Kelly Brantley. Vice President Avalere Health
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1 Kelly Brantley Vice President Avalere Health
2 Health Policy Outlook Avalere Health An Inovalon Company February 8, 2018
3 Agenda Recap The Tax Cut and Jobs Act Individual Market Outlook Medicaid Waiver Reforms Copay Optimization Programs Midterm Elections Outlook 3
4 Repeal and Replace Efforts Consumed the 2017 Congressional Agenda 2017 Recap TIMELINE OF KEY 2017 REPEAL AND REPLACE ACTIVITIES Trump Signs Executive Order on ACA Enforcement Senate Passes Resolution to Repeal the ACA Through Budget Reconciliation AHCA Passes BCRA Fails ORRA Fails HCFA Fails HHS Announces 90% Cut to 2018 Federal Navigator Funding Senate Pulls GCHJ Ahead of Potential Vote Trump Signs Executive Order on Healthcare Choice and Competition White House Announces End to Federal CSR Payments Alexander- Murray Release Market Stabilization Package Executive Action House Action Senate Action Signed into Law Deadlines Individual Mandate Repealed Sept 30 Nov 1 Jan 4 Jan 20 May 4 July Aug 31 Sept 20 Oct 12 Oct 13 Oct 18 Dec 22 Last Day to Pass ACA Repeal & Replace Under Reconciliation Shortened OEP Begins ACA: Affordable Care Act; AHCA: American Health Care Act; BCRA: Better Care Reconciliation Act; HCFA: Health Care Freedom Act; ORRA: Obamacare Repeal Reconciliation Act; GCHJ: Graham Cassidy Heller Johnson ACA repeal bill; HHS: U.S. Department of Health and Human Services 4
5 The Tax Cut and Jobs Act of 2017 Will Affect the Healthcare of Patients via Several Mechanisms Tax Reform Individual Mandate After December 31, 2018, the ACA s individual mandate is repealed. Medical Expense Deduction In 2017 and 2018, medical expenses exceeding 7.5% of an individual s adjusted gross income are tax deductible. Beginning in 2019, the threshold increases to 10%. Orphan Drug Tax Credit As of January 1, 2018, the Orphan Drug tax credit for developers of rare disease drugs was reduced from 50% to 25% of qualified clinical trial costs. Charitable Giving As of January 1, 2018, the percentage limit for charitable cash donations by an individual taxpayer to public charities and certain other organizations increased from 50% to 60%. H.R. 1, The Tax Cut and Jobs Act. December 18, Available at: 5
6 CBO Indicates Repeal of the Individual Mandate Will Lower Deficits and Increase Uninsurance Individual Market $338 Billion 4 million 13 Million Reduction in Federal Deficits Increase in Number of Uninsured by 2019 Increase in Number of Uninsured by 2027 Premiums and Stability / CBO estimated the nongroup market would remain stable over the next 10 years, but premiums would increase by about 10 percent in most years of the decade. CBO. Repealing the Individual Health Insurance Mandate: An Updated Estimate. November
7 Exchange Enrollment Rates Declined for 2018, Due in Part to Shortened Open Enrollment Period Individual Market HealthCare.gov Sign-Ups During Open Enrollment, Includes Auto-Reenrollment* Total Enrollment (Millions) Percent of OEP Elapsed 2018 (Current) *2016 and 2017 enrollment figures include auto-reenrollment effective December 15. Note: 2018 OEP for the FFE ended on December 15, Sources: Avalere analyzed HHS publicly available biweekly enrollment reports published for the 2016, 2017, and 2018 OEPs. 7
8 Over Half of Counties Will Have A Single Issuer, a Substantial Jump from 2017 Individual Market ISSUER PARTICIPATION BY COUNTY IN FFE STATES, % 32% Percent of Counties 33% 27% 56% 3+ Issuers 2 Issuers 1 Issuer 35% FFE: Federally Facilitated Exchange Source: Avalere PlanScape, a proprietary analysis of exchange plan features, November Avalere analyzed data from the FFE Individual Landscape File released October
9 AHP Proposed Rule Is Administration s First Step to Introduce New Insurance Options in the Market Individual Market On January 4, the DOL issued a proposed rule to expand access to AHPs and make it easier for AHPs to avoid some state and federal coverage and benefit mandates Proposed AHP Changes AHP Eligibility Ensures sole proprietors who are actively engaged in a legitimate trade or business have access to AHP coverage AHP Large Group Status Requires AHP members to either: 1) be in the same trade, industry, line of business, or profession or 2) have a principal place of business in same state or metro area (even if crosses state lines) Anti- Discrimination Prohibits exclusion of any employee or group, prohibits premiums based on health risk, and applies nondiscrimination provisions of the ACA and HIPAA ACA: Affordable Care Act; AHP: Association Health Plan; DOL: Department of Labor; EO: Executive Order; HIPAA: Health Insurance Portability and Accountability Act; Department of Labor. Definition of Employer under Section 3(5) of ERISA -- Association Health Plans. 9
10 While Entitlement Reform Is Unlikely in 2018, Changes to Medicaid Will Occur via Waiver Activity Medicaid Waivers Eligibility Reduce expansion eligibility Enrollment Time limits Lockout periods Cost Sharing Higher premiums / cost sharing Program Incentives Work requirements Wellness programs Drug Coverage Exclude / cover fewer drugs Plan Design Alter benefit package Restrict networks 10
11 The Trump Administration Is Reconsidering Flexibilities Previously Denied Medicaid Waivers Category Waiver Component Denied Pending Approved Eligibility Enrollment Reduce expansion eligibility to 100% FPL; maintain enhanced match Indefinite disenrollment until all Medicaid debts are paid Time limits on Medicaid enrollment (e.g., 4-5 years) AR, MA OH WI AZ, UT, WI, KS, ME Work Requirement Work requirement as a condition of eligibility NH, PA AR, AZ, KS, ME, MS, NC, NH, UT, WI KY, IN Premiums may be greater than 2% of income IN IN Premiums / Cost Sharing Mandatory premiums for individuals with incomes <100% FPL OH ME, NC, WI KY Total cost sharing up to 7% of income MI Prescription Drug Coverage Closed formulary; exclude drugs with inadequate evidence of clinical efficacy MA, AZ FPL: Federal Poverty Level Note: Mississippi s waiver has not been submitted to CMS yet. The state intended to submit in December. 11
12 State Waiver Changes May Reduce Access but Offers Opportunities to Engage with States Medicaid Waivers KEY WAIVER IMPLICATIONS Lower Enrollment Patient Affordability Less Generous Drug Coverage Decreased eligibility Work requirements Lockout periods / disenrollment Greater required cost sharing Higher premiums Health savings accounts (HSAs) Allow coverage of fewer drugs More strict use of utilization management PATIENT COMMUNITY CONSIDERATIONS Decreased Patient Access Opportunity for State-Level Engagement 12
13 Copay Optimization Programs Limit the Effect of Manufacturer Copay Assistance Copay Assistance Manufacturer copay assistance has traditionally applied towards a member s deductible and/or OOP maximums To limit their payer/employer customers liability for costs above a member s deductible/oop maximum, PBMs increasingly are implementing Copay Optimization Programs Model A (More Common): Accumulator Adjustment Program PBMs will track copay assistance and adjust the accumulator (deductible and OOP max) to apply the amount the member (versus the third party) is paying OOP Model B: Maximum Copay Allowance Program PBMs will adjust a member s copay for select specialty drugs up to the maximum manufacturer copay allowance As Copay Optimization Programs are expected to grow in 2018, the patient community will need to develop a strategic approach to address and counteract their impact. OOP: Out-of-Pocket costs are expenses not reimbursed by insurer and can include deductibles, coinsurance, and copayments 13
14 Early Legislative Deadlines and November Elections Will Likely Shape 2018 Environment Midterm Outlook TIMELINE OF 2017/2018 KEY DATES AND EVENTS Early Feb: President s FY2019 Budget Request Legislative Deadline / Action Administrative Activity Exchange Market Activity Dec 20: Congress Passes Tax Reform Dec 15: 2018 Exchange Open Enrollment Period Ends Dec 21: Congress Passes Stop-gap Government Funding Package Feb 7: Senate Unveils 2-Year Budget Agreement* Jan 16: Comments Due on Medicare Part C/D Proposed Rule Jan 22: Congress Passes Stop-gap Government Funding Package with 6-year CHIP Reauthorization Jan 29: Alex Azar Sworn in as HHS Secretary March: Expected Omnibus Bill Early March: Expected Debt Limit Nov 6: Midterm Elections Nov 1: 2019 Exchange Open Enrollment Period Begins Mid/Late 2018: Potential Action on Market Stabilization Mid/Late 2018: Potential Administrative Action on VBC, Pass Through Rebates CHIP: Children s Health Insurance Program; VBC: Value Based Contracting *Expected to pass by midnight on February 8 14
15 The 2018 Midterm Elections Will Dictate Future Activity on Numerous Healthcare Policies Midterm Outlook Status Quo Republicans retain control of Congress Partially Divided Government Democrats control one of the two houses of Congress Renewed efforts to repeal/replace the ACA Potential movement on entitlement reform No legislative options for repeal/replace activities Current Congressional oversight efforts curtailed Divided Government Democrats sweep both houses of Congress Congress broadly changes priorities on healthcare policy Opportunity to compromise in certain areas (e.g., drug pricing) Down Ballot Changes: State-level election results could influence current activity on drug pricing policies and Medicaid waivers. 15
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