By John Reichard, CQ HealthBeat Editor

May 29, 2014 -- New research on the early consumer experience with the health law's insurance exchanges sends a mixed message about the new marketplaces. Many buyers are pleased with their new coverage but concerns about coverage costs are keeping many of the uninsured from opting in.

However, the research also suggests at least the possibility that once their gaps in knowledge about the health law are filled, more uninsured people, especially younger ones, could sign up for coverage in 2015.

Two surveys looked into the insurance buying experience. One was released last week by Enroll America, a nonprofit formed to boost enrollment under the health law (PL 111-148, PL 111-152). The other was released by the Deloitte Center for Health Solutions, a consulting firm.

The Enroll America survey found that 41 percent were either very happy (20 percent) or somewhat happy (21 percent) with their new coverage. By comparison, 11 percent were either somewhat unhappy (7 percent) or very unhappy (4 percent). About half either had no particular reaction to their new coverage or said it was too soon to tell.

Funded by the Robert Wood Johnson Foundation and the California Endowment, the poll surveyed 671 newly enrolled individuals and 853 who remained uninsured. It was conducted by the PerryUndem research firm from April 10 to April 28.

Asked what best describes what it feels like to have health insurance, 47 percent said "relieved" while 12 percent said "financially stressed."

The survey also found that 74 percent of those who had signed up for a private plan were either very confident (40 percent) or somewhat confident (34 percent) that they would be able to afford their insurance premiums each month.

Of those who had enrolled in a private plan or in Medicaid, 56 percent said they felt they would have enough "doctors and providers" to pick from while 13 percent said no. Thirty-eight percent said they had tried to see a doctor with their new insurance. Thirty six percent said they had tried to get prescriptions filled.

Asked if they experienced problems with their new insurance, 9 percent said yes. Forty-two percent said no, and 49 percent said they hadn't tried to use their benefits.

Cathy Hope of the Georgetown University Center for Children and Families noted that only half of the Medicaid enrollees surveyed thought they would qualify for the program when they began looking for coverage. Since Medicaid costs little or nothing out of pocket, that suggests a significant number of people who thinks coverage is unaffordable might decide otherwise if they learn they qualify for the entitlement program.

"The survey also reaffirmed what children's health care advocates know, securing coverage for family members is a major motivating factor for those signing up for coverage," she added. "Also, mothers played an important role in young adult enrollment with 19 percent of those between ages 18 and 29 saying mom 'helped them enroll.'"

Deloitte, which said its survey was self-funded, focused specifically on the so-called young invincibles. All of the participants were uninsured when open enrollment began Oct. 1 under the health law. About half of them then obtained coverage.

Deloitte said it polled 500 randomly selected young adults of ages 19-34, 253 uninsured and 247 newly insured. Of the newly insured group, 111 got coverage on exchanges, 50 through Medicaid and 86 through other insurance. The survey took place from April 9 through April 23.

Among those who remained uninsured, 66 percent said they couldn't afford it and 46 percent said they do not see its value. The young adults who went on to get coverage saw it value, with 67 percent saying they got it for greater future protection against medical bills and 60 percent to have peace of mind they would have access to coverage when they need it.

Those polled "don't know what they don't know," a Deloitte summary stated. "There is still a lack of awareness around elements of the Affordable Care Act intended to make coverage more affordable." Seven out of 10 knew about insurance exchanges, the mandate that they must have coverage and the March 31 deadline to sign up.

But 47 percent were unaware that some state Medicaid programs now let in more people to get coverage, 45 percent that low income Americans can get subsidies to buy coverage, and 40 percent that young adults can stay on their parents' coverage until age 26.

By John Reichard, CQ HealthBeat Editor

May 28, 2014 -- Employers who have been giving their workers a lump sum of pre-tax money to buy health coverage won't be able to do so without facing stiff penalties because of the health care law, the Internal Revenue Service (IRS) has stated in recent days.

To avoid the penalties, employers can stop paying for health care or keep making the payments on a taxable basis. That option would result in companies and workers both facing higher tax payments.

Some consultants say the IRS could have resolved the matter differently, by permitting workers to use the tax-free employer contributions to buy individual coverage on the health law's insurance exchanges. That would have slowed what they say is an accelerating trend toward small employers dropping coverage.

A change in presidential administrations could overturn the current policy, they add.

Some small employers trying to help workers with medical expenses offer an insurance plan while others offer a sum of money intended to help workers pay their premiums.

The IRS policy is found in a May 13 question-and-answer document stating employers face a penalty of $36,500 per employee per year if they continue to make tax-free contributions to help workers buy their own plans.

The IRS document states "these employer payment plans are considered to be group health plans subject to the market reforms" of the health law (PL 111-148, PL 111-152).

The health law bars caps in insurance plans on annual benefit payouts. It also requires plans to provide certain preventive benefits without the enrollee having to pay out of pocket charges.

Because the employer payment plan arrangements don't comply with these requirements, the employers offering them will have to pay stiff penalties, the IRS says.

The tax collection agency's stance means that "an employee cannot purchase an insurance policy sold in the individual health insurance market with non-taxable contributions, period, exclamation point," says Christopher Condeluci, a former tax counsel at the Senate Finance Committee.

Condeluci, now a lawyer with the Venable LLP law firm, says the payment arrangements violate the annual limit prohibition because they are viewed as imposing a cap up to the cost of the individual market plan an employee purchases. Also, the arrangements "are not integrated with another group health plan that otherwise meets this new requirement."

Condeluci added that it appears certain employee pre-tax contributions can't be used to buy an individual market plan sold outside of the exchanges.

Rick Lindquist, president of Zane Benefits in Park City, Utah, predicted in an interview last week that 60 percent of the small businesses with fewer than 50 workers that provide health insurance will stop doing so within three years. Today, less than half of employers with less than 50 workers are paying at all for health coverage, he said.

Factors fueling that trend, experts say, include rising health costs stemming in part from new health law requirements, as well as the availability of generous federal subsidies for individuals to buy coverage on the exchanges.

But Lindquist, whose firm helps employers reimburse employees for individual health insurance costs, said small employers would jump at the chance to keep paying something for health care if those contributions were considered tax free and their workers could use them on the exchanges.

He predicted "there are going to be riots in the streets" when employees realize that many small employers otherwise willing to provide health care dollars are backing out because of the threat of stiff tax penalties.

"This conversation is just starting," he said. "I think it will be revisited. But, until it does, employers should ensure they design reimbursement arrangements in compliance with the current rules."

Condeluci says he's optimistic about a change "if the politics in Washington, D.C., change after the 2016 elections."

A change may be more likely if Republicans control all three branches of government, he said. But even with a Democratic president, it could occur after the individual insurance market has had time to adjust to the major changes it has undergone because of the health law, he added.

Neil Trautwein, vice president of the National Retail Federation, likens the odds of having Republicans running all branches to winning a trifecta at the race track—a bet he's not willing to make.

Linda Blumberg, an analyst with the left-leaning Urban Institute, doubts that changes permitting such tax-free contributions could be limited on Capitol Hill to small employers. "It's just a matter of do you want to unravel employer sponsored coverage," she said.

Instead of getting covered by the employer, the worker would have to pick a plan on exchanges, no simple matter given the exchange shopping experience so far under the health law, she noted.

Many people would be facing "enormous disruption," she said. Blumberg emphasized that she's not saying the tax treatment of employer contributions won't change some day. But she said if it happens, it's likely to involve a more fundamental examination of how tax incentives are allocated to purchase health care than the issues dealt with in the IRS document.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 27, 2014 -- Texas became the 12th state to win federal approval for a demonstration program to shift low-income elderly or disabled people into managed care.

The demonstration will start on March 1 and continue until Dec. 31, 2018.

The pilot program affects people who qualify for both Medicare and Medicaid. Instead of getting their care through both programs, with Medicare paying first and Medicaid picking up costs such as co-pays and extra services, the patients will be covered by one health plan.

The demonstrations, first announced in 2011, are designed to test whether federal and state officials can save money by better coordinating the care of the so-called dual eligibles.

About 168,000 Texans will be affected by the change, according to the Texas Health and Human Services Commission. That's more than 40 percent of the almost 400,000 people in the state who receive both Medicare and Medicaid.

Federal and state officials hope to save a significant amount of money by using managed care. From March 1 until Dec. 31, 2015, the government expects to save 1.25 percent of the amount it would have otherwise spent on those services over the same period. In 2016, federal and state officials expect to save 2.75 percent. The savings are expected to grow to 3.75 percent of the baseline costs in 2017 and to 5.5 percent in 2018.

"Combining a person's Medicaid and Medicare services into one plan makes sense for the consumer and for the taxpayer," said Chris Traylor, chief deputy commissioner of the Texas Health and Human Services Commission, in a statement. "We'll be able to improve the coordination of care, helping people get the right care in the right setting, and we can save money for both the state and federal governments."

Texas plans to pilot the program in six of the state's most populated counties.

After the demonstrations were announced in 2011, 26 states applied to participate, although a few later dropped out.

The demonstrations are an area where the Obama administration and states are working in a nonpartisan way to test ways that they hope will improve care and save money. A number of states that are led by governors critical of the rest of the administration's health care agenda have asked to be part of the Centers for Medicare and Medicaid Services(CMS) demonstrations.

So far, CMS has approved Texas and 11 other states for three-year projects that either shift patients into managed care plans or coordinate patients' care through managed fee-for-service. Washington state is running both a managed care and managed fee-for-service project. Michigan's approval in April was the most recent demonstration approved before Texas.

By Kerry Young, CQ HealthBeat Associate Editor

May 20, 2014 -- Paying doctors to coordinate the care of their patients seems a likely path to both better health and some cost reductions. But creating the systems needed to support the approach will take time, planning and money, speakers at a conference said last week.

The Alliance for Health Reform briefing focused on the concept of patient-centered medical homes, in which doctors are paid flat fees to spot gaps in patients' care, keep tabs on whether people are getting needed medicines and screenings and prevent unnecessary visits to the emergency room.

"From a very diverse set of stakeholders, there was universal optimism about the medical-home model, and what it can do for patients and quality, but it is not without challenges," said Amy Cheslock, vice president of payment innovation at WellPoint Inc., one of the nation's largest health insurance companies. "It's a substantial transformation. It's an evolution. It's a journey."

A study in the Journal of the American Medical Association raised questions about the potential benefits of the medical home model. Rand Corp. research found few improvements in quality of care and no reductions in hospitalizations, emergency department visits or total costs of care when it compared results from a Pennsylvania medical home project to those from practices not involved in the project.

Doctors involved with the medical-home project, the Pennsylvania Chronic Care Initiative, responded in a HealthAffairs blog.

"We believe that the reaction to this publication has oversimplified our rich and multidimensional experience with medical home transformation," they said.

They noted that blood pressure, cholesterol and blood-sugar control in diabetic patients " far exceeded comparable results from conventional interventions."

"These outcomes simply weren't captured in the study," they wrote in the blog.

WellPoint's Cheslock said that her company has published research in Health Affairs that show positive results connected with medical homes, such as a reduction in emergency room visits. It's to be expected that there will be some mixed signals, though, as doctors and insurance companies work through major changes in the coordination and delivery of care.

"This isn't like a light switch where you turn it on and it is universally better," she said.

The concept of a medical home has been kicked around for decades. The American Academy of Pediatrics introduced the concept of a medical home in 1967. By 2008, the National Committee for Quality Assurance launched its Patient-Centered Medical Homes program, which now involves more than 34,600 medical professionals at 6,800 sites.

The focus is to head off complications from chronic conditions. Patients are more likely to get reminders to get needed medical screening, to be able access the practice by email and get treatment during evenings and weekends.

By Kerry Young, CQ HealthBeat Associate Editor

May 29, 2014 -- Two advocacy groups are seeking federal action against four Florida insurance plans that they say discriminate against people with HIV by making drugs difficult to obtain under the health law.

The National Health Law Program and the AIDS Institute said recently that they filed a complaint with the Office for Civil Rights at the U.S. Department of Health and Human Services (HHS). The groups allege that CoventryOne, Cigna, Humana and Preferred Medical plans are violating the law (PL 111-148, PL 111-152) by structuring their drug coverage to create hurdles to access.

"The companies are going out of their way to discourage people with HIV/AIDS from enrolling in their plans—a blatantly illegal practice," said Wayne Turner, a staff attorney for the National Health Law Program, in a statement.

The groups wants the civil rights office to investigate the plans and require the insurers to alter the design of benefits. In one example cited by the groups, a plan puts all HIV drugs into a category called Tier 5 with more cost sharing, specifically 40 percent co-insurance after a $1,000 deductible. Some medicines require prior authorization. The groups contend that these practices steer people with HIV/AIDS away.

Representatives for the advocacy groups said on a press call that their concern about these drug pricing options go beyond the discrimination that they allege is happening with the Florida plans at this time. Other plans may adopt similar practices to try to control costs if HHS allows these pricing models for HIV drugs to stand, they said.

Attempts to reach CoventryOne and Preferred Medical were not immediately successful. A Humana spokesman said that the company covers all HIV drugs, but may not do so for branded ones when generics are available. The medicines are most often covered in a specialty tier, which is either the 4th tier of 4-tier benefit plans or the 5th tier of 5-tier plans.

Other conditions that tend to covered in the specialty tier are treatments for rheumatoid arthritis, multiple sclerosis, hepatitis B & C, cancer, growth hormone disorders, anemia and osteoporosis, said Tom Noland, a Humana spokesman, in an email.

"Humana offers several plan choices so members can select the one that best meets their needs and budget. Once the out-of-pocket maximum is reached for the year, the plan pays 100 percent of the cost for any drug therapy, including HIV drugs," he wrote.

"For our exchange plans, members using these HIV medications would be responsible for satisfying their pharmacy deductible, and then for any applicable tier 5 co-insurance percentage (32-50 percent, depending on the plan) until their maximum out-of-pocket limit has been reached. At that point the plan would pay 100 percent of any additional costs."

Cigna spokeswoman Karen Eldred said the company's plans include coverage for all medically necessary HIV drugs and follow HHS guidelines.

"Cigna's marketplace exchange plans offer consumers a variety of benefit options so they can pick one that best meets their needs," Eldred said. "There are plans that offer the flexibility of a higher deductible and lower monthly premium and those that have higher premiums and lower cost sharing for greater predictability."

May 30, 2014 -- Bowing to mounting demands by lawmakers, Veterans Affairs Secretary Eric Shinseki has resigned over allegations that VA hospitals falsified waiting lists to conceal excessive patient wait times for health care.

President Barack Obama said he accepted the resignation "with considerable regret" after meeting with Shinseki at the White House. He said Shinseki said he did not want to be a distraction.

"I agree," Obama said. "We don't have time for distractions. We need to fix the problem."

Shinseki has been under fire for weeks over reports that veterans at a Phoenix VA hospital waited months for care and that officially reported wait times were falsified to cover up the delays. An interim report this week by the agency's inspector general found that as many as 1,700 veterans at the Phoenix hospital may not have been put on official waiting lists.

The allegations, along with reports of similar problems at other VA hospitals around the country, have prompted demands for Shinseki's removal. In recent days, high-profile Democrats including Sens. Mark Udall of Colorado, Mark Warner of Virginia and Kay Hagan of North Carolina have joined Republican lawmakers in insisting that Shinseki must go.

Shinseki, a retired four-star general and former Army chief of staff, came to national prominence in 2003, when he told a Senate committee that several hundred thousand more troops than the Bush administration planned to use would be needed for an effective invasion of Iraq.

A veteran of the Vietnam War, Shinseki also was U.S. Army commander in Europe and head of the NATO peacekeeping force in Bosnia-Herzegovina during his 38-year career. He was decorated with two purple hearts and three bronze stars.

"Rick Shineski has served this country with honor for almost 50 years," Obama said, noting that he had "left part of himself on the battlefield."

Obama called Shinseki "a good person who has done exemplary work."

"I regret that he has to resign under these circumstances," the president added.

Shinseki resigned just hours after apologizing to veterans groups and calling the coverups of waiting times a "breach of integrity."

"I was too trusting of some," Shinseki said.

Shinseki will be succeeded for now by Deputy Secretary of Veterans Affairs Sloan D. Gibson.

Gibson was confirmed by the Senate on Feb. 11, following his nomination by Obama. Gibson before then was president and chief executive officer of the United Services Organizations. He is a 1975 graduate of the U.S. Military Academy at West Point and served as an infantry officer in the Army.