December 8, 2011
The Affordable Care Act’s Puzzle Box
When I was a kid, my dad brought home a Japanese Puzzle Box. For those unfamiliar with a Japanese Puzzle Box, they are beautiful and deceptively complex, as they involve figuring out a series of pressure points or manipulations performed in just the right order to allow for the opening of the box. I’ve been told that some Japanese Puzzle Boxes can be solved in as many as two or three moves to more than 1,500 maneuvers to open a box. I am pretty certain the puzzle box gift from my dad required fewer than 10 maneuvers to solve, but it still took a great deal of time to solve, to say nothing of the time it took to reassemble it. And the only prize in the end was an open box and I suppose a small sense of accomplishment. Needless to say, the puzzle box was relegated to a shelf to be admired and sometimes discussed, but no further attempts were made to re-open the box.
The Affordable Care Act (ACA) is in and of itself a giant puzzle box, but the Health Benefits Exchange is the ACA’s puzzle box “gift” to the states. Some have immediately shelved it, others, like Illinois are still tinkering with it, but no state has really cracked the Exchange puzzle box. No one thought implementation of the Exchange would be an easy feat, but even those doubters probably did not anticipate the depth of challenges associated with building an Exchange.
Illinois is proof of how deep those challenges run. The state is one of only a handful of states that have actually approved legislation authorizing an Exchange, but battles over what that Exchange will look like, how it will operate, and how it will be funded in the future halted efforts to advance additional Exchange language during the fall veto session. Even if those disagreements did not exist, however, politics would still have played a prominent role in suffocating movement of any Exchange legislation in the short veto session.
The slew of amendments filed to SB 1313  in the October session demonstrates the ideological differences over key Exchange decision points. The Illinois Chamber supported House Amendment #3  to SB 1313, but legislators ultimately never entertained committee discussion of any of the amendments, unmoved by the Administration’s fear that Illinois could miss the grant application deadline for Level 2 federal funding to support Exchange implementation and operation through 2014.
No one can blame legislators for frustrations over stringent federal deadlines with regard to Exchange funding and implementation benchmarks when there is still regulatory fluidity and lack of clarity on some tremendously complex policy decisions. A pending Supreme Court ruling this summer that could decide the fate of the entire Act certainly does not help implementation efforts either.
Recent HHS guidance , if one is to read between the lines, suggests nervousness on the part of the feds. HHS added a stick to its federal funding carrot to make it perfectly clear that federal funding for the Exchange is not “free money.” States that have accepted federal funding to establish an Exchange, but fail to do so and ultimately rely on a to-be-determined federal Exchange, will be required to pay that money back. States also have longer to apply for Level 1 funds, as HHS pushed the application deadline back six months. The Level 2 application deadline on June 29 still stands but logic would suggest the feds will have to push this date back as well, which begs the question of what will happen to the ACA’s key implementation dates for the Exchange, the first of which is just slightly more than 12 months away.
Illinois is one of 29 states that have received Level 1 funding and over half of those states have yet to pass Exchange implementation or authorization legislation. Rhode Island is the first and the only state to have received a Level 2 grant.
The road ahead is certainly not paved with gold when it comes to the Exchange, and more specifically, the future of the Illinois Health Benefits Exchange. From the Illinois Chamber and the Healthcare Council’s perspective, however, it is still a road worth traveling as the state has two clear choices right now: commit to the Illinois Health Benefits Exchange or risk federal intervention and pay back the federal funds the state has so far received to move forward with its Exchange.
The Illinois Chamber is committed to the ACA’s puzzle box and ensuring that what is inside is an Exchange that adheres to the pro-market principles we have fought for and will continue to fight for in 2012 and beyond.
Illinois’ Other Exchange
While efforts to begin construction on a new health benefits exchange have stalled, the development of another kind of state exchange is moving forward. The Illinois Office of Health Information Technology (IL OHIT) announced last month that it has officially selected a new vendor to begin building the state’s health information exchange (ILHIE) that will allow providers across the state to electronically share patient health data and medical records securely through a central portal. InterSystems Corporation has been tapped to serve as the state’s health information “technology partner” to begin construction of an interoperable system that allows for greater care coordination and better patient outcomes.
State efforts to encourage provider use of electronic health records is also proving fruitful, with the Illinois Health Information Technology Regional Extension Center (IL-HITREC) recently announcing it has attained its enrollment goal of 1,300 primary care providers committed to working to adopt Electronic Health Records (EHRs). IL-HITREC is one of 64 Regional Extension Centers in the nation to provide technical assistance to primary care providers to help achieve “meaningful use” of electronic health records. The ILHIE will also begin assisting healthcare professionals in reaching Stage 1 Meaningful Use with a new service called ILHIE Direct Secure Messaging beginning December 2011 through 2012. The service is provided at no cost to the provider and helps these providers securely transmit information to another provider outside of the network to quickly achieve the clinical exchange requirement that serves as a baseline function of the ILHIE. Providers also receive financial incentives under the Medicare and Medicaid programs to achieve Meaningful Use.
The ILHIE initiative has evolved dramatically over the past three years, starting with the release of $3 million in state funds in March 2009 to support planning efforts. In 2010, the state was awarded nearly $19 million in federal stimulus funds to begin implementation of a statewide HIE. In the meantime, the General Assembly and the Governor enacted HIE authorization legislation and the new HIE Board created by the authorizing legislation was formerly appointed in February of this year. The ILHIE Authority is now actively seeking an Executive Director to help manage the transition of the ILHIE from the IL OHIT to the Authority and oversee implementation and eventual operation of the ILHIE. The position is a three-year gubernatorial appointment that is subject to approval by the full Senate. For more information on the position, please click HERE. 
ILHIE’s Impact on Employers
The impact of a new statewide HIE and the widespread use of EHRs may be more readily apparent to the patient and provider communities, but a healthcare delivery system that is digitalized bears tremendous benefits for all stakeholders, including employers. In an era where policymakers and the system itself strives to achieve better coordination, greater efficiency, higher quality, and stronger patient outcomes, technology plays a key role in achieving all of those goals, whether the conversation is about building a health benefits exchange or transforming the healthcare delivery system .
The value of a system that relies much more heavily on health information technology (HIT) is not lost on employers, as demonstrated by a recent survey conducted by the Midwest Business Group on Health (MBGH). According to the survey conducted last month, nearly all responding employers of various sizes support efforts to adopt EHRs and promote the interoperability of EHRs, believing it will improve management of costly conditions such as chronic disease and result in long-term savings.
Employers, however, do not appear as certain about payment reforms based in part on provider use of EHRs and even more hesitant to accept higher up-front costs for regional and statewide HIEs. The survey results are not surprising, but do demonstrate a level of support among the employer community for HIT and the role it can play in transforming the system. The technological transformation of the healthcare delivery system, however, is not without cost and the short-term cost of moving a paper-based, somewhat “siloed” system to an integrated electronic system is not insignificant. The question of who pays for that “transformation” is always understandably prevalent, even if long-term savings are guaranteed.
The Illinois Chamber has been very supportive of state efforts to move forward with a statewide HIE because of the long-term, extended benefits of the ILHIE and Illinois providers that rely on secure electronic capture and transmittal of patient data. The Illinois Chamber, however, is cognizant of the short-term costs associated with such a transformation and knows that private sector support is key, but also not easily gained without education and collaboration.
MBGH is hosting a learning network program on this issue on December 7 and we look forward to partnering with them next year to broaden that education platform on the value of electronic health records and the importance of interoperability to the employer community.
For more resources:
ILHIE Website 
Other State News
Illinois’ R&D Tax Credit Still Awaits Reinstatement
Illinois will have to wait a little longer for the reinstatement of its Research and Development (R&D) tax credit after plans to pass a more comprehensive state tax relief package fell apart when legislators returned to Springfield briefly for a special session on November 29. The 5-year extension of the tax credit, which officially expired last December, was included in legislation attempting to create incentives that will keep CME and Sears from locating elsewhere. The package also included a number of other provisions, including increases in the Estate Tax exemption, the Earned Income Tax Credit (EITC) and the standard deduction for individuals; automatic 5-year extension of all income and sales tax exemptions, credits and deductions scheduled to expire in 2011, 2012, and 2013; and some loosening of the state’s suspension on the net operating loss deduction, among other things.
While there is bipartisan support for the reinstatement of the R&D tax credit, including a recent expression of support by the Governor, the legislative “packaging” of the provision has proved controversial, becoming so top heavy that the House was unable to muster more than 8 votes in support of its version of the tax relief package. The Senate managed to approve a slightly different version of the tax relief package, but that version was never called in the House.
Legislators are continuing to negotiate the provisions of the tax relief package in the hopes of striking a compromise before the end of the year. The cost to reinstate the R&D tax credit is approximately $25 million, but its return on investment far exceeds the cost to the state with Illinois home to over 400 research and development facilities. Illinois also has a strong pharmaceutical and biotechnology sector, which benefits from the state’s R&D tax credit. The Illinois Chamber has been actively involved in negotiations on the legislative tax package, lobbying for the inclusion of the reinstatement and extension of the R&D tax credit as a critical component of any final tax relief package.
The House is scheduled to return to Springfield on Monday, December 12 to take up a revised version of the tax relief package that is likely to be split over several bills.
For more information on the status of the state’s tax relief package, please visit the Illinois Chamber of Commerce’s Tax Institute .
Property Tax Exemption Status for Hospitals and the Double-Edged Sword
The battle over property tax exemptions for non-profit hospitals hit a new high earlier this year after the Illinois Department of Revenue revoked property tax exemption status for three hospitals claiming the percentage of hospital revenues dedicated to charity care was too low. The rulings, however, were later reversed citing lack of clarity in the law as to what is considered an appropriate level of charity care. Shortly after the Department of Revenue issued its ruling, the Illinois Chamber joined with the Hospital Association to call on government officials to work out a reasonable and practical legislative solution that includes a clear and unambiguous definition of eligibility. Click here to see joint Illinois Chamber/IHA statement.
Charity care standards have been a source of controversial debate that culminated in an Illinois Supreme Court ruling last year revoking Provena Convenant’s property tax exemption for the 2002 tax year. Legislative proposals that seek to establish a baseline standard for charity care have surfaced over the years, including earlier this year when a bill sponsored by Senator Iris Martinez failed to clear a Senate Committee due to strong opposition from hospitals, the Illinois Hospital Association, and the Illinois Chamber of Commerce.
Crain’s Chicago Business reported last week that the Department of Revenue may be working to craft a proposal that puts non-profit hospitals back on the property tax rolls in exchange for tax credits for charity care. The Illinois Chamber of Commerce has confirmed with the Department of Revenue that they are holding any future hospital property tax exemption rulings in abeyance until the Governor’s office assembles a task force to examine the issue and put forward recommendations by early spring of 2012. The Department has recommended that any hospital that has been issued an exemption denial should still file the appropriate protest notices to ensure they retain the appeal rights.
The battle over property tax exemption status for hospitals is somewhat of a double-edged sword for hospitals, as it also raises additional questions over what happens to a hospital’s sales tax exemption status since the same standard is used for both exemption rulings. The Department of Revenue told the Illinois Chamber that hospitals that have received property tax exemption denials are now being given “provisional” sales tax exemption rulings, rather than the normal 5-year renewal. Sales tax exemptions for non-profit hospitals are also an issue to be considered in future task force discussions.
The Illinois Chamber’s Healthcare Council is working closely with the Tax Institute on this issue.
HFS Coordinated Care Update
As reported in the Council’s October Newsletter, the Department of Healthcare and Family Services (HFS) has rolled out a new “Care Coordination Innovations Project” to be implemented in two phases, the first of which will focus on utilizing “alternative models” of care coordination that targets provider collaboration while the second phase will incorporate managed care organizations. The Medicaid Advisory Committee (MAC)’s Care Coordination Subcommittee met on November 15 to consider HEDIS and HEDIS-like performance measures that will be included in the Innovations Project solicitation to go out early next year. HFS is seeking to utilize uniform measures to compare different models of care coordination across similar coverage populations.
The U.S. Department of Health and Human Services (HHS) recently announced its own Health Care Innovation Challenge  from the CMS Innovation Center, a new initiative designed to test creative ways to deliver high quality medical care and reduce costs across the country. The Challenge will award up to $1 billion in total grants to applicants who can rapidly implement the most compelling new ideas to deliver better health, improved care and lower costs to people enrolled in Medicare, Medicaid and CHIP, particularly those with the highest health care needs.
For more information on the federal Health Care Innovation Challenge, visit www.innovations.cms.gov .
For more resources on the state’s Care Coordination program:
Federal News Roundup
MLR Final Regulations Released
The U.S. Department of Health and Human Services (HHS) released its final regulations that will dictate how insurers spend their premium dollars. Insurers are required to spend at least 85% of premium revenues on clinical services and quality improvement in the large group market. Insurers serving the individual and small group market cannot spend less than 80% of premium revenues on those areas. The National Association of Insurance Commissioners (NAIC) and HHS have been working for months on the medical loss ratio (MLR) calculation, determining what activities fall into the clinical/quality improvement side and what activities could be deemed as administrative or marketing in nature. The final regulations do not exclude agent and broker commissions from the MLR calculation despite the recent approval of an NAIC resolution supporting the exclusion of these commissions.
The Illinois Chamber weighed in several times with the NAIC in support of exempting agents and brokers from the calculation because of the critical role they play in assisting employers – particularly small employers- in benefit selection and design issues. While the pleas of support resonated with enough members of the NAIC, HHS’ decision to ignore the NAIC recommendation and move forward with the exclusion of agent/broker commissions is disheartening given the navigational challenges of the new coverage landscape and the increased need for broker/agent guidance and advice.
Beginning in 2012, if insurers fail to meet the prescribed MLR, they will be required to provide a rebate to enrollees. The Government Accountability Office (GAO) recently estimated that at least 64% of insurers will have met or exceeded the 2011 MLR requirement, which means over 30% of insurers may face penalties in 2012 in the form of a rebate back to individuals and small group enrollees. The interim MLR regulation initially made these MLR rebates taxable, but the final regulation reversed that to make all rebates tax-free. HHS also released interim final regulations (IFR) on the MLR rebate provision that offers up several ways in which an employer can distribute rebates back to employees participating in the plan, including using the rebate to reduce premiums. The IFR on the MLR rebate provision is open for comment through early January.
Other highlights of the final MLR regulation include a slower adjustment of the MLR for “mini-med” plans. By 2014, those “mini-med” policies will likely not be allowed. The final rule also does not extend the limited ICD-10 exemption to include costs of maintaining the new coding system, which will become effective in 2013 and further requires insurers to explain their MLR to enrollees regardless of whether they meet the MLR benchmarks or not.
To read the Final MLR Regulation and the Interim Final Regulation on MLR Rebates, please click on the links below:
Super Committee’s Unsuper Outcome and What it Means for the Healthcare Community
Most everyone knows by now that the Super Committee just couldn’t live up to its moniker. Even those most jaded by partisan politics held onto to a shred of hope. After all, some Democrats were just as surprised as Republicans that the Affordable Care Act would be the political equivalent of a Phoenix rising from the ashes. Just ask. The Super Committee’s failure to reach an agreement, however, has ramifications beyond just “politics as usual.” While the healthcare community could be spared next year, 2013 could be a different story as across-the-board cuts to Medicare, including cuts to insurers that offer Medicare Advantage products take effect.
To be clear, however, the Super Committee’s task represented a bit of double-edged sword for the healthcare community (at the risk of overusing the double-edged comparison in this newsletter) because items under consideration could have had even worse financial implications for those in the healthcare industry to a varying degree. Nevertheless, the need for a Super Committee raises even deeper questions about our nation’s future and if the healthcare community, employers, and consumers can continue to be ok with ending each year in such collective brow-swiping fashion, only to worry what the next year holds.
Our federal budget problem (as well as our state budget issues) would suggest that no one is safe until everyone is safe, which doesn’t necessarily require a Super Committee to figure out.
To read more about the “Health Programs Facing Cutbacks after Super Committee’s Failure”, click HERE. 
Supreme Court Takes on the ACA
The Supreme Court has agreed to consider legal challenges to the Affordable Care Act (ACA) referred by several lower courts; however, most of the legal questions before the Supreme Court originated with the 11th Circuit Court including the constitutionality of the individual mandate, whether the mandate is severable from the rest of the ACA, states’ rights with regard to the Medicaid expansion mandate, and whether the Anti-Injunction Act applies. While that last issue has less to do with matters of the U.S. Constitution, it could effectively delay a ruling if the Supreme Court finds the penalty associated with the individual mandate to be a tax-related issue. If the Supreme Court does find the individual mandate penalty to be a “tax,” it could pull the Anti-Injunction Act card, which bars federal courts from striking down tax provisions until they have actually taken effect (in this case, 2014). Translation: delay legal decision until after 2012 election.
Political and legal analysts have been predicting since the day President Obama signed the ACA that Supreme Court action was imminent and most likely in a presidential election year. They should not be disappointed. DC in 2012 is the new Las Vegas. In fact, if gambling were legal in DC, there might not be any need for a Super Committee.
The legal questions surrounding the ACA have always been one of many of the law’s Albatrosses and the summer of 2012 could be the first and only opportunity to cut loose the largest of those Albatrosses, or it could throw yet another wrinkle into the rollout of a law that has ramifications for virtually every sector of our private and public economies. For the Illinois Chamber, the Supreme Court’s consideration of the severability of the individual mandate is a key issue, as it could significantly impact the cost of group health plans for employers if the Supremes decide it is indeed severable from the remaining Affordable Care Act. To that end, we are exploring opportunities with a coalition of other state chambers to weigh in on Amicus Brief.