- Report Published -
|Report Document No. 77|
PUBLICATION YEAR 2017
|Health Insurance Reform Commission Executive Summary of 2016 Interim Activity and Work – January 2017|
|Health Insurance Reform Commission|
Chapter 53 (§ 30-339 et seq.) of Title 30 of the Code of Virginia charges the Health Insurance Reform Commission (HIRC) with:
• Monitoring the work of appropriate federal and state agencies in implementing the provisions of the federal Patient Protection and Affordable Care Act (the Act), including amendments thereto and regulations promulgated thereunder;
• Assessing the implications of the Act's implementation on residents of the Commonwealth, businesses operating within the Commonwealth, and the general fund of the Commonwealth;
• Considering the development of a comprehensive strategy for implementing health reform in Virginia;
• Recommending health benefits required to be included within the scope of the essential health benefits (EHBs) provided under health insurance products offered in the Commonwealth, including any benefits that are not required to be provided by the terms of the Act;
• Assessing proposed mandated benefits and providers and recommending whether, on the basis of such assessments, mandated benefits and providers be providers under health care plans offered through a health benefit exchange, outside a health benefit exchange, neither, or both;
• Conducting other studies of mandated benefits and provider issues as requested by the General Assembly; and
• Developing such recommendations as may be appropriate for legislative and administrative consideration in order to increase access to health insurance coverage, ensure that the costs to business and individual purchasers of health insurance coverage are reasonable, and encourage a robust market for health insurance products in the Commonwealth.
The HIRC is chaired by Delegate Kathy Byron (the Chair). Senator Frank Wagner serves as the HIRC's vice-chairman. The other members of the HIRC are Delegates Lee Ware, David Yancey, and Eileen Filler-Corn and Senators Rosalyn Dance, Richard Saslaw, and Ryan McDougle. Commissioner of Insurance Jacqueline Cunningham and Commissioner of Health and Human Resources William Hazel serve as ex officio nonvoting members.
This executive summary of the interim activity and work of the HIRC is submitted pursuant to § 30-345 of the Code of Virginia.
II. ISSUES ADDRESSED
Inborn Errors of Metabolism - House Bill 601 (Murphy)
House Bill 601, introduced by Delegate Kathleen Murphy, would have required health carriers to provide coverage for treatment of inborn errors of metabolism that involve amino acid, carbohydrate, and fat metabolism and for which medically standard methods of diagnosis, treatment, and monitoring exist. Coverage required pursuant to the bill would have included expenses of diagnosing, monitoring, and controlling the disorders by nutritional and medical assessment, including clinical visits, biochemical analysis, medical foods, nutritional supplements, and formulas used in the treatment of such disorders. This bill was continued to 2017 in the House Commerce and Labor Committee by a voice vote.
During the June 14, 2016, meeting, the HIRC voted to refer House Bill 601 to the Bureau of Insurance (BOI) for a Step One assessment. The BOI had completed a Step One assessment prior to the meeting and presented it at that meeting.
Jim Young of the BOI presented the BOI's Step One assessment. Qualified Health Plans (QHPs) are required to provide coverage for services in Virginia's benchmark plan. The benchmark plan has a provision stating that the plan covers special medical formulas that are the primary source of nutrition for covered persons with inborn errors of amino acid or organic acid metabolism, metabolic abnormality, or severe protein or soy allergies. Therefore, Virginia's benchmark plan's coverage is consistent with that described in HB 601. Because the benchmark plan essentially includes the benefits proposed in the bill, the BOI determined that there will likely be no cost incurred by the Commonwealth from the proposed mandate in HB 601.
During the second meeting of the interim on September 27, 2016, the Chair announced that she has been working with Delegate Murphy to identify how coverage is unavailable when it is required in the benchmark plan. It appears that the main issue may be self-insurance, which is not addressed in the bill, rather than a legislative issue. Until this is resolved, the HIRC will not be addressing this issue.
The HIRC did not take any further action on this issue during the 2016 interim.
Step Therapy Protocols - House Bill 362 (Davis), Senate Bill 331 (De Steph), Senate Bill 332 (De Steph)
House Bill 362, introduced by Delegate Davis, Senate Bill 331, introduced by Senator De Steph, and Senate Bill 332, introduced by Senator De Steph, all propose requiring a process for the granting of an override to the step therapy protocol when the treating physician believes it to be necessary. HB 362 and SB 332 apply to all prescription drugs and require no protocol for patients who either satisfied the protocol or were granted an override. HB 362 was passed by indefinitely with a letter in the Senate Commerce and Labor Committee on a vote of 15-0. SB 332 was passed by indefinitely with a letter in the House Commerce and Labor Committee on a vote of 15-0. SB 331 applies to psychiatric medications only. This bill was passed by indefinitely with a letter in the House Commerce and Labor Committee on a vote of 15-0.
During the September 27, 2016, meeting, the HIRC received testimony on the practice of step therapy. Delegate Glenn Davis, patron of HB 362, introduced the topic of step therapy as a process whereby an insurer establishes a specific sequence in which prescription drugs for a certain medical condition are medically appropriate and covered by a health plan. Under step therapy, coverage of a prescription medication is often conditioned on a patient's first trying an alternative, often generic, medication without success. Delegate Davis gave a personal testimonial about his wife's struggle to obtain needed medicine that her doctor prescribed because of step therapy protocols in place under her health insurance coverage.
Delegate Davis introduced Denise Marksburg and Marcus Jones, who each provided personal testimony about the difficulty of obtaining required medication due to step therapy protocols. Ms. Marksburg testified that she has rheumatoid arthritis and goes through an appeals process each time her medication is changed and that she has been following step therapy protocols for four years. Mr. Jones, Chair of Government Relations for the Multiple Sclerosis Society for West Virginia and Virginia, testified that the generic drug that his wife was required to try before gaining access to the drug originally prescribed by her doctor was ineffective and left her very weak. When she eventually obtained the prescribed drug, Mr. Jones testified, her quality of life improved significantly.
Senator Bill DeSteph, patron of SB 331 and SB 332, testified to the importance of this issue and of the doctor-patient relationship. He explained that step therapy protocols can interfere with the choices made by the patient and the prescribing doctor. The prescribing doctor, rather than the insurance company, knows the patient the best.
Delegate Davis introduced Dr. Kent McDaniel, a psychiatrist with Henrico Area Mental Health and Development Services. Dr. McDaniel testified about his concerns regarding step therapy and the algorithms used by the insurance companies to create the step therapy protocols. The algorithms are based on population studies rather than on the unique characteristics of the patient. For patients with mental health needs, he maintained, it is very important to provide the right drug the first time instead of trying something else first to see if it fails; the failure of medication could mean that such patients end up in the hospital or in jail. Additionally, such patients often miss follow-up appointments or grow distrustful of medication, so it is detrimental to their health to waste time on potentially ineffective medication. Obtaining prior authorizations is time consuming, and Dr. McDaniel reported that he sometimes pays for patients' medication out of pocket rather than wait for the prior authorizations. Dr. McDaniel stated that his group records the time spent on obtaining prior authorizations, which totals 1,500 hours a year. Senator Wagner asked if he receives automatic authorization for patients with Medicaid or Medicare, and Dr. McDaniel responded that he does with Medicaid but not with Medicaid HMO.
Dr. Olabisi Oshikanlu, Medical Director for Aetna, spoke on behalf of the Virginia Association of Health Plans. Dr. Oshikanlu explained that health plans develop their step therapy programs in accordance with Virginia law, which requires that health plans have a Pharmacy and Therapeutics Committee (P&T Committee) comprising independent practicing physicians and pharmacists to develop the drug formularies. The purpose of the step therapy protocols is to ensure that doctors are using tried and true medications rather than prescribing medications because they are being pushed by pharmaceutical companies or requested by a patient on the basis of advertising. The goal is to use effective, less risky drugs before advancing to potentially more risky and expensive options. Dr. Oshikanlu stated that Aetna uses a holistic approach to managing mental health, where case managers follow the patient and ensure that methods of care beyond just medication are being employed. "Transition Fill" programs, which permit a one-time fill for the medication to allow time for the prior authorization to occur, are available for most maintenance medications. Step therapy programs ensure portability because, by state law, once patients go through step therapy, they will not have to repeat the steps even if they go to a new plan so long as they can prove that they completed the steps. Costs are a motivating factor in step therapy programs because of the high cost of prescription drugs, particularly specialty drugs. These high-cost drugs can increase noncompliance if patients cannot afford the deductible, which leads to a burden on the health system and other negative consequences. Prior authorization policies are on the health plan websites, and health professionals handle the calls.
The BOI noted that it receives complaints about step therapy protocols and assists individuals seeking to appeal the application of a protocol to obtain prescribed medication.
The Department of Human Resource Management conducted a fiscal impact analysis for the bills related to step therapy. This analysis concluded that the fiscal impact of HB 362 and SB 332 would be $1.25 million. The fiscal impact of SB 331 would be less than $45,000.
Doug Gray, Director of the Virginia Association of Health Plans, concluded the discussion on step therapy. He testified that managed care is necessary for adequate access to care and that managed care is a group effort with protections in place. He stated that health plans can currently be fined if there are excessive wait times and that if the providers are having issues with work hours spent on prior authorizations, they should be reporting those instances to the BOI.
The HIRC received testimony on HB 362, SB 331, and SB 332 but did not make any recommendations.
Abuse Deterrent Formulations (ADFs) of Opioids - House Joint Resolution 45
House Joint Resolution 45, introduced by Delegate Byron, is a continuation of House Joint Resolution 630, which was introduced in the 2015 Session of the General Assembly by Delegate Byron. Both joint resolutions passed both houses unanimously and directed the HIRC to study mandating health insurance coverage for ADFs for opioid medications. ADF opioids are opioid drugs that are formulated in such a way that deters misuse and abuse, including making it difficult to snort or inject the drug for a more intense "high." In conducting its study, the HIRC was directed to examine the issues of access by citizens of the Commonwealth to effective pain management medications and the need to require the adoption of ADF technologies for pain medicines in order to assist in the Commonwealth's continuing efforts to eliminate substance and prescription drug abuse.
The HIRC received testimony on ADF opioids during the November 7, 2016, meeting. At this meeting, the HIRC also reviewed the staff overview of the HIRC's study of ADF opioids from the 2015 interim.
Shruti Kulkarni, Esq., Policy Director of the Center for Lawful Access and Abuse Deterrence (CLAAD) recommended mandating access to ADF opioids when doctors determine that ADFs are preferred for the patient. Ms. Kulkarni explained that CLAAD is a not-for-profit organization that works to reduce prescription drug fraud, diversion, misuse, and abuse and advocates for consumer access to quality health care. Efforts encouraged by CLAAD to address the opioid epidemic include prescriber education, safer storage of medications, and treatment for those who abuse or misuse opioids.
The Food and Drug Administration (FDA), Ms. Kulkarni testified, has encouraged the development and use of ADFs. To get an "abuse-deterrent" label from the FDA, the drug must go through rigorous studies to demonstrate that the product reduces known or expected routes of abuse. Some drugs have incorporated ADF features but have not sought the "abuse-deterrent" labeling from the FDA.
Ms. Kulkarni testified that insurers impede access to ADF opioids by imposing cost/benefit-related restrictions. For example, many insurers use a "fail first" policy that means a patient would have to fail on methadone or a similar generic drug before having access to ADF opioids even though methadone is many times more likely than ADF opiods to cause an overdose death.
As explained by Ms. Kulkarni, ADF opioids are designed to make unintended overdoses less likely. One method used by ADF opioids to decrease the risk of overdose is preventing altered routes of administration. Individuals who use altered routes of administration are at an increased risk of overdose. ADF opioids can also prevent accidental misuse. For example, if an individual crushed an opioid to make it easier to digest, the active ingredient would release all at once, which could result in an accidental overdose. ADF opioids can also make medications more difficult to manipulate or can increase their unpleasant side effects when manipulated, which could result in lower black market demand.
Ms. Kulkarni stated that the arguments against mandating access to ADF opioids have been that ADF opioids do not prevent euphoria or addiction, they cost more because there are no generics available, and the health benefits of ADF opioids are difficult to isolate. Ms. Kulkarni explained that the impact on public health can only be realized once there is increased use of ADF opioids. Additionally, ADF opioids are priced on par with other brand name medications. She stated that even an incremental reduction in abuse can have a significant public health impact, considering the widespread nature of the opioid epidemic.
Ms. Kulkarni concluded by emphasizing that CLAAD urges the HIRC to recommend legislation that ensures access to ADFs when deemed necessary by a doctor rather than allow insurers to use a "fail-first" process that could lead to overdose or death.
Doug Gray, Executive Director of the Virginia Association of Health Plans, also spoke on this issue. He testified that the opioid epidemic is a substantial problem in Virginia and nationwide, with just the tip of the iceberg showing. Opioid abuse is a particularly difficult public health issue because opioids are so prevalent in society, but any efforts focused on limiting access to opioids may drive people to heroin use.
Mr. Gray explained that ADF opioids that are used as directed are still addictive. These formulations may be tamper resistant, but they do not stop abuse. Therefore, insurers do not favor ADF opioids because of their higher cost and the fact that they can still be abused and are still addictive. Mr. Gray stated that other efforts such as the prescription monitoring system are more effective in addressing this issue and that coverage of ADF opioids will not be productive until the prescribing and treatment sides are under control first.
In response to a question from Delegate Ware about whether mandating coverage of ADF opioids would help solve the opioid abuse epidemic, Mr. Gray emphasized that providing coverage for ADFs would not stop people from becoming addicted to opioids or from feeling euphoric effects from the drugs. Ms. Kulkarni added that while the ADF opioids do not prevent addiction, mandating access would allow a prescriber who finds that an ADF opioid would be beneficial to his patient to prescribe that medication. Such patients might include those with teenage children in the house or elderly patients who have an increased likelihood of unintended misuse. Mandating access would also aid the development of future generation drugs that avoid addictive properties.
Ms. Bea Gonzalez from the Capital Results consulting firm testified that only a physician knows the right form of treatment for his patient and, considering the high stakes involved with addiction, he should have the option of prescribing an ADF opioid if that is what he deems necessary. The costs are not prohibitively high, and this effort would not mandate use by everyone; instead, mandating coverage would provide access for those who need it. "Fail first" policies put patients in a very risky position.
In response to a question from the Chair on the benefits of ADF opioids, Ms. Kulkarni explained that abuse deterrent qualities such as including acetaminophen, which causes irritation when snorted, make the drug more difficult and less enjoyable to abuse. Additionally, these abuse deterrent factors could lead to less black market demand for the drugs.
The Chair asked Mr. Gray what danger might exist in having ADF opioids on the formulary when there are already such substantial differences in pricing on the formulary. Mr. Gray explained that cost share is limited because it is already being used to cover other extremely high priced drugs, such as the medication necessary to treat Hepatitis C. Allowing products to compete rather than mandating coverage enables health plans to manage costs. Because there are no generics for the ADF opioids, they cannot compete with other opioid medications.
The HIRC made no recommendations on the abuse deterrent opioid formulation resolution but indicated that the HIRC will continue to review this issue independently rather than extending the study.
Proton Radiation Therapy - House Bill 978 (Yancey) and Senate Bill 639 (Alexander)
House Bill 978, introduced by Delegate Yancey, and Senate Bill 639, introduced by Senator Alexander, are identical. HB 978 was continued to 2017 in the House Commerce and Labor Committee by a voice vote. SB 639 was passed by indefinitely with a letter in the Senate Commerce and Labor Committee on a vote of 15-0. These bills prohibit health insurance plans that provide coverage for cancer therapy from holding proton radiation therapy to a higher standard of clinical evidence for benefit coverage decisions than the standards that are applied to other types of radiation therapy treatments. Proton radiation therapy, which utilizes protons as an alternative radiation method, was approved by the FDA in 1988 as a form of cancer treatment. These bills do not establish a mandated benefit.
The HIRC received testimony on HB 978 and SB 639 during its November 7, 2016, meeting.
Bill Thomas, Associate Vice President of Governmental Relations at Hampton University, and Dr. Vahagn Nazaryan, Executive Director of the Hampton University Proton Radiation Institute, began the discussion on proton radiation therapy. Mr. Thomas explained that the Proton Radiation Institute is asking the HIRC to allow patients and prescribers to be able to make choices and have access to this therapy, which is available at Hampton University and a few other places in the country. Proton radiation therapy is Medicare approved and FDA approved. The facility at Hampton University has saved over 2,000 lives, and it has the largest capacity in the country for serving veterans. Other universities, such as Stanford University, are beginning to invest in proton radiation therapy. Additionally, the costs are coming down. Dr. Nazaryan testified that insurance companies generally do not cover proton radiation therapy even when they cover other radiation therapies, and he opined that insurers need to give options to their patients and provide coverage for this therapy.
Mr. Gray from the Virginia Association of Health Plans testified that proton radiation therapy is not covered by most insurers because there is no evidence that it is better than other radiation therapies and it is more expensive than other radiation therapies. Plans choose to cover less expensive therapies that are just as effective. Mr. Gray stated that this technology is not being evaluated differently than other technology but that evaluations show that it is not cost effective.
Delegate Ware asked Mr. Gray to respond to a review from a medical authority that indicated that proton radiation therapy is particularly effective in treating certain complex cases. In response, Mr. Gray indicated that proton radiation therapy may be covered in some specific cases. Mr. Thomas responded that the efficacy of this treatment has been accepted elsewhere, as evidenced by the fact that other states are expanding this treatment and that the Department of Veterans Affairs has accepted it. In response to a question from Delegate Yancey, Dr. Nazaryan testified that proton radiation therapy is able to treat certain ailments that result from exposure to Agent Orange.
In regard to the proton radiation therapy issue, Commissioner Cunningham pointed out that both internal and external appeal processes currently exist for the patient if the insurer will not cover a specific type of treatment. In response to follow-up questions, staff explained that the proposed legislation would not mandate coverage of proton radiation therapy but it would prohibit insurers from holding proton radiation therapy to a higher level of clinical evidence for benefit coverage decisions than other types of radiation therapy treatment.
The HIRC made no recommendation on these bills and decided to continue reviewing this issue independently and invite others to learn more about proton radiation therapy.
Other Items on Which the HIRC Was Briefed During Its Four Meetings in the 2016 Interim
A. The Process for Reviewing Proposed Mandated Benefits - Staff gave a presentation on the mandated benefits review process. This process is governed by § 30-343 of the Code of Virginia. It was codified in 2015 through HB 2026, which was introduced by the Chair. Development of a formal process was motivated by § 1311(d)(3)(B) of the Act. Under the Act, qualified health plans sold in the Exchange or other markets must include EHBs. EHBs are defined using either a benchmark plan selected by the state or a federal default plan. States are permitted to require that qualified health plans in that state offer benefits that exceed the benchmark plan. However, the state must defray the costs to the individual of any additional state-mandated benefits. In response to the potential financial liability on the state, the mandated benefits review process was created. This process applies when a legislative measure containing a mandated health insurance benefit is proposed that is not substantially similar to a legislative measure previously reviewed by the HIRC within the three-year period immediately prior to the proposal. The three-year limitation ensures that the HIRC is not repeating its review every year.
The process begins when the Chairman of the House or Senate Commerce and Labor Committee requests that the HIRC assess a mandate. Upon such request, the HIRC has 24 months to complete the assessment. The HIRC will then request that the BOI conduct a Step One assessment. This assessment focuses on whether the Commonwealth could be financially liable for defraying the costs of the mandate. Specially, this assessment will address the extent to which the mandate is already available in qualified health plans and whether the applicable agency is likely to determine that the mandate goes beyond the scope of an essential health benefit. During the 2016 Regular Session, this portion of the process was amended by HB 87, which was introduced by the Chair, to clarify that the applicable governmental agency will make the determination of whether a mandate goes beyond the scope of an EHB. The statute previously referred to the Exchange as the entity making this determination, but the Exchange is not able to make such determinations.
Once the BOI has completed the Step One assessment, the BOI will provide the HIRC with a memorandum and presentation at a scheduled meeting on the results of the Step One assessment. The memorandum and presentation will address whether the mandate exceeds the scope of the EHBs and whether there will be increased costs to the Commonwealth under § 1311(d)(3)(B) of the Act. The HIRC will then determine if further assessment is warranted. If no further review is warranted, the process is finished and there will be a report of the HIRC's findings. If the HIRC determines that further review is warranted, the HIRC will request that the Joint Legislative Audit and Review Commission (JLARC) and the BOI conduct a Step Two assessment.
If a Step Two assessment is requested, JLARC and the BOI will present their findings to the HIRC. JLARC will report on background information on the condition and coverage, the effectiveness of coverage, the current availability of treatment, the financial impact on individuals, and the impact on public health. The BOI will report on the financial impact of the proposed mandate on the state, providers, and service, as well as on premium costs, administrative costs, and total cost of health care in the Commonwealth. The HIRC will review the Step Two assessments and create recommendations on the proposed mandate. A report summarizing the HIRC's assessment and recommendations will be forwarded to the Chairman of the House or Senate Commerce and Labor Committee that requested the assessment.
B. Balance billing - Balance billing is the practice of billing patients for outstanding balances after the insurance company pays the provider a portion of the claim. This usually arises when a patient receives out-of-network care or when an insurance payment is less than the total cost of the care. Balance billing has been particularly problematic with air ambulances because these services are federally regulated and the state does not have as much control. This issue also arises when certain service providers refuse to contract with the health plans but provide services in connection with services provided by a covered service provider. For example, some anesthesiologists are associated with covered medical facilities, but the anesthesiologist is not part of the plan and those services will not be covered, thus leading to balance billing. Situations such as this raise notice issues and are particularly problematic when providing emergency services in which a patient cannot consent to pay for the noncovered care.
C. BOI rate filings and cost trends update - David Shea of the BOI gave a presentation on rate filings and cost trends. Prior to July 1, 2013, no small group rates required approval, and the plans were permitted to employ rating variables, so it was very difficult to make accurate comparisons between companies and plans. Since July 1, 2013, all individual and small group plans have been required to obtain prior rate approval from the BOI, and fewer rating variables are permitted, so it is easier to compare plans and companies. Virginia is a fully effective rate review state, as determined by the federal Department of Health and Human Services' Center for Consumer Information and Insurance Oversight.
Maximum out-of-pocket limits are rising, and average rate increases have grown over time. Mr. Shea reminded the HIRC that this is only the third year of rate filings in the new marketplace and that in previous years the insurance carriers had no experience on which to base their predictions. The new pools of patients are more unhealthy than expected, but this could decrease as the pools grow. Rates may become more stable as carriers become more experienced at predicting rates in the new marketplace, as coverage expands, and as the pools get larger and therefore more stable and predictable. Some of the plans that left the marketplace were part of a larger parent company that still offers coverage, and Virginia has a competitive market with a substantial number of carriers.
Mr. Shea explained that the ACA Risk Corridor program is a temporary program to help stabilize premiums due to underpricing or overpricing. Carriers that make more than the targeted amount pay into the program, and carriers that make less than the targeted amount receive money from the program. Payouts must equal pay-ins. For 2014, carriers only received 12.6% of what they requested. Any shortfall from 2014 (about $2.5 billion) will be paid from the revenue collected in 2015 before any carriers are paid for any 2015 shortfall.
Mr. Shea reviewed various potential rate change scenarios that demonstrate that rate changes from pre-2013 to post-2013 depend on a number of factors. Because carriers can no longer adjust prices due to rating variables, the change in rates will vary greatly between policyholders depending on what advantage or disadvantage the policyholders received from the rating variables. He noted that, as rate change statistics indicate, there is not much change year to year in the most popular plans and the individual market has much higher deductibles in the most popular plans than the small group market.
D. Virginia Health Information (VHI): All-Payer Claims Database (APCD) - Michael Lundberg, Executive Director of VHI, and Kyle Russell, the APCD Program Manager, presented at both the September 27, 2016, and January 5, 2017, meetings of the HIRC.
VHI is a nonprofit organization with a board of directors comprised of representatives from a diverse group of health care stakeholders, including businesses, consumers, hospitals, health insurance companies, physicians, nursing facilities, and state officials. VHI publishes health information on a wide variety of topics such as HMOs, patient satisfaction, long-term care, and obstetrical services. This information is made available to the public on the VHI website, www.VHI.org.
Virginia's APCD, established in 2012, is a voluntary database that provides a centralized information hub. The APCD is an aggregation of paid health insurance claims. Forty percent of the costs to operate the APCD are paid by the insurance companies that participate. The APCD has been used to monitor pharmacy use across the state and in comparison with national and Virginia benchmarks, which has been helpful in understanding opiate use.
The Healthcare Pricing Transparency report, developed in 2008, details average costs by site of care, including physician offices, surgical centers, hospital inpatient facilities, and hospital outpatient facilities. The current health care pricing report provides information about the various procedures and a breakdown of cost by site of care and provides the average allowed amount for each service involved in the procedure (e.g., facility, surgeon, anesthesiologist, etc.).
Mr. Lundberg and Mr. Russell returned at the January 5, 2017, meeting to present information from VHI's updated 2015 Healthcare Pricing Transparency report. This report is based on data from the APCD and has regional breakdowns as well as site-of-care breakdowns.
Mr. Russell explained that the Healthcare Pricing Transparency report is designed to give consumers information on pricing as well as information on the medical procedure and risks thereof. On VHI's website, the consumer can find general information and pricing information for 31 procedures. The consumer can look at pricing information by geographical region or by service provider. The user can also get a detailed breakdown that shows what is driving the pricing information (facility costs, physician costs, drug costs, etc.). Mr. Russell demonstrated that pricing differences are sometimes regionally driven and sometimes driven by the type of provider.
In response to a question from Delegate Ware about why the facility costs varied so much between services and regions, Mr. Russell explained that there is no one-size-fits-all rule and there is not one location or service provider that is always more or less expensive. Delegate Ware and Senator Dance asked if VHI could explain what factors influence the price differentials. Mr. Russell explained that the data they gather is meant to be informational for the consumer and VHI does not analyze why the numbers are the way they are. Senator McDougle noted that it would be helpful to see the volume of services as well as cost, because this is important to put the data in context. Mr. Russell said that this information is coming in the future.
E. Role of Pharmaceuticals in the Marketplace - Sharon Brigner, Deputy Vice President of State Advocacy for PhRMA, provided the HIRC with an update on the role of pharmaceuticals in the marketplace.
There has been widespread discussion about the cost of medicines. Brand prescription drugs were only 2.8% of the total 2015 Virginia Medicaid spending; 4.2% of the total was from generic prescription drugs. A massive spike in prescription medication spending growth occurred in 2014, due to FDA approval of more than 40 drugs, including a cure for hepatitis C; almost no new drugs going off patent; and about 15 million people receiving drug coverage as a result of the Act. Government actuaries project that growth in prescription drug spending will remain between 5–7% through 2024.
Average net brand price growth is lower than list price growth as a result of increased rebates. List prices also exclude government-mandated discounts. If a drug is covered by Medicaid, drug manufacturers pay a rebate to the state and the Centers for Medicare and Medicaid Services based on a statutory formula. In 2015, drug manufacturers paid Virginia rebates totaling $419 million.
The average dollar increase in monthly premiums for 2016 individual small group plans was $25.26, and only $3.29 was from prescription drugs; $14.12 was due to hospital and professional costs. Overall growth in retail drug prices has been in line with other health care prices.
According to Ms. Brigner, adherence to medicines lowers total health spending for chronically ill patients, and prescription drugs are often the most cost-effective means of preventing and treating disease. A 2013 IMS Health study estimated that the U.S. health care system could save $213 billion annually if medications were used properly. Delegate Yancey asked how the health care system can get people to finish their medications. Ms. Brigner responded by describing how Minnesota has employed comprehensive medication management through Medicaid. She explained that comprehensive medication management involves counseling the patient as to the importance of finishing the medicine as well as completing regular checkups to monitor the effects of the medicine and discuss the importance of managing medicine responsibly. This can be costly to implement but can lead to cost savings. Discharge counseling with the patient can also be a strong tool for ensuring medicine management.
F. Changes to State Corporation Commission Rules - The BOI is proposing changes to the State Corporation Commission's (SCC) Rules Governing the Reporting of Cost and Utilization Data Relating to Mandated Benefits and Providers. The first change is that the SCC's report will be biennial rather than annual but the carriers will still report to the SCC annually. The second change is that the carriers required to report to the SCC will be based on the number of covered lives rather than the number of premiums written. The proposal has gone out for comment, which will be considered, and the SCC will then choose whether or not to adopt the changes.
G. Certificate of Public Need - During the January 5, 2017, meeting the HIRC received testimony on proposed reforms to the Certificate of Public Need (COPN) process in the Commonwealth.
John B. Syer, RVP of Provider Solutions for Anthem, testified about the need to reform COPN. Mr. Syer works primarily with provider contracting and therefore works with providers in all types of care. He testified that health care insurers depend on competition. COPN impacts costs because consolidation of services allows for higher reimbursement. Self-insurance is particularly influenced when providers raise their costs.
Anthem, which amounts to about 35% of the insurance carrier market share in the Commonwealth, supports COPN deregulation as proposed in Delegate O'Bannon's House Bill 193 from the 2016 Regular Session. Mr. Syer testified that enabling competition would lead to more affordable care because existing providers would have to compete with lower cost alternatives. Many services are much cheaper in ambulatory or freestanding providers rather than in hospitals, and with reforms the hospitals would have more of an incentive to compete.
Dr. John Bowman, the Chief Medical Officer for OrthoVirginia, introduced himself as a physician who knows firsthand how patients need reform. He testified that the existing COPN program is outdated. It was created at a time when medical necessity guidelines were not in place. Many providers do not provide certain services because it is very expensive to even go through the COPN process. Dr. Bowman testified that his most recent application cost about $300,000 in legal fees and used 100,000 hours in staff hours. Hospitals also have those costs, which have to be recovered from patient care fees.
Dr. Bowman told a personal story about when he needed hand surgery and it cost him $22,000 out of pocket because he had a high deductible plan. Now many people have high deductible plans so they are shopping around to find providers with low prices. This is causing backlogs for cheaper providers.
Physicians are required to do charity care through COPN. Dr. Bowman stated that he is not opposed to a reform of COPN that would still require charity care. He testified that reforming COPN would lead to improved choice, would help people shop for service providers, and would reduce out of pocket costs. Under the current COPN structure, many people have high deductible plans because that is all they can afford, so the providers have more write-offs and unpaid costs. Some people are even opting not to have care rather than paying the high out of pocket costs.
H. Direct Primary Care - House Bill 685, introduced by Delegate Landes, and Senate Bill 627, introduced by Senator Stanly, were identical as introduced. SB 627 was continued to 2017 in the Senate Commerce and Labor Committee on a vote of 13-2. HB 685 passed the House unanimously and passed the Senate with a substitute on a vote of 23-17. The House agreed to the Senate substitute on a vote of 87-8. The Governor proposed recommendations, which were rejected by the House on a vote of 34-66, and the bill was vetoed by the Governor on May 20, 2016. As introduced, these bills provided that the Commonwealth's insurance laws do not apply to direct primary care agreements. The measure further provides that (i) a direct primary care practice is not subject to the jurisdiction of the State Corporation Commission (SCC) and is not required to obtain a certificate of authority or license to market, sell, or offer to sell a direct primary care agreement; (ii) entering into a direct primary care agreement shall not be considered to be engaging in the business of insurance; and (iii) a direct primary care agreement is not a contract of insurance and is not subject to regulation by the SCC. The bill defines a "direct primary care agreement" as an agreement entered into between a health care provider and an individual patient under which the provider charges a predetermined fee as consideration for providing primary care to the patient, subject to certain conditions. As passed, HB 685 also prohibited a direct care practice from submitting a claim to an insurer with respect to services provided to direct primary care patients covered by their direct primary care agreement, unless the services are outside the scope of the agreement.
Dr. Jay Keese, Executive Director of the Direct Primary Care Coalition, introduced Direct Primary Care (DPC) as the practice of having a contract for health services directly between provider and patient or patient employer. He testified that DPC decreases the administrative burden and provides a significant improvement in preventative care. He testified that it leads to better outcomes and lower costs. Bills like those proposed in 2016 have been passed in 17 states. Such legislation clarifies that DPC is not insurance and provides patient protections. The proposed legislation is important even though nothing in the current law prohibits DPC because it is hard for employers to make DPC agreements without clarity regarding it in the law. There are currently DPC practices are in 48 states.
Dr. Keese introduced Dr. Garrison Bliss, Chairman of the Direct Primary Care Coalition. Dr. Keese is a physician with a DPC practice in Washington. He testified that the quality of health care in the nation is declining and the price is getting higher. The burden of health care is on the patients and the providers. He argued that service providers are forgetting that they work for the patient, not the insurance provider. Insurance carriers are encouraging service providers to work in certain ways but those ways are not the always in the best interest of the patient. As the importance of primary care is declining, the incentives to become a primary care doctor are as well. Physicians are afraid to participate in DPC agreements because they worry that the insurance commissioner will come for them and they do not know if the business model will work. He stated that the dangers of DPC have been overrated and such providers have led to a 20–30% reduction in the costs of health care. Patients still need insurance, but DPC allows patients to have another choice to get better care that is not structured around the insurance company.
Dr. Maura McLaughlin, Blue Ridge Family Practice, owns a DPC practice in Charlottesville. She testified that she began that practice because she wants to care for patients regardless of ability to pay. She found that patients are not getting basic care because they cannot afford their deductible. In a traditional practice, they would be paying hundreds of dollars for labs and appointments. She provided an example where she billed a patient $38 for four tests and the same tests cost him $1,300 last year with insurance. DPC can also help encourage primary care and preventative care. Dr. McLaughlin stated that small business owners are interested in offering direct primary care to their employers.
Jed Constantz, Chief Operating Officer of Employer Advantage Health Care Solutions in Lynchburg, represents large self-funded employers who see DPC as a way to offer a better relationship with primary care. People are increasingly less likely to see a primary care provider and are more likely to receive fragmented care from emergency rooms and emergency clinics. The advocacy power of doctors in DPC practices is great, because the care is personalized to the patient, which increases health literacy and education of the patient. Otherwise, individuals are more likely to waste money trying to figure out the health care system. Mr. Constantz stated that the employer community would love if they had the clarity in the law that would allow them to pursue DPC more aggressively.
In a discussion following these presentations, the speakers clarified that DPC is not right for every doctor or every patient but it can be a good option for certain participants in the health care system. Patients still need insurance for unexpected costly emergency events, but DPC is about saving costs on the primary care side, and if the patient does not need emergency care, it is very helpful. With DPC, the provider does not have administrative costs, and there are lower health care costs, so it saves costs for the patient and the physician.
Commissioner Cunningham asked if the DPC providers had any criteria for patients. Dr. McLaughlin said that she does not but there are some things that she cannot do at her practice, so she advises her patients of those limitations. Dr. Bliss stated that people who most want DPC are those who need the most involved care. Doctors who work in DPC practices seek people who need their help rather than traditional practices that pursue healthy people with good insurance. Therefore, doctors are encouraged to provide excellent care and treat patients with serious medical needs.
Dr. Thomas Epps testified that DPC is a great way for businesses to collaborate with physician groups. DPC practices have saved costs and made people healthier. Washington has a way to administer DPC through Medicaid, so that might be something to look into in Virginia.
Doug Gray, Executive Director of the Virginia Association of Health Plans, stated his opposition to the proposed legislation. He explained that he does not have a problem with DPC medicine, but he argued that there is not a need for the bill. He testified that the proposed legislation ensures that the consumer will have no recourse or place to complain that functions like the SCC does for insurance companies. The Washington Code has more restrictions on the provider than does this proposed legislation.
Mr. Gray testified that this is unfair to the consumer, because the only recourse to an issue with a DPC practice is filing a lawsuit. Other states establish mechanisms for filing complaints against the providers in their statutes. DPC is also problematic because preventative services are already paid for through the patient's insurance and these will be duplicated in DPC. A patient cannot have a catastrophic insurance plan unless he meets certain rare qualifications. Based on a discussion led by Senator McDougle, stakeholders indicated that some concerns could be addressed by inserting consumer protections in the proposed legislation.
Materials provided by speakers at the HIRC's meetings in 2016 may be found on the HIRC's website at http://dls.virginia.gov/commissions/hir.htm?x=mtg.