiscally equivalent to those expected to be distributed through CSRs for in-state patients.  Such funds would be available for the sole purpose of distribution to the Health Savings Accounts of individuals and families with incomes below 250% FPL.

Section 113.  Health Savings Accounts

 

Health Savings Accounts allow pre-tax dollars to be used for certain medically-related costs.  Currently, only policyholders with high-deductible plans qualify to open HSAs.  This section provides all policyholders with exchange plans access to an HSA.  Additionally, it allows HSA funds to pay for premiums on certain insurance plans.

 

Section 114.  Copper Plans on Exchanges

 

Plans currently available on insurance exchanges are placed into tiers.  This section adds to the platinum, gold, silver, and bronze tier options a new “copper” tier.  Copper-level plans will have an actuarial value of 50% and will be exempt from annual out-of-pocket limitations.

 

Section 115.  FEHBP Eligibility for Annuitants

 

The Federal Employee Health Benefits Plan currently provides coverage for annuitants without regard for the alternative options available to those individuals. This section eliminates such eligibility for those who qualify for Medicare.

 

Subtitle B—Association Health Plans

 

This subtitle codifies current regulations allowing the formation of associations for purchasing health insurance.  These associations may be composed of organizations from different industries and shall have the freedom to cross state lines.

 

Subtitle C—Tax-Related Provisions

 

Section 131. Age-Adjusted Premium Assistance

 

Under current law, premium assistance for purchasing exchange plans is based solely on income.  This section adjusts premium assistance to incorporate recipients’ age, implementing a transitional schedule of tax credits that are both means-tested and age-adjusted (see below).

 

 

 

Up to Age 29

 

Age 30-39

 

Age 40-49

 

Age 50-59

 

Over Age 59

               

Initial %

Final %

Initial %

Final %

Initial %

Final %

Initial %

Final %

Initial %

Final %

Up to 100%

0

0

0

0

0

0

0

0

0

0

100%-133%

2

2

2

2

2

2

2

2

2

2

133%-150%

3

4

3

4

3

4

3

4

3

4

150%-200%

4

4.3

4

5.3

4

6.3

4

7.3

4

8.3

200%-250%

4.3

4.3

5.3

5.9

6.3

8.05

7.3

9

8.3

10

250%-300%

4.3

4.3

5.9

5.9

8.05

8.35

9

10.5

10

11.5

300%-400%

4.3

4.3

5.9

5.9

8.35

8.35

10.5

10.5

11.5

11.5

Section 132.  Repeal of the Health Insurance Tax

 

The Affordable Care Act imposed an annual fee on certain health insurance providers, sometimes referred to as the health insurance tax (HIT).  This section repeals that fee.

 

Section 133.  Repeal of the Medical Device Excise Tax

 

The Affordable Care Act imposed an excise tax on the sale of certain medical devices.  This section repeals that tax.

 

Section 134.  Repeal of the Tax on Employee Health Insurance Premiums, Plan Benefits

 

The Affordable Care Act imposed an excise tax on high cost employer-sponsored health care coverage, sometimes referred to as Cadillac plans.  This section repeals that tax.  It also establishes a standard tax deduction for employer-sponsored health insurance of up to $10,200 for individual coverage or $27,500 for family coverage.

 

Section 135.  Repeal of the Tax on Over-the-Counter Medications

 

The Affordable Care Act excluded over-the-counter medications from the definition of qualified expenses for purposes of HSA spending.  This section allows pretax dollars to pay for certain health-related products by qualifying them as medical expenses for such purposes.

 

Section 136.  Repeal of Limitations on Contributions to Flexible Spending Accounts

 

The Affordable Care Act limited the amount an employer or individual could contribute to a health care Flexible Spending Account.  This section fully repeals that limitation.

 

Section 137.  Repeal Elimination of Deduction for Expenses Allocable to Federal Subsidies

 

The Affordable Care Act eliminated the previously-existing ability of employers to deduct from their taxes certain amounts contributed toward prescription drug coverage for retirees.  This section reverses that elimination, reinstating the business-expense deduction for retiree prescription drug costs without reductions due to federal subsidies.

 

Section 138.  Repeal of Net Investment Tax

 

The Affordable Care Act imposed a tax on certain net investment income of individuals, estates, and trusts.  It is sometimes referred to as the Unearned Income Medicare Contribution Surtax.  This section repeals that tax.

Section 139.  Basis for Purposes of Determining Gain or Loss

 

This section eliminates uncertainties surrounding the definition of “cost basis” for the purpose of capital gains by creating clear statutory authority for the Treasury Secretary to write such a definition, inclusive of the effects of inflation.

 

Section 140.  Deduction for Qualified Charity Care

 

This section creates a new tax deduction that may be utilized by primary care physicians who provide certain medical services free of charge.  The deduction shall be a predetermined amount, in most cases equivalent to amounts payable under Medicare’s physician fee schedule.  It shall apply when the services were provided to an individual enrolled in Medicaid or CHIP.

 

Section 141.  Limitation on Liability for Volunteer Health Care Professionals

 

To further protect those who volunteer their time and resources to provide medical services, this section limits the ability of individuals to sue physicians for certain actions that occur while providing charity care.

 

TITLE II: Medicare, Medicaid, and Miscellaneous Reforms

 

Subtitle A—Medicaid Reforms

 

Section 201. State Option to Block Grant Medicaid

 

Give states the option to receive a block grant for coverage of their Medicaid population. Those that do not choose this option may continue operating their current program.  States that choose this option will have flexibility to determine who qualifies for Medicaid in their state.  Choosing this option will also initiate exchange plan and federal premium subsidy eligibility for the population in that state between 60%-100% FPL (see Section 204).

 

Section 202.  Medicaid Eligibility Determinations

 

Each year, states are responsible for reviewing their Medicaid population to determine who should remain in the program.  Currently, Medicaid conducts such activity.  This section provides states with flexibility to hire outside contractors for Medicaid redeterminations.

 

Section 203.  Lowering Safe Harbor Threshold with Respect to State Taxes on Providers

 

Taxes on health care providers are common sources of state Medicaid funding.  But states may only use provider taxes to pay for the state share of Medicaid under specific conditions.  One such rule provides that states generally cannot hold providers harmless for the burden of the tax (i.e., guarantee the provider will receive money back through another avenue).  Exceptions are made where the tax collected does not exceed 6 percent of net patient revenues.  This section transitions from the 6 percent rule, decreasing for the next 25 years until no safe harbor exists.

 

Section 204.  Eligibility for Premium Subsidies

 

In states that have elected the option presented in Section 201 above, individuals with incomes between 60%-100% FPL shall be eligible for premium subsidies from the federal government.

 

Subtitle B—Medicare Reforms

 

Section 221.  Reimbursement Rates for Site Neutral Services

 

Currently, Medicare Parts A and B publish separate lists of payment rates.  Medicare Part A traditionally covers inpatient hospital care and Medicare Part B traditionally covers outpatient services. But overlap between services provided in these settings is increasing.  This section establishes equivalent reimbursement rates for substantially similar services.

 

Section 222.  Elimination of Medicare Eligibility for Certain Individuals

 

Elderly individuals are not required to obtain their health care coverage from Medicare.  This section introduces the concept that wealthy individuals who do not need Medicare assistance should not automatically qualify for the benefit simply based on age.  It does not affect Medicare Part A, as individuals contribute to that fund throughout their lives.  It does alter Parts B & D and Medigap eligibility for those whose lifetime reported earnings exceed $5 million.

 

Section 223.  Reduction in Medicare Coverage of Bad Debt

 

Currently, Medicare will cover allowable bad debt incurred by institutions at a rate that is reduced by 35 percent—yielding 65 percent coverage.  This section increases the reduction rate by 10 percent per year for the next four years, lowering allowable bad debt to just 25 percent.

 

Subtitle C—Medical Malpractice Reform

 

Direct and indirect costs associated with medical malpractice lawsuits are out of control.  This section enacts provisions affecting health care lawsuits in which the care at issue was provided or subsidized by the federal government.  It preempts state laws governing health care lawsuits in the areas of statutes of limitation, joint and several liability, product liability, and contingency fees to encourage speedy resolution of claims and reduce the cost of malpractice insurance.

TITLE III: Prescription Drug Competition

 

Subtitle A—Eliminating Delays of Generic Drugs and Biosimilar Products

 

This section creates a new path for generic and biosimilar drug developers to obtain injunctive relief during the development process.  Specifically, it allows them to bring lawsuits against brand manufacturers blocking access to sufficient quantities of reference samples, and it eliminates a requirement that risk mitigation systems be identical to their branded counterparts.

 

Subtitle B—Increasing Access to Drugs and Biosimilar Products

 

Section 311.  Abbreviated Approval Process for Generic Complex Drug Products

 

Developers of certain generic drug products that do not clearly fit the definition of a drug or device, or that operate as a combination product, sometimes struggle to obtain approval.  This section gives the Secretary of Health and Human Services authority to develop and apply efficient and flexible approaches to expedite the development of such products.

 

Section 312.  Increasing Pharmaceutical Options to Treat “Under-met” Medical Needs

 

Currently, when a disease or condition cannot be treated with existing products (there is an unmet need), FDA can fast-track the approval process for new drugs with potential to meet the need.  To increase the speed at which additional products may join the market, this section allows FDA to also use the fast-track process when a disease or condition is currently treatable by only one or two FDA-approved products (there is an “under-met” need).

 

Section 313.  Preemption of State Barriers to the Substitution of Biosimilar Products

 

Instances exist in which a pharmacist could, under FDA guidelines, substitute a more affordable biosimilar in place of a brand name product.  But because nearly half of states do not explicitly allow this, confusing pharmacists, such substitutions do not always occur.  This section provides for such dispensation of biosimilars with FDA designation as interchangeable products.

 

Subtitle C—Limiting Exclusivity Periods Delaying Competition

 

Section 321.  Limiting Exclusivity for Drugs Treating Rare Diseases and Conditions

 

Currently, manufacturers may stack 7-year monopolies for multiple orphan indications on a single drug.  This section bans that practice, limiting it to one 7-year monopoly and a second 3-year monopoly.

Section 322.  Limiting Exclusivity for Biologic Products

 

Currently, market exclusivity can be affected by patent status as well as FDA status.  This section gives new clinical entities 5 years of market exclusivity regardless of patent status.

 

Subtitle D—Congressional Review of Agency Rulemaking

 

This section establishes a requirement that Congress vote on all major actions proposed by FDA—those that would have an economic impact of $100 million or more.  The action shall be approved with a simple majority of both the House and Senate.

 

Subtitle E—Prescription Drug Pricing & Competition

 

Section 341.  Required Medicare Part B Drug Coverage Formulas

 

The Medicare Part B reimbursement structure currently provides that reimbursements are made at Average Sales Price (ASP) +6%, or at 106% of wholesale acquisition cost.  This section gives discretion to the Secretary of Health and Human Services to alter that reimbursement rate.

 

Section 342.  Fees on Pharmacy Benefits Managers

 

Current laws make it difficult for pharmacies to know how much Pharmacy Benefits Managers (PBMs) or insurers will reimburse for prescriptions when they enter into a contract.  Because PBMs have grown so large, pharmacies usually cannot avoid those contracts.  At times, PBMs reimburse below purchase prices, and sometimes take back certain amounts after transactions occur.  This section provides some relief by eliminating the ability of PBMs to, after a clean claim is submitted by a pharmacy, retroactively and unilaterally change payment on that claim.

 

Section 343.  Repeal of Maximum Rebate Amount Provision in the MDRP

 

The Medicaid Drug Rebate Program (MDRP) requires drug manufacturers participating in Medicaid to submit certain product and pricing data and provide rebates to help offset the overall cost of prescription drugs in the Medicaid program. The ACA capped the potential amount of a rebate at 100% of Average Manufacturer Price (AMP).  This section repeals that provision.

 

Section 344.  Ability to Control Manufacturer Contributions to Copays

 

Currently, patients can be tempted to request the brand name of certain prescription drug products because the manufacturer offers to cover their copay.  When this occurs, it does not lower the insurer contribution.  Medicare beneficiaries are prohibited from engaging in such activities, which can be perceived as unfair.  This section gives the Secretary of Health and Human Services authority to regulate and/or prohibit contributions of pharmaceutical manufacturers to patient copays via discount cards or otherwise.

 

Sections 345-346.  Transparency in 340B

 

The 340B drug program allows certain hospitals to purchase prescription drugs at discounted prices and use those savings for services that benefit patients.  This section enacts some minor reforms to the 340B drug discount program that focus on transparency. It requires participating entities to report to the Secretary the low-income utilization rates of specific outpatient hospital services and provides for a subsequent OIG/Comptroller General report based on the data.

 

TITLE IV: Provider Competition

 

Section 401. Action to Address Hospital Consolidation

 

This section provides grants to states that take specific actions to improve hospital competition, including eliminating Certificate of Need, Scope of Practice, and Any Willing Provider laws.  These grants may be used for infrastructure improvements to state hospitals and/or as supplemental funding for hospital programs.

 

To address the need for hospitals to compete instead of consolidate, this section reduces incentives for hospital mergers.  It does so by requiring hospitals covering a significant population to accept Medicare reimbursement rates from commercial payers.  Hospitals with less than 15% market share are exempt to protect hospitals in rural areas.

 

Section 402.  Hospital Price Transparency

 

This section requires hospitals to publish, in a standardized digital format, volume-weighted average prices for their 100 most common services.

 

Section 403.  Repeal of Incentives from Medicare Shared Savings Program

 

This section repeals incentives to form Accountable Care Organizations that encourage consolidation among providers.

Section 404.  Repeal of Prohibition on Establishment of New Physician-Owned Hospitals

 

This section repeals provisions of the Affordable Care Act preventing the establishment of new physician-owned hospitals.

 

Section 405.  Funding for Federal Trade Commission Antitrust Activities

 

This section authorizes a 400% increase in Federal Trade Commission (FTC) funding for the exclusive purpose of increasing the size of its antitrust staff investigating hospital consolidation.

 

Section 406.  Authority of the Federal Trade Commission

 

This section provides FTC jurisdiction for certain tax-exempt organizations, allowing them to evaluate the actions of nonprofit hospitals.

 

TITLE V: Digital Health Care

 

Section 501.  Patient Data Ownership

 

This section establishes patient ownership of all diagnostic tests and objective clinical measurements conducted on their behalf.

 

Section 502.  Medicare Reimbursement in Telehealth

 

This section expands Medicare coverage of telehealth services by eliminating geographic and setting requirements currently associated with reimbursement for telehealth services.

 

Section 503.  Application of Stark Law to Certain Payment Actions

 

This section allows the Secretary of Health and Human Services to exempt from federal anti-kickback and Stark laws value-based purchasing arrangements, alternative payment models, and technologies that assist providers in maintaining and analyzing electronic health records and assist in the transfer of electronic health information.

 

Section 504.  Penalties for Certain Violations of Stark Law

 

This section creates a new provision under Stark Law establishing modest penalties for technical noncompliance with the law (as opposed to intentional and egregious violations).

Issues: