With President Obama Re-elected, Preparation For ACA Coverage Expansion Accelerates

The presidential election resolves uncertainty about the future of the health reform law, and the administration is expected to move full steam ahead to implement its central coverage expansion provisions.

Now that President Barack Obama has been re-elected, biopharma companies should ready themselves for a flood of regulations and other activities in the coming weeks geared toward implementing the coverage expansion provisions of the Affordable Care Act through state-based insurance exchanges.

State preparations for ACA-directed Medicaid program expansions are also expected to pick up, though the pace of those activities may be somewhat slower than activities around the exchanges.

Obama’s re-election Nov. 6 resolves uncertainty about the future of the health reform law, and the administration is expected to move full steam ahead to implement its central coverage expansion provisions.

President Obama At His Re-election Celebration Nov. 7

Under the law, the insurance exchanges, where each state will provide information on plans available for purchase by individuals in the state, are to be operational by Jan. 1, 2014, with member enrollment beginning in October 2013. Expansion of state Medicaid programs to individuals with annual incomes of up to 133% of the federal poverty level is also set to begin in 2014. Together, the private insurance available through exchanges and the expanded Medicaid programs are expected to provide coverage to 30 million currently uninsured individuals by 2022, according to the Congressional Budget Office.

Meeting the 2014 deadline will require some scrambling. The chance that Republican presidential candidate Mitt Romney would repeal the law in early 2013 had he been elected led a number of states to move slowly, or not at all, on setting up an exchange or preparing for broader Medicaid eligibility. As of late September, fewer than 20 states had submitted information to HHS on the insurance plan that would serve as their state benchmark for plan benefits, although another 17 had made some progress toward selecting a benchmark (Also see "State “Essential Health Benefit” Benchmark Plans Include “Fairly Robust” Formularies So Far" - Pink Sheet, 28 Sep, 2012.).

And HHS has yet to release key implementing regulations for the exchanges. The delay has led to speculation that the administration wanted to wait until after the election before issuing the rules, given the political sensitivity surrounding the health reform law (see sidebar for overview of upcoming regulations affection biopharma).

Importantly for biopharma, the upcoming exchange regulations will include the rules governing the “essential health benefits” that must be offered by individual and small group plans sold through the exchanges. The EHB rules are expected to address formulary standards for exchange plans. Stakeholders are watching closely to see whether the rules will reverse earlier pre-regulatory statements by HHS proposing that plans cover only one drug per category (Also see "House Democrats Raise Drug Access Concerns With HHS Standards For Essential Health Benefits" - Pink Sheet, 13 Feb, 2012.).

Also upcoming is the Nov. 16 deadline for states to submit their plans for an exchange to HHS. The exchange blueprints will describe whether the state will operate the exchange alone, whether it envisions a partnership with the federal government, or whether it will rely on the federal government to establish an exchange. The ACA requires the federal government to step in if a state does not move to set up an exchange by 2014.

Medicaid Expansion

As far as the expansion of Medicaid goes, prospects for state activity have been complicated by the Supreme Court decision in June on the constitutionality of key provisions of the ACA. In its ruling, the court narrowed the government’s ability to withhold Medicaid payments to induce states to expand eligibility for their Medicaid programs in accordance with the law, holding that states would only lose new funds if they didn't comply with the new requirements, rather than all of their Medicaid funding (Also see "Medicaid Expansion To Be Reduced By 3 Mil. Under Supreme Court’s Ruling, CBO Says" - Pink Sheet, 24 Jul, 2012.).

State budget constraints are also a real concern. Republican governors in Texas, Florida, Mississippi, South Carolina, Louisiana and Georgia have cited the cost of the added coverage as the reason they will not participate in the Medicaid expansion. But other states have not announced their plans, and HHS has not set a deadline for states to commit to expansion.

On the other hand, the federal government is required to fund 100% of the cost of expanding Medicaid eligibility through 2016 and cover at least 90% of the cost thereafter. The federal payments offer states much needed revenue for hospitals and other health care providers, which governors “may find it hard to say ‘no’ to without suffering politically,” Avalere Health CEO Dan Mendelson said in an interview.

He predicted there will be a “strong push” in the White House to meet the 2014 deadline, observing that President Obama “does not have long to institutionalize” the changes in Medicaid, as well as the new exchanges, before his new term is up.

Deficit Talks And Biopharma

The insurance coverage expansion activities will proceed as lawmakers intensify discussions about reducing the federal deficit. That has led to some speculation that there is interest in scaling back the premium subsidy payments ACA establishes to help lower-income individuals purchase insurance through the exchanges. Under the law, those earning up to 400% of the federal poverty level are eligible for subsidies.

However, many health care observers are not expecting the idea to garner serious momentum. “I don’t think the Democrats will bend far on that,” said National Health Council Chief Operating Officer Marc Boutin. A reduction in subsidies would reduce individuals’ motivation to buy insurance coverage. Thus “it feels very unlikely” that the White House would undermine President Obama’s “most important legacy” in that way, Mendelson agreed.

More likely is that deficit reduction talks will resurrect other ideas for raising revenues, such as mandated drug rebates in Medicare Part D for beneficiaries who are also eligible for Medicaid. Another oft-cited idea for generating cost savings in government drug expenditures is shortening the exclusivity period for innovator biologics from 12 years to seven years in the rules for biosimilars.

The drug industry is well-versed in opposing those ideas and in recent months has been actively lobbying against them by arguing that such policies threaten innovation.

In a Nov. 7 statement on the elections, the Pharmaceutical Research and Manufacturers of America said “as Congress and the administration address health care and fiscal issues in the coming months, the biopharmaceutical research sector recognizes the importance of securing the country’s financial future and supports solutions that foster innovation and economic growth. It is imperative that public policies preserve and sustain continued medical progress, which improves lives and is an engine of economic development.”

It may be that policymaker discussions on a plan for reducing the deficit continue into the first half of 2013, despite the current end-of-year deadline for federal budget sequestration, expiration of Bush-era tax credits and the pending “fiscal cliff.” A number of observers expect that legislators and the White House will agree to push back the deadline while they work on a permanent solution.