AFPComment_CMS–9989–P_Exchange | Americans For Prosperity | Patient Protection And Affordable Care Act

Centers for Medicare & Medicaid Services Department of Health and Human Services File code: CMS–9989–P Date: August

17, 2011

Americans for Prosperity Comments Regarding: Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans
To Whom It May Concern: Americans for Prosperity (AFP) is a free market non-profit organization that is committed to educating and engaging grassroots citizen activists across the country to advocate for smaller government, lower taxes and free enterprise. We believe that the free market is and always has been the true path to prosperity. With the nation struggling to regain its economic footing following the recent recession, AFP believes reinvigorating the core American values of entrepreneurship, self-reliance and constitutionally-restrained government are central to the nation’s resurgence. AFP currently has more than 1.8 million members in all 50 states, including our 31 chapter and affiliate states. In 2010, the country witnessed one of the most aggressive legislative battles in a generation, with unified Democratic governance advancing a health care reform bill that divided the nation and jeopardized individuals’ control of their health care choices.1 AFP worked tirelessly in opposition to this legislation because we were concerned that it would create unnecessary centralization and government control of the health care market. One aspect of centralization that concerns us is command-and-control regulation that puts bureaucrats between patients and doctors. While examining the Affordable Care Act (the Act), Philip Klein from The American Spectator found “more than 700 instances in which the Secretary is instructed that she ‘shall’ do something, and more than 200 cases in which she ‘may’ take some form of regulatory action if she chooses. On 139 occasions, the law mentions decisions that the ‘Secretary determines.’”2 AFP remains concerned about this broad delegation of rulemaking authority to the Department of Health and Human Services (the Agency) and the spate of regulations that is sure to result. It is in this context that AFP submits comments in regard to the Agency’s proposed rule: Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans.3

The Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119 (2010) as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111–152, 124. Stat. 1029 (2010). 2 Philip Klein, The Empress of ObamaCare, AM. SPECTATOR, June 2010, available at http://spectator.org/archives/2010/06/04/the-empress-of-obamacare. 3 76 Fed. Reg. 41866 (2011) (to be codified at 45 C.F.R. pts. 155-56) (proposed July, 15, 2011).

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Lack of Real State Flexibility AFP’s major concern with the proposed rules is the lack of true state flexibility. Although the Agency went out of its way to give the appearance of flexibility, in many of the important Exchange features the Agency has retained control. The Agency has created a “significant change” test that limits a state’s ability to alter or control its own Exchange without Agency notification and approval.4 The Agency provides a non-exhaustive list of “significant changes” in the proposed rule that includes: key operation functions, timeframes for crucial functions, Exchange governance structure, state laws or regulations, IT systems or functionality, QHP certification procedures and QHP enrollment processes.5 Discretion is meaningful only if states have the authority, autonomy and freedom to use it as they wish. States are free to exercise “substantial discretion” with respect to their Exchanges under the proposed rules, but only within a tightly-prescribed box of federal regulations and restrictions promulgated by the Agency, and only with Agency approval of even seemingly mundane details of Exchange operations. Telling states what to do, how to do it and then giving them “discretion” to run the Exchanges when the only “choices” are to follow the Agency’s detailed directions or face a federal takeover is “discretion” only in the most Orwellian sense. AFP encourages the Agency to adopt an Exchange management structure that provides states with autonomy to innovate, adapt and self-manage the Exchanges with virtually no approval required from the Agency. States are more in tune with their health care markets, citizens’ needs and existing governance structures than the Agency can ever be. It is crucial to the maintenance and availability of quality health care coverage and insurance that the 50 states be free to make changes as needed without Agency bureaucrats standing in the way. Section 155.105: Approval of a State Exchange AFP believes that the Agency has not provided the states with sufficient time to establish Exchanges, while at the same time using the specter of an explicit federal takeover of the Exchanges to prod states into action. The Act and the proposed rule both dictate that the Agency must determine by January 1, 2013 whether states have complied with the Agency’s directive to establish an Exchange.6 However, the Agency envisions a 90-day window during which the Agency will evaluate a state’s Exchange plan. This means states will need to submit final Exchange plans to the Agency by October 2012. If states want to ensure they will have time to reply to Agency comments and alter their final Exchange plans they will need to build in another 30-60 days lead time; pushing the deadline up to August 2012. AFP believes that given the series of Exchange regulations still to come—along with associated notice-and-comment and reply comment periods—this deadline less than a year from now is simply not attainable. We fear that the Act and the Agency are pushing an accelerated timeline that will jeopardize coverage and inject more uncertainty into the health care marketplaces. We also feel that the proposed rule’s conditional approval process will simply drag out this uncertainty.7
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PROPOSED RULE, supra note 3, at 41871. Id. 6 AFFORDABLE CARE ACT, supra note 1, at § 1321(c) and PROPOSED RULE, supra note 3, at 41867. 7 PROPOSED RULE, supra note 3, at 41871.

Federalism Concerns With the states lacking meaningful discretion and facing an unrealistic timeline to comply with hundreds of pages of yet-to-be-released regulations, AFP is deeply concerned that the Act and the Agency’s proposed rules will supplant state authority over the health insurance industry. The federal government is abusing the limits of federal power relative to the states, threatening to make states the administrative arm of the federal government. The Supreme Court discussed the dangers and ahistorical nature of this type of federal overreach, writing: [T]he Framers rejected the concept of a central government that would act upon and through the States, and instead designed a system in which the state and federal governments would exercise concurrent authority over the people … The Framers explicitly chose a Constitution that confers upon Congress the power to regulate individuals, not States. The great innovation of this design was that our citizens would have two political capacities, one state and one federal, each protected from incursion by the other.8 The Agency is endangering that constitutional design by using the blunt weapon of a federal takeover of the Exchanges—which affects a vast portion of any state’s economy, its budget and the welfare of its citizens—as the inducement to comply. The proposed rules in practice appear to merely tighten the federal grip on health care, taking more power away from the states in one of the few areas of public policy where they still have some meaningful role. AFP urges the Agency to respect the Constitution’s federalist spheres of authority and exercise the discretion the Act gives the Agency to allow the states to manage their Exchanges and health care markets. Section 155.405: Single Streamlined Application In the proposed rule’s section on streamlined applications, the Agency requests comments on “whether [the Agency] should codify a requirement that applicants may not be required to answer questions that are not pertinent to the eligibility and enrollment process.”9 AFP believes that this information protection does not go far enough. The Agency should not stop at simply codifying that applicants may not be required to answer non-pertinent questions. We believe the Agency should codify a requirement that these single streamlined applications may not ask any questions that are not relevant to eligibility and enrollment. AFP understands that our recommendation restricting Exchanges’ ability to collect non-relevant personal information creates tension with our recommendation for state flexibility. However, as AFP discussed in our separate comment on the proposed rule for Standards Related to Reinsurance, Risk Corridors and Risk Adjustment, use and abuse of individuals’ personal information is a very large concern with the Exchanges the Act envisions. We urge the Agency to take all possible steps to limit the amount of extraneous patient information that Exchanges can capture.

8 9

Printz v. United States, 521 U.S. 898, 919-20 (1997). PROPOSED RULE, supra note 3, at 41881.

Section 155.1000: Certification Standards for Qualified Health Plans Conceptually, health care exchanges are marketplaces where willing buyers and sellers can come together to disclose pricing information, negotiate benefits and enter into contracts for coverage. However, the Exchanges the Act envisions are quite different.10 The Act instructs the Agency to establish prohibitive standards relating to essential benefits, medical loss ratios and risk adjustment data disclosure. When entrance to Exchanges is conditioned by burdensome rules, the resulting market distortions destroy any benefits created by bringing patients and insurers into a common space. AFP opposes any rules that insert Agency bureaucrats into this process. We urge the Agency to create rules that will allow states to permit any insurer to be listed on the state Exchange if the state so chooses. It appears that the Agency is not concerned that limiting access to the Exchanges will hurt the competition that results from broad issuer participation. This competition is necessary to create the downward pressure on prices that proponents of this overhaul remind us was one of the Act’s intended purposes in the first place. The Agency is perhaps also not concerned that blocking insurers from entering the Exchanges could result in a shortage of “approved” coverage. The Hirsch Law and Policy Program at George Washington University noted that this could be the result of the Agency’s plan, writing: [Availability] is a central issue related to QHP qualifications, entirely overlooked in our view by the Exchange rule. The rule appears to be predicated on the belief that the QHP individual and group markets will be plentiful, that competition will be fierce, and that in fact there will be more competition for business than what is needed to serve the Exchange population … But an important lesson from the Medicare Part D and Medicaid managed care experiences is that in the case of subsidized network plans … capacity often falls well short of what is needed. In such situations, people can be eligible and literally have no means of enrolling …11 AFP shares this concern and urges the Agency to consider the ramifications of increasing demand for health care services through tax subsidies while simultaneously limiting supply in the Exchanges by blocking certain insurers. AFP again urges the Agency to create rules that will permit states to include any insurer on the state Exchange if the state so chooses.

PROPOSED RULE, supra note 3, at 41891. Memorandum from the Hirsh Health Law and Policy Program, the George Wash. Univ. Sch. of Pub. Health and Health Serv., to Interested Parties, Subject: Health Ins. Exch., 2 (July, 18 2011) (on file with the Hirsh Health Law and Policy Program).
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Conclusion AFP is wary of the Agency’s implementation of the Act through these proposed rules. We urge the Agency to consider: the lack of state flexibility, restrictive timeline, federalist concerns, undue access to patient information, “approved” coverage shortages and lack of competitioninduced downward cost pressure, all of which this proposed rule threatens to bring about. Sincerely,

James Valvo Director of Government Affairs Americans for Prosperity
Americans for Prosperity (AFP) is a nationwide organization of citizen-leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and intrusiveness of government is the best way to promote individual productivity and prosperity for all Americans. AFP educates and engages citizens to support restraining state and federal government growth and returning government to its constitutional limits. AFP is more than 1.8 million activists strong, with activists in all 50 states. AFP has 31 state chapters and affiliates. More than 85,000 Americans in all 50 states have made a financial contribution to AFP or AFP Foundation. For more information, visit www.americansforprosperity.org Americans for Prosperity does not support or oppose candidates for public office. ###

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