Formulary design, individual mandate key to healthcare reform law

January 28, 2011

With the healthcare reform law repeal exercise behind them, Congressional leaders can get down to focusing on ways to eliminate or repair some of the more contentious reform provisions and to modify others, according to policy watchers.

With the healthcare reform law repeal exercise behind them, Congressional leaders can get down to focusing on ways to eliminate or repair some of the more contentious reform provisions and to modify others, according to policy watchers.

The 245-189 vote back on January 19, was largely along party lines, and fulfills Republican promises to Tea Party candidates and other members who opposed the healthcare reform law. The debate for both parties in the days leading to the vote was notably tame in the wake of the Tucson shootings.

“No one expects it [the House attempt to repeal the law] to ever become law, due to strong opposition in the Senate, and even more so in the White House,” according to Formulary Policy Watch columnist Jill Wechsler, a Washington-based reporter specializing in federal and state healthcare issues.

“As most suspected, the repeal vote easily passed the House of Representatives,” Jeff Smokler, senior vice president at Powell Tate, the Washington, D.C.-based public affairs division of Weber Shandwick Worldwide, told Formulary. “While it is unlikely that an official repeal vote will occur in the Senate, ongoing debate of the law will spill into this year’s appropriations process. Republicans who want to roll back key components of the law will seek ways to defund various elements. This creates an additional headache for industry stakeholders, who must move forward with implementation but still pay some attention to what is happening in terms of rolling back some of the reforms.”

Since repeal is unlikely, the biggest issue for managed care and hospital decision-makers is how new requirements on medical loss ratio (MLR) impact managed care and other stakeholders’ decisions on formularies, experts agreed.

“With a pretty narrow definition of ‘quality’ as a backdrop for meeting the new MLR requirements, health plans and others will more than ever be looking at getting the very best outcomes for the best value,” Smokler said. “I suspect that the new requirements will cause health plans and hospitals to totally re-evaluate the way they design formularies. In many ways, this is a new era for healthcare, and I imagine that that means new ways of doing business. With drug spend being as large as it is, formulary design is an enormous part of the business.”

Healthcare stakeholders should be planning ahead for provisions 3 or more years down the road but also be open to changing strategy if those provisions that come on line in the future change because of future legislation or regulatory developments, according to Steve Wojcik, vice president of public policy at the National Business Group on Health, a non-profit association of more than 300 large US employers.

“Certainly some of the tax provisions warrant another look,” Wojcik said. “In addition, we should step up the focus on payment and delivery reforms, which are the key overlooked area in the law. They are ultimately what needs to be tackled to eliminate waste, overuse, and overpayment, and to make sure we have the money to cover all the needed care for those who have no coverage and may soon have access to coverage and care because of the law.

“If we don't radically change how we pay hospitals and physician specialists in particular, the government will soon find that it cannot afford the promised expansion of Medicaid or the generous tax credits to keep coverage affordable,” he continued.

Individual mandate key

The biggest threat is the elimination of the individual mandate, Smokler believes. “Such a move would derail the entire legislation,” he said. “And there is no alternative to the mandate. Without it, the entire bill fails.”

If the reform law becomes ineffective, as many as 129 million Americans with pre-existing medical conditions would be at risk of losing health insurance or denied coverage altogether, according to a new report from the Department of Health and Human Services.

“No one, neither Democrats nor Republicans nor insurers, believes that the individual and small group market reforms, including this one, should be repealed,” said Wojcik. “There was a broad consensus right from the start of last year’s debate that these reforms were needed along with the individual mandate in order to have a functioning individual and small group market that offers affordable coverage. Additionally with so many people having pre-existing conditions-many of which are preventable, chronic conditions-we all can do better to help people stay healthier so that they can avoid future healthcare crises.”

However, according to Smokler, the health insurance industry voluntarily offered to end the practice of denying coverage based on pre-existing conditions long before it became a pillar of the reform law.

“This is not an issue that industry is being forced to adopt, rather it is a reform that all stakeholders agree must occur,” Smokler said. “The trick, though, is making sure that these kinds of major insurance reforms are coupled with a sustainable requirement that all people purchase health insurance. I’ve heard some people argue that the latter is just a boon to the insurance industry, in terms of new members. That is not the case. The fact is that insurers cannot cover everybody regardless of health status if healthy people are not purchasing coverage to balance out the costs of the sick. That is the very nature of insurance.”

Smokler suggested that watching what happens to challenges to the individual mandate is critical to the success of reform.

“If the mandate is eliminated yet insurers must still accept all applicants, then health plans will either go out of business or their members will see premium increases like never before,” he said. “The real risk to the 129 million people with pre-existing medical coverage-and the real risk to the hundreds of millions of Americans with insurance today-is the elimination of the individual mandate.”