Briefings

On May 23, 2019, Senators Patty Murray (D-WA) and Lamar Alexander (R-TN) released draft legislation which, if enacted, would be the largest federal overhaul of the health insurance market since the passage of the Affordable Care Act (ACA) in 2010. While many health care reform bills have come and gone in the last nine years, this one is notable for its focus on areas where there is consensus between partisans on the right and left. Because it is being proposed by the chair and ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, it is being hailed as a serious bipartisan effort on reducing health care costs.

The 165-page draft bill, which has not yet been formally introduced in Congress, is titled the “Lower Health Care Costs Act,” and is comprised of five sections addressing surprise medical billing, prescription drug pricing, transparency, public health, and health information.

The section on medical billing would require that emergency charges to a patient are counted toward the patient’s in-network deductible, hold patients harmless from surprise medical bills, and bar balance billing for more than the in-network cost-sharing amount for emergency care. Post-stabilization, patients that entered a facility through the emergency room would have to be given advance notice of out-of-network care, along with an estimate of out-of-network costs and referrals for alternative options for in-network care.

While deferring to state laws regulating fully-insured plans, the bill offers three alternatives for self-insured plans to resolve surprise bills:

• In-Network Guarantee: The first option would require that an in-network facility guarantee to patients and plans that every practitioner in the facility will be considered in-network. Providers and plans have thirty days to resolve the rate for out-of-network costs, or the plan must pay the facility and practitioner based on the median contracted rate for services in that geographic area.
• Independent Dispute Resolution: The second option provides for an arbitration process for surprise bills of more than $750. For bills of $750 or less, the plan would be required to pay the practitioner or facility based on the median contracted rate for services in the geographic area.
• Benchmark for Payment: In the third option, the plan would be required to pay the practitioner or facility based on the median contracted rate for services in the geographic area.

Finally, this section would require that bills for air ambulance trips be broken out by air and medical charges, so that patients and health plans are better able to understand the cost of emergency air transport.

The section on prescription drugs focuses on pricing and access to biological products (such as insulin, which has seen market price increases in recent years) and generic drugs. Regarding biologics, the bill contains provisions aimed at streamlining the process for approval of biosimilar and interchangeable products, and providing more publicly available information about biological products, biosimilars and interchangeable products.

The bill would:

• Clarify the transition process of drugs from one “pathway” to another. Under existing law, in March of 2020, a small subset of biological products (including insulin) will transition from the drugs “pathway” at the Food and Drug Administration (FDA) to a biologics “pathway.” This change is intended to open biological products up to competition from biosimilar products. This bill would clarify that biological products that will transition from the FDA’s drug pathway to the biologics pathway cannot receive new, extended market exclusivities, while still preserving certain unexpired exclusivities for biological products as the FDA transitions the regulation of those products. This bill would also ensure that marketing applications submitted six months prior to the transition that are still in FDA review will not have to be resubmitted, thereby avoiding delays in product availability.
• Exclude all biological products subject to regulation under the Public Health Service Act from requirements to follow certain standards originally drafted to apply to drugs, and prevent delays related to compliance with these standards in the licensure of biosimilar and interchangeable products.
• Increase the transparency of patent information for biological products by requiring information to be submitted to the FDA and published in the “Purple Book” which would be a single, searchable list of information about each licensed biological product, including marketing and licensure status, patent information and relevant exclusivity periods.
• Require the FDA to establish a website to provide educational materials on biological products, biosimilars and interchangeable biological products.

With regard to generic drugs, the bill contains several provisions aimed at clearing some of the roadblocks in the process that delay the approval of generic drugs. Specifically, the bill would:

• Prevent first-to-file generic drug applicants from blocking the entrance of subsequent generics to the market for a period longer than a 180-day exclusivity period granted by the FDA to the first-to-file when a subsequent applicant has been tentatively approved but the first-to-file applicant has still not received final approval.
• Limit the definition of a “new chemical entity” (NCE) under current law so that only the most innovative or novel drugs qualify for the 5-year NCE market exclusivity.
• Maintain but provide limits on the use of citizen petitions to allow interested stakeholders (including other drug companies) to notify the FDA of concerns with pending generic or other follow-on drug applications. This is intended to curb abusive practices used to delay the approval of generics and follow-on applications.
• Require the FDA to include in the “Orange Book” up-to-date information about patents and exclusivities so as to encourage drug development in areas no longer patented.

The transparency section of the bill contains a sweeping series of provisions that would govern plans, providers, Pharmacy Benefit Managers (PBMs) and health benefit brokers and consultants. The bill would impose new restrictions on the contracts between providers and health plans, including bans on the following types of contract provisions:

• Gag clauses that prevent enrollees, plan sponsors or referring providers from seeing cost and quality data on providers, or that prevent plan sponsors from accessing de-identified claims data that could be shared with third parties for plan administration and quality improvement purposes.
• Anti-tiering and anti-steering clauses that restrict the plan from directing or incentivizing patients to use specific providers and facilities.
• All-or-nothing clauses that require plans to contract with every provider in a particular system or none of them.
• Most-favored-nation clauses that require that the insurance company be given the most favorable pricing of any health plan in the market.
• Obligations that plan sponsors agree to the terms of contracts that the sponsor is not a party to and cannot review.

The transparency section of the bill would also provide certain patient protection provisions, such as:

• Requiring plans to have up-do-date directories of their in-network providers, available to patients online or within 24 hours of an inquiry.
• Holding a patient responsible only for the in-network cost-sharing amount if the patient received incorrect information from a carrier about a provider’s network status prior to a visit.
• Requiring providers and health plans to give patients good faith estimates of their expected out-of-pocket costs for specific health care services, and any other services that could reasonably be provided, within 48 hours of a request.
• Requiring health care facilities and providers to give patients a list of services received upon discharge.
• Requiring all bills to be sent to a patient within 30 business days and giving patients at least 30 business days to pay bills upon receipt.

With regard to PBMs, the bill would prohibit PBMs from engaging in spread pricing, or charging a plan sponsor, health plan or patient more for a drug than the PBM paid to acquire the drug. It would require PBMs to pass on 100% of any rebates or discounts to the plan sponsor. And it would require that plan sponsors receive a quarterly report on the costs, fees, and rebate information associated with their PBM contracts.

Health benefit brokers and consultants would be required to disclose to plan sponsors and individual market enrollees any direct or indirect compensation they may receive for referral of services.

The bill would also designate a non-profit entity charged with improving the transparency of health care costs. That entity would use de-identified health care claims data from self-insured plans, Medicare and participating states to develop information on the cost and quality of care. Depending on how this provision were enacted, it could result in a new federal reporting burden for self-insured plans.

The bill’s health information section would require commercial health insurers to make claims, practitioner and out-of-pocket cost information available to patients through application programming interfaces. At the same time, it would incentivize health care entities to adopt strong cybersecurity practices by including an entity’s adoption of recognized cybersecurity practices with conducting audits or administering fines related to the HIPAA security rule.

Lastly, the draft bill’s public health provisions would authorize resources to increase awareness of vaccines, improve maternal health outcomes for pregnant and postpartum women, and fund anti-discrimination training for health care providers, among other initiatives.

In closing, this is draft legislation that has not yet been introduced. Congress has not been able to enact significant health care legislation since the ACA was enacted nine years ago. The closer we get to the election of 2020, the less likely we are to see significant legislative action of any kind in Congress. Still, this bill indicates the trend of health care legislation, both federally and in some states. We will continue to track this legislation and update clients as events warrant.

Please contact your Keenan Account Manager for questions regarding this Briefing.

Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.