This Week: Centers for Medicare and Medicaid Services (CMS) Releases 2017 State Essential Health Benefit Plans... Health Resources and Services Administration (HRSA) Releases Draft Guidance on 340B Drug Program... Internal Revenue Service (IRS) Proposed Rule Mandates Employer Health Plans Offer Hospital and Physician Services

1. Congress

House of Representatives

District Work Period: Aug. 3–Sept. 7


District Work Period: Aug. 5–Sept. 7

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


District Work Period: Aug. 3–Sept. 7


District Work Period: Aug. 5–Sept. 7

2. Administration

Food and Drug Administration (FDA) Releases Draft Guidance on Orphan Drug Development

To assist companies that make drugs intended to treat or prevent rare diseases, the FDA released draft guidance in conducting more efficient and successful development programs.

Specifically, the guidance addresses the important aspects of rare disease drug development, including: adequate description and understanding of the disease’s natural history; adequate understanding of the pathophysiology of the disease and the drug’s proposed mechanism of action; nonclinical pharmacotoxicology considerations to support the proposed clinical investigation or investigations; reliable endpoints and outcome assessment standard of evidence to establish safety and effectiveness; and drug manufacturing considerations during drug development. FDA notes in the draft that all drug sponsors face similar issues in the drug development space, but given the limited medical experience with rare diseases, these challenges are difficult to address in the orphan drug space. FDA will accept public comments on the draft guidance document until Oct. 16, 2015.

Food and Drug Administration (FDA) Draft Guidance on Biosimilar Naming 

FDA released draft guidance on Aug. 27 entitled “Nonproprietary Naming of Biological Products” that proposes to add FDA-designated four-letter suffixes to the names of both biosimilars and the brand biologics they reference.

How biosimilars will be named has been a contentious issue. Proponents of biosimilars, pharmacy benefit managers and insurers want the biosimilar products to have the same nonpropriety name as their branded counterparts. However brand biologic companies say different names are necessary to track safety issues with biosimilars.

The FDA says that while shared nonproprietary names are not appropriate for all biological products, there is a need to clearly identify biological products to improve pharmacovigilance, and to clearly differentiate among biological products that have not been determined to be interchangeable.

The agency is asking for comments on whether interchangeable biosimilars should share the same suffix as their reference products or have their own separate suffixes. FDA is also looking for feedback from stakeholders concerning the following scenario: Should the World Health Organization (WHO) adopt a biological qualifier proposal, how should drugs be considered in the determination of FDA-designated proper names. In addition to the draft guidance, the FDA suggested there might be a new rule to rename six biologic products to be in line with the naming scheme outlined in the draft guidance. This would include Sandoz’s filgrastim-sndz, the first approved biosimilar in the U.S.

Health Resources and Services Administration (HRSA) Releases Draft Guidance on 340B Drug Program

HRSA published proposed draft guidance on the 340B drug discount program in the Aug. 28 Federal Register. That program provides drugs to qualified entities at a discount. HRSA stated that the goal of the guidance is to strengthen program integrity while 340B providers could remain able to carry out the intent of the program. In the guidance, HRSA proposes a number of clarifications including the definition of a 340B patient, contract pharmacy arrangements, audit procedures and other provisions.

The proposed guidance follows a Government Accountability Office recommendation to provide a clear patient definition. Under the definition, the number of drugs that would qualify for 340B could decrease because the guidance says patients must be outpatients while receiving care. That means discharge prescriptions provided after an inpatient hospital stay may not be eligible for the 340B program. The guidance also states that the individual will not be considered a patient of the covered entity if the only health care delivered to the individual is the infusion of a drug or the dispensing of a drug. This would reduce inappropriate 340B drug use during referrals, but may hurt community health centers where much of the specialty care is provided on a referral basis. In addition, the guidance stated that the 340B program should not serve as a general pharmacy benefit for 340B providers.

Many stakeholders had disagreed on fines and how to treat entities that had violated the 340B program rules. Under the proposed guidance, a provider that is removed from the program because it failed to retain records could re-enroll in the program during the next regular registration period after the provider demonstrates that it can comply with the program’s requirements. The guidance also proposes a notice and hearing process for 340B providers to respond to audits that could lead to the loss of program eligibility.

The comment period will be open for public comment through Oct. 27, 2015.

Centers for Medicare and Medicaid Services (CMS) Releases 2017 State Essential Health Benefit Plans

On Aug. 28, CMS released essential health benefit (EHB) benchmark plans for all 50 states and the District of Columbia. The list of each state’s required benefits has been compiled to help states and issuers determine which state-required benefits must be included in plan designs. The Affordable Care Act (ACA) requires nongrandfathered health plans in the individual and small group markets to cover essential health benefits (EHB), which include items and services in the following 10 benefit categories: (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. For plan year 2017 and beyond, the EHB benchmark plan is a plan that was sold in 2014.

States’ EHB benchmark plans, plan summaries and prescription drug coverage requirements can be found here.

Centers for Medicare and Medicaid Services (CMS) Solicits More Information from Insurers for Risk Corridors Program

CMS published a Federal Register notice Aug. 27 asking insurers for additional data to help calculate payouts for the Affordable Care Act’s (ACA) insurer risk corridors program. While conducting program integrity reviews of submitted data, CMS identified a number of significant discrepancies in the 2014 benefit year submissions that issuers made for medical loss ratio (MLR) and risk corridors in July 2015. The agency is asking qualified health plans (QHP) that have risk corridor data discrepancies, when compared to other risk-mitigation program sources, to fill out a “Risk Corridor Discrepancy Worksheet” to explain the differences and to provide CMS with supporting documentation.

CMS has also asked the White House Office of Management and Budget (OMB) for authorization to make an emergency alteration to risk corridor collection requirements in order to accelerate the review and payment process. The insurer risk corridors program is one of Obamacare’s three risk mitigation mechanisms, and aims to limit issuers’ earnings or losses and protect both health plans and the federal government against uncertainty in pricing during the first few years of the ACA’s market reforms. CMS intended to release aggregate risk corridor calculations on Aug. 14, but sent out a delay notice to insurers after finding significant inconsistencies in the data.

Centers for Medicare and Medicaid Services (CMS) Announces New Payment Model for Initiative to Improve Care for Nursing Facility Residents

On Aug. 27, CMS announced it is extending for four years its initiative to reduce the number of hospitalizations from nursing homes. The new payment model is available to providers already participating in an initiative to improve care, and it takes effect October 2016. The model funds high-intensity interventions in nursing facilities. The model also includes payments to practitioners, including physicians, nurse practitioners and physician assistants, that are similar to the payments they would receive for treating beneficiaries in a hospital. Practitioners would also receive new payments for “multidisciplinary care planning activities.” The program targets long-term stay nursing home residents who receive Medicare and Medicaid coverage (dual eligible).

Centers for Medicare and Medicaid Services (CMS) Issues Results Showing ACOs Continue to Improve Quality of Care

On Aug. 25, the CMS released 2014 quality and financial performance results for Medicare Accountable Care Organizations (ACOs). Authorized by the Affordable Care Act (ACA), ACOs are groups of doctors, hospitals and other health care providers, who come together voluntarily to provide coordinated care with improved outcomes to the Medicare patients. The 20 ACOs in the Pioneer ACO Model and 333 Medicare Shared Savings Program ACOs generated more than $411 million in total savings in 2014, which includes all ACOs’ savings and losses.

At the same time, 97 ACOs qualified for shared savings payments of more than $422 million by meeting quality standards and their savings threshold. In the third year of operation, Pioneer ACOs showed improvements in 28 of 33 quality measures and experienced average improvements of 3.6 percent across all quality measures. Additionally, Shared Savings Program ACOs that reported quality measures in 2013 and 2014 improved on 27 of 33 quality measures. These results show that ACOs with more experience in the program tend to perform better over time. Since the ACA, more than 420 Medicare ACOs have been established, serving more than 7.8 million Americans with traditional Medicare as of Jan. 1, 2015.

Centers for Medicare and Medicaid Services (CMS) Announces Medicare Advantage Value-Based Insurance Design Model

On Sept. 1, CMS announced that the Medicare Advantage Value-Based Insurance Design Model (MA-VBID) to determine whether giving Medicare Advantage (MA) plans more flexibility to offer targeted extra supplemental benefits or reduced cost sharing to enrollees who have specified chronic conditions can lead to higher-quality and more cost-efficient care. Examples of what could be permitted are the elimination of copays for eye exams for beneficiaries with diabetes or extra tobacco cessation assistance for enrollees with COPD. The value-based insurance design model will focus on Medicare Advantage enrollees with the chronic conditions of diabetes, congestive heart failure, chronic obstructive pulmonary disease (COPD), past stroke, hypertension, coronary artery disease, mood disorders and combinations of these categories. It will begin Jan. 1, 2017, and is authorized for five years. Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania and Tennessee were selected as the areas to test the model. CMS will also hold a webinar introducing the model on Sept. 24, 2015.

Centers for Medicare and Medicaid Services (CMS) Creating Dental Plan Workaround

Because is currently unable to allow an individual to terminate coverage of a qualified dental plan (QDP) without also ending his or her qualified health plan coverage, the Centers for Medicare and Medicaid Services (CMS) is creating a workaround until the system can be fixed. Until the system can permit the terminations to happen separately, CMS is instructing the dental plans to end coverage when requested by the enrollee. Terminations should be included in subsequent reconciliation files. CMS said enrollees can request terminations in three ways: directly through the issuer; through the call center (which will send a ticket to the issuer); or through regional case workers.

Centers for Medicare and Medicaid Services (CMS) Letter: States Can Continue to Use SNAP Eligibility Data to Fast Track Medicaid/CHIP Enrollment

CMS sent a letter to state Medicaid directors on Aug. 31 stating that the agency is making permanent a fast-track enrollment process for Medicaid and the Children’s Health Insurance Program (CHIP) that utilizes income data from the Supplemental Nutrition Assistance Program (SNAP), the federal program that provides food assistance for low-income Americans.

Using SNAP data, states can more easily identify low-income individuals who are eligible but not yet enrolled in Medicaid. Once these individuals give consent and their eligibly is confirmed, they can be enrolled in Medicaid without completing a full Medicaid application or undergoing a separate eligibility determination. The SNAP pathway, which was supposed to conclude at the end of 2015, was first offered in a 2013 letter to Medicaid directors prior to the beginning of the first open enrollment period under Obamacare. CMS expected a potential backlog of program enrollment processing on the state level due to Medicaid expansion.

3. State Activities

Louisiana Department of Insurance to Take Control of ACA Insurance CO-OP

The Louisiana Department of Insurance announced that a court has granted an order of rehabilitation and injunctive relief that permits that state’s Insurance Commissioner, Jim Donelon, to take charge of the Louisiana Health Cooperative (LAHC). LAHC announced in July it would discontinue all policies for 2016’s open enrollment period. Insurance Commissioner Donelon noted that LAHC should still be able to pay claims as promised. “We are convinced that the CO-OP, with the support of (CMS), will have the ability to pay claims owed to health care providers and I am confident that we can more efficiently and successfully wind down affairs in a timely and equitable fashion,” he said. LAHC is a health maintenance organization (HMO) formed under the provisions of the Affordable Care Act as a non-profit health insurance company and was developed using $56 million in Department of Health and Human Services (HHS) loans. Enrollment in LAHC in 2014 was less than half of what it planned — 13,000 at mid-year in 2014 compared with the 28,100 people it projected. By December 2014, those numbers fell 23 percent. The Nevada Health CO-OP announced the shuttering of its business last week, and CoOportunity Health, which sold plans in Iowa and Nebraska, also closed earlier this year. LAHC’s closure leaves just 20 of the original ACA CO-OPs standing.

Alaska Supreme Court Rejects State Legislators’ Request to Halt Medicaid Expansion

Alaska’s highest court announced Aug. 31 that it will reject GOP state legislators’ plea to provisionally halt state Medicaid expansion while a lawsuit proceeds over the legality of expanding the program without legislative approval. Gov. Bill Walker (I) announced an executive action July 16 to accept federal funds to unilaterally expand Medicaid without the approval of the Republican-controlled legislature, prompting state lawmakers to bring a lawsuit to request a temporary halt to the program. “The Alaska Supreme Court’s ruling today brings final assurance that thousands of working Alaskans will have access to health care tomorrow,” said Gov. Walker in a prepared statement. “Medicaid expansion will save the state more than $100 million in its first six years, and save Alaskan lives.” Alaska is the 30th state to expand Medicaid under the Affordable Care Act (ACA). The expansion is projected to cover an additional 20,000 low-income state residents with earnings at or below 138 percent of the federal poverty line.

Arizona Court Upholds Medicaid Expansion Offset

On Aug. 26, a county superior court judge upheld former Arizona Gov. Jan Brewer’s (R) 2013 Medicaid expansion offset plan, ruling that a hospital assessment that funds the expansion is not subject to a provision in the Arizona Constitution that requires a super-majority vote in the state legislature for a tax increase. Thirty-six Republican lawmakers sued the state after Medicaid expansion funding did not get a two-thirds yes vote in the legislature, arguing the tax should be considered a tax because the Department of Health and Human Services (HHS) secretary looks upon assessments in that manner. The court’s decision comes more than two years after the expansion took effect and protects funding for health insurance coverage for over 350,000 low-income Arizonans. A legal appeal by the state legislators is almost certain.

4. Regulations Open for Comment

Department of Health and Human Services (HHS) Proposes Updates to “the Common Rule”

HHS and 15 other agencies released a notice of proposed rulemaking Sept. 2 for the Common Rule, the existing regulatory framework to transparency and oversight for scientific research involving human subjects. The proposed changes are to address the substantial changes that have occurred within scientific research. Current regulations have been in place since 1991 and are followed by 18 federal agencies. Proposed updates to the rule include:

  • Strengthened informed consent provisions
  • Requirements for administrative or IRB review that would align better with the risks of the proposed research
  • New data security and information protection standards
  • Requirements for written consent for use of an individual’s biological samples, for example, blood or urine, for research with the option to consent to their future use for unspecified studies
  • Requirement, in most cases, to use a single institutional review board for multisite research studies
  • Application of rule to clinical trials, regardless of funding source, if they are conducted in a U.S. institution that receives funding from a Common Rule agency for research involving human participants.

In July 2011, HHS issued an Advance Notice of Proposed Rulemaking to seek the public’s input on updating the Common Rule. The proposed rule issued reflects input and requests comments for HHS to consider as it drafts the final rule. HHS will take public comment on the proposed rule until Dec. 7.

For a press release detailing changes to the rule visit

Department of Health and Human Services (HHS) Releases Proposed Rule on Health Equity

On Sept. 3, HHS issued a proposed rule, Nondiscrimination in Health Programs and Activities, to advance health equity and reduce disparities in health care. The proposed rule establishes that the prohibition on sex discrimination includes discrimination based on gender identity. It also includes requirements for effective communication for individuals with disabilities and enhanced language assistance for people with limited English proficiency. The proposed rule applies to Health Insurance Marketplaces, any health program that HHS itself administers, and any health program or activity any part of which receives funding from HHS, such as hospitals that accept Medicare patients or doctors who treat Medicaid patients. Finally, the proposed rule extends these nondiscrimination protections to individuals enrolled in plans offered by issuers participating in the Health Insurance Marketplaces and explicitly bars any marketing practices or benefit designs that discriminate on the basis of race, color, national origin, sex, age or disability. Section 1557 of the Affordable Care Act (ACA) extended civil rights protections banning sex discrimination to health programs and activities. Previously, civil rights laws enforced by HHS’s Office for Civil Rights (OCR) barred discrimination based only on race, color, national origin, disability or age. The rule will be published in the Federal Register on Sept. 8, and is open for public comment through Nov. 6, 2015.

For more information, including a fact sheet and Frequently Asked Questions, visit

Internal Revenue Service (IRS) Proposed Rule Mandates Employer Health Plans Offer Hospital and Physician Services

The IRS released a proposed rule Aug. 31 that would require employer health plans to offer substantial coverage for inpatient hospital services and physician services. The Affordable Care Act requires employer health plans to be at least 60 percent of the minimum value standard. News reports uncovered the fact that employer plans could do so without providing hospital or physician coverage.

The preamble of the proposal points out that while large group plans are not required to cover the ACA’s Essential Health Benefit, a plan that does not cover hospital and physician services “does not meet a universally accepted minimum standards of value expected from and inherent in any arrangement that can reasonably be called a health plan and that is intended to provide the primary health coverage for employees.”

Under the proposed rule, an employer group health plan must, to meet the minimum value standard (MSV) and avoid a penalty, meet or exceed an actuarial value standard of at least 60 percent coverage including substantial coverage for doctor and hospital services. The proposed rule provides a transition period for employers that have previously offered non-compliant coverage prior to Nov. 4, 2014. The proposal aligns IRS and Department of Health and Human Services (HHS) policies. The ACA compels employers who do not meet the affordability and MSV thresholds to pay a penalty of $3,000 for each worker that receives a tax credit. The IRS proposed rule, published in the Federal Register Sept. 1, also says that any employee offered a non-compliant plan would not be prevented from receiving premium tax credits. IRS is taking comments on the proposed rule until Nov. 2, 2015.

Centers for Medicare and Medicaid Services (CMS) Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

CMS issued a final rule on July 31, 2015, to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percent adjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable Care Act and further adjusted by - 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic health records will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued -1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonuses and penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be published in the Federal Register on Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

Centers for Medicare and Medicaid Services (CMS) Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the Sustainable Growth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused on person-centered care, and continues the Administration’s intention to transition the Medicare program to a system based on quality and healthy outcomes. In the proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA, including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5 percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System, which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties a portion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systems survey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistants and other non-physicians. In the proposed rule, CMS is additionally seeking comment on the potential expansion of the Comprehensive Primary Care Initiative, a CMS Innovation Center initiative designed to improve the coordination of care for Medicare beneficiaries. Other items included in the proposed rule include an initiative that supports patient- and family-centered care for seniors and other Medicare beneficiaries by enabling them to discuss advance care planning with their providers.

For a fact sheet on the proposed rule, please see here. For further information, please see the rule on display here. CMS is accepting public comments on the CY 2016 PFS proposed rule until Sept. 8, 2015. The proposed rule will be published in the Federal Register on July 15, 2015, and CMS will issue the final rule by Nov. 1.

Food and Drug Administration (FDA) Issues Final Rule to Phase Out Trans Fats

FDA issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

5. Reports

Centers for Disease Control and Prevention (CDC) Report Finds U.S. Uninsured Rate Falls to Less than 10 Percent in 2015

CDC’s National Center for Health Statistics (NCHS) released new data on Sept. 1 that found the percentage of uninsured Americans under age 65 declined from 14.4 percent in 2013 to 11.2 percent in 2014 and to 9.2 percent through March 2015.

Network Adequacy Report Released by University of Pennsylvania

According to a report by researchers at the University of Pennsylvania, at least half of the plans sold on 16 states’ exchanges have narrow provider networks. In this analysis a narrow network plan was defined as those plans that included 25 percent or fewer providers in an area. Their analysis looked at exchange plans for 2014.

Their research showed that Georgia had the highest concentration of narrow networks, with 83 percent of plans sold on its exchange meeting that definition. In California, Florida and Oklahoma, at least three-quarters of the products sold on their marketplaces had narrow networks.

Network adequacy has become a major issue. Consumers tend to seek cheaper plans, and insurers have responded by using limited networks to reduce premiums. However, some have raised the concern that consumers do not have enough information to know the tradeoffs that come with choosing a narrower network. The Obama Administration has added rules for 2016 to address accuracy and availability of provider directors. In addition the National Association of Insurance Commissioners has been working on a model state law for enforcing network adequacy. A final draft of that recommendation is expected to be released in September.

Kaiser Family Foundation Publishes Report on Cadillac Tax

An analysis by the Kaiser Family Foundation of the “Cadillac Tax” found that about 25 percent of employers offer at least one health plan that could trigger the Cadillac tax in 2018. The analysis also found that about 30 percent of employers would be hit by the tax in 2023, and 40 percent of employers would be hit by the tax by 2028, if they did not make changes to their health plans. A growing concern for employers and employees is that Flexible Spending Accounts (FSA) are counted towards the tax. This study demonstrated that FSAs may be in jeopardy over time.

The tax is a 40 percent excise tax on expensive health plans that takes effect in 2018. The tax will be applied to individual plans exceeding $10,200 and family plans at $27,500. The thresholds are indexed to inflation. However, health care spending usually has been greater than the inflation rate so more plans over time will face the tax. The tax was part of the revenue raisers in the Affordable Care Act and was also designed to reduce costs by discouraging employers from offering generous benefit packages.

The “Alliance to Fight the 40,” which includes unions and businesses, is urging Congress to act quickly to repeal the tax because the tax will hit more health plans than Congress intended. The Alliance also points out that the Congressional Budget Office’s projection that the tax would raise $87 billion over 10 years is based on faulty assumptions.