Friday, October 2, 2015

qotd: Can Sec. 1557 be used to prevent discriminatory adverse tiering?

Health Affairs Blog
September 21, 2015
The Section 1557 Regulation: What's Missing, And How We Can Include It
By Douglas Jacobs

Kristin Agar, a 63-year-old social worker, was diagnosed with lupus in
2008, a rare disease in which the body's own immune system can cause
serious damage to the kidneys, brain, skin, and joints. Unfortunately,
despite having insurance coverage, Kristin has found that the drug she
needs to treat her lupus is unaffordable. All around the United States,
Kristin joins other patients with chronic conditions like HIV, Hepatitis
C, Multiple Sclerosis, Rheumatoid Arthritis, and Leukemia, who are
having trouble paying for their medications.

In June, Robert Restuccia and I wrote a Health Affairs Blog post showing
that discrimination in our health care system is evolving. Some insurers
that once refused outright to offer coverage to patients like Kristin
are now resorting to more surreptitious means to discourage enrollment,
like increasing the cost of all medications for certain conditions. This
practice, called "adverse tiering," has been regulated under Section
1302 of the Affordable Care Act (ACA), which grants the Department of
Health and Human Services (HHS) the authority to define essential health
benefits under the ACA.

However, the Section 1302 regulation has so far been limited. The rule
states that adverse tiering may be discriminatory, but also appears to
allow an exemption for expensive drugs like Kristin's lupus medication.
Additionally, insurers that are "caught" practicing adverse tiering only
have to provide written justification for their actions to HHS or comply
by fixing their benefit design.

Even without practicing adverse tiering, insurers could discourage the
most expensive beneficiaries from enrolling by increasing the cost of
wheelchairs, nursing homes, or even specific surgeries. If HHS wanted to
categorize any future insurance practices as discrimination under
Section 1302, the regulatory process could take years. As such, these
new forms of discrimination have prompted many to call on the Obama
Administration for a stronger response.

The Section 1557 Regulation

Earlier this month, over five years after the Affordable Care Act was
adopted, the Obama Administration finally proposed the highly
anticipated rule that implements the ACA's main nondiscrimination
provision: Section 1557. The rule prevents discrimination on the basis
of race, color, national origin, sex, age, and disability, and broadly
applies to all health programs and activities that receive assistance
through HHS.

For those who have experienced discrimination in its many forms, the
regulation includes a number of provisions to protect consumers. Each
health entity must provide appropriate aids and services to those with
limited English proficiency and disabilities. The rule extends
protections for transgender persons unlike ever before, including it as
a form of sex discrimination. Furthermore, all services must be made
available for gender transition (like a hysterectomy) that are available
to a person seeking non-transition related care. All transgender persons
must be treated consistent with their own gender identity.

The proposed rule also establishes a private right of action, giving
individuals the ability to file a lawsuit under Section 1557 (courts had
already begun to authorize private Section 1557 lawsuits, but this makes
it official). This is an important step forward, because unlike the
Section 1302 regulation, insurers will be highly motivated to comply
with the 1557 regulation or face costly litigation. Insurers will think
twice about changing their benefit design to discourage enrollment by
individuals of a certain race, color, national origin, sex, age, and
disability. Instead of taking years to pass a new regulation, a private
cause of action allows the justice system to "keep pace" with quickly
evolving insurer practices.

However, these positive developments are tempered by some noticeable
omissions. Namely, the rule is conspicuously silent about discrimination
on the basis of health status. As Timothy Jost stated in his recent
post, "Surprisingly, the proposed rule does not directly address one of
the most salient current discrimination questions: whether insurers can
impose high cost sharing or otherwise limit access to expensive drugs
needed by certain disabled populations."

Kristin Agar, who can't afford her lupus medication, may not be assisted
by the Section 1557 regulations. Insurers could continue to discourage
enrollment by the sickest consumers through manipulation of their
benefit designs.

Without directly addressing the issue, HHS seems to have made a
distinction between two different types of discrimination:
discrimination by categorically excluding certain individuals from care,
and discrimination by "pricing out" certain enrollees by making specific
services unaffordable. In other words, making drugs or services
unaffordable seems to be an effective way for insurance companies to
discourage enrollment and improve their bottom lines.

The reticence to address "price-based" discrimination likely stems from
insurers historically charging different prices for medications and
services. Insurers argue that this pricing structure allows them to
encourage the use of more low-cost services and medications.

However, this omission even has the potential to undermine the very
forms of discrimination that the proposed Section 1557 regulation aims
to protect against. For example, despite the new transgender protections
in the rule, plans could still discriminate against transgender people
by making hormonal treatments and transition-related care unaffordable.
A plan could more broadly still discriminate on the basis of sex by
increasing costs for medications predominantly used by women (like
breast cancer treatment), increasing costs for pregnancy care, or
severely limiting the number of gynecologists in the plan network. It is
clear that in order to have a strong Section 1557 regulation, HHS must
also address cost.

A Way Forward

HHS should adopt a standard way of addressing cost-based discrimination
in the final Section 1557 rule. When does changing the cost of a drug or
service make it "unaffordable," thus discouraging enrollment and
constituting discrimination? The answer to this question appears in
other ACA regulations.

The Internal Revenue Service (IRS) defines "unaffordable" in the ACA as
a percentage of income, which could set a standard for price-based
discrimination as well. An "unaffordable" medication or service would
become discriminatory if there is no lower-cost, but similarly
efficacious drug or service. This would preserve an insurer's ability to
encourage the selection of lower cost drugs and services, while still
protecting consumers from discriminatory pricing schemes. Even if the
final Section 1557 regulation does not include cost-based
discrimination, standards of discrimination may evolve with ongoing
litigation. As individuals increasingly file Section 1557 cases, it is
entirely possible that courts will find cost-based discrimination unlawful.

However, Kristin Agar and others with chronic conditions need more than
a federal regulation recognizing cost-based discrimination: HHS should
ban discrimination on the basis of health conditions in their final
rule. HHS has the authority to interpret Section 1557 broadly as part of
an overall statutory and regulatory regime to make health care more
accessible to those who need it the most, and also have the
responsibility to counter long standing and pervasive discriminatory
practices by insurers.

In the absence of an explicit ban, another way to achieve Section 1557
protection against discrimination is for HHS or courts to categorize
certain diseases as "disabilities." Courts have historically been
reluctant to do this, defining a "disability" as being restricted to an
"impairment that substantially limits one or more major life activities."

However, this was before the passage of the Americans with Disabilities
Act Amendments in 2008, and the subsequent final rule in 2011 that
broadened the definition of disability to include impairments to bodily
functions (such as the immune system, special sense organs, normal cell
growth, and digestive, genitourinary, neurological, bowel, respiratory,
cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and
reproductive functions, among others). Since the amendments passed,
courts have more broadly interpreted "disability," although they
continue to assess each case individually. This relatively untested new
version of disability could include protections for Kristin and many
others with chronic conditions under Section 1557.

Until HHS or a court decides, those with health conditions will continue
to rely on the slow, partial protections of Section 1302. Kristin
deserves a better system. She deserves a system that prospectively bans
discrimination on the basis of her race, color, national origin, sex,
age, disability, and health, either by being excluded from insurance
plans or by being priced out of them. Kristin deserves to be able to
file suit when she is being discriminated against. Kristin deserves to
be covered by Section 1557.


Federal Register
September 8, 2015
Nondiscrimination in Health Programs and Activities


The Department of Health and Human Services (HHS or "the Department") is
issuing this proposed rule on Section 1557 of the Affordable Care Act
(ACA) (Section 1557). Section 1557 prohibits discrimination on the basis
of race, color, national origin, sex, age, or disability in certain
health programs and activities. Section 1557(c) of the ACA authorizes
the Secretary of the Department to promulgate regulations to implement
the nondiscrimination requirements of Section 1557. In addition, the
Secretary is authorized to prescribe regulations for the Department's
governance, conduct, and performance of its business, including, here,
how HHS will apply the standards of Section 1557 to HHS-administered
health programs and activities.


Comment by Don McCanne

Insurers will always try to find a way to avoid paying for health care
whenever they can. This article explains "adverse tiering" - an
innovation by the insurers wherein needed services or products used by
individuals with high-cost disorders are placed in a higher tier of
coverage in which patient cost sharing is much higher. This adverse
tiering is being used by insurers to discourage enrollment in plans by
people with disorders such as HIV, hepatitis C, multiple sclerosis,
rheumatoid arthritis, or leukemia.

Section 1557 of the Affordable Care Act (ACA) - the nondiscrimination
section - states that an individual shall not "be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under, any health program or activity, any part of which
is receiving Federal financial assistance, including credits, subsidies,
or contracts of insurance, or under any program or activity that is
administered by an Executive Agency or any entity established under this
title (or amendments)."

After five years, HHS has finally released a proposed rule for Section
1557 nondiscrimination under ACA. As Douglas Jacobs explains in the
Health Affairs Blog, the proposed rule does not seem to adequately
address adverse tiering discrimination. Banning such discrimination can
be technically challenging since price tiering is encouraged by some in
the policy community as a means of discouraging patients from receiving
expensive care that they do not really need (the rhetoric of advocates
of consumer-directed health care). Another possibility that Douglas
Jacobs suggests is that the proposed rule could be modified to enable
lawsuits under the amended Americans with Disabilities Act (ADA).

After reviewing the 200 page proposed rule and considering the
complexities of defining how adverse tiering discrimination could be
banned while still leaving tiering in place, or considering the
complexities of lawsuits under ADA, even in defining whether these
expensive conditions are disabilities, it does seem clear that these
approaches further increase the wasteful administrative excesses that
already plague our heath care system.

In contrast, a single payer national health program would eliminate cost
sharing thereby eliminating the insurers' tool of adverse tiering, not
to state the obvious of eliminating the insurers themselves. Life for
patients and their health care professionals would be so much simpler.

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