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UltraLink - FOCUS...on benefits
September 2004
Health Plan Mergers Challenged
Two separate mergers involving major health plans have been blocked, at least temporarily, by regulatory and legal challenges.
After approval by the federal government, nine states, Puerto Rico and California's Department of Managed Health Care, California Insurance Commissioner John Garamendi refused to approve the acquisition of Wellpoint Health Networks by Anthem, Inc. In his July 23d decision, Garamendi objected to the financial impact of the transaction on California policyholders, charging that it would drain $400 million per year from the state for at least 3 year to finance the takeover. Of particular concern to Garamendi are the proposed executive payouts associated with the acquisition, which are projected at between $200 million and $600 million. "There is no justification for such...largesse, while nearly 6 million Californians are uninsured," said Garamendi.
In response, Anthem filed suit against Garamendi on August 2nd, asserting that he failed to follow California law, overstepped his authority and based the decision on personal beliefs.
Legal analysts predict a lengthy court battle, with little precedent to draw on. Garamendi has stated that he would reconsider his decision if Anthem would agree to invest $600 million in health programs for low-income Californians.
Meanwhile, a Superior Court judge in New Jersey has stayed the approval, by the New Jersey Commissioner of Banking and Insurance, of United HealthCare's acquisition of Oxford Health Plans. The Medical Society of New Jersey initiated the court appeal, asserting that the Commissioner approved the merger without proper consideration of evidence submitted by the Medical Society that the merger would harm policyholders and providers. A full trial lasting several months is expected.
More on Patient Safety
A recent study by Health Grades, Inc., a hospital rating firm, suggests that the number of deaths due to medical errors may be twice that reported by the Institute of Medicine in 1999. Methodological differences between the two studies include use of a "failure to rescue" code by the Health Grades team, a code that refers to errors in diagnosis and treatment of illnesses, such as pneumonia, that occur after an operation. Authors of the IOM study questioned inclusion of that code, saying it is broad and subjective. Other leading causes of preventable deaths in the hospital in the Health Grades study included infected bed sores and postoperative blood clots, infections and respiratory failure.
On a more positive note, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) imposed rules, effective July 1, 2004, aimed at preventing wrong-site surgery. The rules require surgeons to confer with patients just before surgery and sign "yes" or their initials on the surgical site. Surgical teams must also follow a standard procedure in the operating room prior to starting surgery that involves the entire team in verifying the patient's identity, the operation to be performed and that the required equipment is available and functioning. Although wrong-site surgeries represent only a small percentage of all medical errors, they are felt to be particularly indefensible since they are easily prevented.
Retiree Drug Benefits Must Qualify for Medicare Subsidies
Recent Medicare legislation mandates prescription drug coverage for all beneficiaries as of 2006. In an effort to encourage employers to continue offering retiree health benefits, including drug coverage, the legislation includes provisions for federal subsidies to those employers who do so. Consumer advocates have charged, however, that the law, as written, will allow some employers to provide less generous drug benefits than they currently do and still receive the federal subsidy.
In response, the Bush administration announced that, in order to qualify for the subsidy, employers will be required to demonstrate that the benefits provided are at least equivalent to the Medicare benefit. While this requirement will help to ensure that employers do not realize a "windfall" from the subsidy, concerns remain about whether employers will continue to provide the drug benefit at all.
The Centers for Medicare and Medicaid (CMS) have identified a number of other complexities related to administering the subsidy program. In the proposed rules for operationalizing the legislation, CMS has asked for feedback on possible methods for doing so; comments may be submitted until October 4.
Additional Guidance on Health Savings Accounts
The U.S. Treasury Department and Internal Revenue Service have issued their third round of guidance this year on health savings accounts (HSAs). As summarized in California HealthLine (7/26/04), the key points of this guidance include:
- Otherwise eligible employees who belong to employee assistance plans, disease management plans or wellness programs would not be disqualified from HSAs;
- Mistaken distributions from an HSA could be repaid to the account without penalty or tax;
- Rules for flexible spending salary deductions do not apply to HSA salary-deducted contributions;
- Employers cannot restrict HSA access to employees on the grounds that employers do not believe expenses qualify as covered health care;
- HSA funds can be used for preventive medicine, including for weight-loss and tobacco cessation programs; and
- Seniors who are not enrolled in Medicare can use HSAs.
Details of this guidance are in Treasury Department Notice 2004-50, which, along with other HSA-related guidance, can be viewed at www.treas.gov/offices/public-affairs/hsa/technical-guidance/.
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