Variation in ACA Premiums
ACA premiums have been a key topic of discussion this month as more state marketplaces and companies released proposed and final rates for QHPs or "qualified health plans" that will be available on October 1. As discussed in an earlier blog, ASPE released an analysis of rates in July from 10 mostly state based marketplaces that showed premiums will be 10 — 18 percent lower than CBO estimates. Subsequent releases show that premiums will increase in some markets, for example Ohio and Florida, as plans move to more comprehensive "essential health benefit packages". Rates for plans in the federally facilitated marketplaces will not be released until September.
The Alliance for Health Reform held a meeting on ACA premiums entitled "Rate Shock or Not" that discussed the reasons for some of the premium differences. These include variations by age, smoking, cost sharing differences, network size and provider reimbursement rates, level of competition, an active vs. passive Marketplace, the ability of Medicaid managed care companies to build on discounted provider payments, the presence of a dominant hospital system, insurer size and experience in the individual and small group markets. There is also a lack of data on current premiums in the individual market and the health status of the uninsured that make pre and post ACA comparisons difficult.
Joel Ario et al wrote an interesting Health Affairs blog that provided some additional insight on the wide variation in premiums that they called "startling". They cite a 76 percent difference in premiums between the second highest silver plan and second lowest silver plan in New York and only a 3 percent difference in San Francisco. They cite a number of reasons that premiums vary so much: actuaries are working in the dark, similar to Part D plans are willing to bid low in the first year to acquire members, plans sponsors are not all the same (e.g. some plans have more narrow networks or more generous drug benefits) and active purchasing works.
Resources
Health plans operating within the Exchanges must evolve from a culture of sales and marketing to a culture that is member-centric and more accountable with a greater sense of urgency. GHG can help, find out how.
From sales and marketing to staff training, data management and reconciliation, GHG Founder & Executive Chairman John Gorman breaks down each potential roadblock and offers tips and suggestions on how to keep your organization moving on the right path before the launch of the Exchanges, in this recording from the 2013 GHG Forum.
Big News: A Health Care Cost Indicator Went *DOWN*. AGAIN!
The national average bid for Medicare Part D drug coverage is going down, again. Since 2011, the average bid has declined every year. The amount of each year's reduction, compared to the prior year, has ranged from 1.4% in 2011 to 5.8% in 2013. The 2014 decrease of 4.7%, fits the pattern. So why, you ask, is the price of Medicare drug coverage going down? And especially why is it going down at a time when drug plans are being required to fill in more of the coverage gap (aka "donut hole") each year?
First, a detour to discuss the donut hole, the gap between coverage of routine prescriptions and catastrophic coverage: The Affordable Care Act includes a provision that requires Part D plans to fill in the hole for generic drugs, by covering 7% more cost each year, until they cover 75% by 2020. Meanwhile, manufacturers of brand name drugs will offer increasing discounts on their products until the cost of brand drugs for people in the "hole" is only 25% of retail. At that point, coverage in the hole will be equal to coverage before a beneficiary falls into the hole, with beneficiaries paying 25%.
So, all other things being equal, we would expect to see bids increase each year to fund the added cost of this annual 7% increment in coverage in the coverage gap. In addition, the Affordable Care Act imposes a fee on all insurance companies, starting in 2014, to help fund the premium subsidies for low income enrollees. This fee, which is a fixed dollar amount that is pro-rated among insurance companies based on their relative premiums, will fall more lightly on Part D plans, due to their relative low premiums compared with comprehensive health insurance. But it still represents an added cost that one would expect to flow through to the bid.
The logical conclusion, since the average bid went down instead of up, is that all other things are not equal.
Since the average bid was announced, there has been considerable speculation about what's happening. Here's my guess. First, remember that the national average bid is a weighted average, and so reflects the bids submitted by the behemoths of the industry. The small guys' bids essentially don't count. It's logical to conclude that the big guys are continuing to improve their ability to wring more price concessions from both manufacturers and drug chains.
Second it's just possible that medication therapy management (MTM) is beginning to make significant inroads into the cost of total drug therapy. Or, since the bids represent plans' expectations about 2014 costs, it's at least possible that plans expect MTM to make significant inroads.
Third, it's possible that more of the total cost of the program is being transferred to the federal government through the reinsurance payments for catastrophic coverage. More on that in a minute.
And, finally, 2014 is the year that the 85% floor on medical loss ratios goes into effect for Medicare drug plans. If a plan is running a lower loss ratio, it will need to refund money to the government if it carries the low loss ratio into 2014. A low loss ratio is no longer a mark of success. Faced with a potential refund to Uncle Sam, the most profitable plans may have concluded it's better to reduce their premium to achieve the minimum loss ratio floor, and use the lower premium to gain a market place advantage. Of course, if everyone has done this, they are really just avoiding the loss of market share.
Curiously, while the average bid has gone down every year since 2011, the base beneficiary premium has gone up in three out of those four years. The base premium is used to calculate the subsidy payment from Medicare to Part D plans. The subsidy is the average bid minus the base premium. The base premium is 25.5% of the average bid, adjusted to account for the expected payments from Medicare to plans to cover the catastrophic reinsurance segment of the Part D benefit. When a beneficiary exits the donut hole due to cumulative prescription costs above the upper bound of the gap, Medicare pays 80% of any additional drug costs. The calculation of the base premium is adjusted to compensate for these payments, in a way that varies the base premium in proportion with changes in expected catastrophic payments. As these reinsurance payments increase, the base premium increases. That is what we have seen in three of the past four years, meaning that the costs to Medicare of the catastrophic component are going up faster than the average bid is going down. Since Medicare pays 80% of these costs, and plans only pay 15% (members pay the rest), an increase in catastrophic, above-the-donut-hole, claim expenses will be borne disproportionately by Medicare, which would be consistent with slower increases, or absolute decreases, in the average bid. That is, more of the total cost of the benefit package is being shifted to Medicare from the Part D plans due to this catastrophic reinsurance provision. But increasing the base premium reduces the subsidy to the plans, since the subsidy is the average bid less the (higher) base premium.
Whatever is behind this, it's been a trend since 2011, and this year's result shouldn't be surprising in that regard. Three conclusions suggest themselves:
- Part D plans will get paid less because the average bid is less, and because the base premium that is deducted from the average bid is greater;
- It's going to be tougher for small plans to compete with big plans, if the main driver of low bids (and lower subsidies as a result) is better price negotiation due to bigness; and,
- Herb Stein's law will eventually overwhelm whatever else is going on.
Stein's law, which is becoming my favorite response to criticisms of Medicare, and the general ill humor of the governing classes these days, says that "If a thing cannot go on forever, it will stop."
So take heart. And, if you are a Medicare beneficiary, enjoy your lower premium.
Resources
The rapid changes to Part D regulations make the tracking and implementation of these CMS requirements exceptionally difficult -- to say nothing of actually managing to them. Find out how GHG can help.
In 2013, GHG Forum attendees went on a detailed walk-through of Part D rejected claims including frequency, sampling, data validation and documentation. Learn what CMS was looking for in past audits, and what plans need to do differently when filing 2013 audits.
Navigating through the maze of Part B versus Part D coverage can be difficult. See how GHG Senior Consultant, Sharon Durfee, breaks down the differences between Medicare Part D and B.
Health Plan's Role in Provider Alignment
Long gone are the days when the provider contracting functions, the medical economics function and the health services/medical management functions within a Health plan could operate in their own separate environment with limited interaction. Health plans today are pressured to provide improved member access to health services at reduced cost while striving for improved treatment outcomes for their members. Consequently, health plans are being asked to motivate their providers to adjust practice patterns in ways that support performance based outcomes and shifts emphasis from procedure based reimbursement to value based reimbursement. That can only be accomplished successfully if the dynamics between providers and Health Plans evolve from adversarial to one of shared interest, collaboration and shared decision making.
Give health plans and the provider community credit for recognizing such and having made significant strides in aligning their own interests, as well as their memberships interests, with those of the provider community. Witness collaborate efforts such as ACOs, patient centered medical homes, bundled payment initiatives and other innovative payment programs. Just today United announced an ambitious five year initiative to contract 50 billion dollars of commercial health insurance contracts with ACOs nationwide. Similarly, CMS is committed to publishing on an annual basis Hospital charges to demonstrate the huge disparities in hospital pricing for the same procedures across the country with the hope of eventually motivating hospitals to bring rationality to inpatient services pricing.
Resources:
At GHG we have a history of helping all stakeholder organizations engaged in providing better health outcomes efficiently and in the best possible setting. Come join us.
A rapidly growing number of provider organizations, especially those involved in accountable care organization (ACO)-type arrangements, are deciding to get into Medicare Advantage. Join us for a webinar on August 8 to get practical advice on the best ways of getting into the MA market.
Read more on ACO opportunities in our white paper on the topic.
The Future of Medicare Advantage
The Alliance for Health Reform and the Kaiser Family Foundation (KFF) sponsored a meeting on the Future of Medicare Advantage (MA) on the day that KFF reported that MA enrollment had reached a historic 28 percent of the Medicare population. A major theme of the conference was whether MA enrollment could be sustained or increased in the face of substantial ACA budget cuts in the next few years. The discussion took place against the backdrop of substantially revised Congressional Budget Office (CBO) projections in their May 2013 Medicare baseline that modified a prediction that MA enrollment would decline to 11 million by 2017 to a new assumption that MA enrollment would increase to 21 million by 2023. CBO did not explain their shifting opinion and the panelists had no inside information on the CBO assumptions.
Most of the discussion was optimistic that MA enrollment could be sustained if not increased even in the light of budget cuts. MA plans are projecting enrollment increases of 9-10 percent for 2014. Mark Miller of MedPAC cited analysis that MA bids have come down in recent years (e.g. MA plan bids are 96 percent of FFS costs on average and HMO bids are 92 percent) suggesting that MA plans could continue to successfully compete against Medicare FFS even in areas that will be paid at 95 percent of FFS. Carl McDonald cited 2010 as a historical precedent when MA plans were able to manage large program cuts by lowering costs. He also noted research shows that current Medicare enrollees are very loyal and do not leave their plans even when premiums are increased or benefits reduced. Alissa Fox from the Blue Cross and Blue Shield Association argued that plans will have a hard time absorbing all of the upcoming cuts and that their Association is lobbying for Congress to repeal the upcoming $100 billion tax on insurers. George Strumpf of Emblem Health says he was pessimistic about future MA enrollment and reminded the audience of the experience in the late 1990s when budget cuts drove half of the Medicare managed care plans from the market.
I was at CMS when the Medicare managed care market practically collapsed and I hope that will never happen again. The environment is very different now and will be in the future. For example, demographics have changed and baby boomers who are experienced with managed care can be expected to choose a private plan when value can be demonstrated. MA plans have more of an incentive to stay in the program since governmental spending is now a significant and growing part of their business. Even if some plans leave the program because they are unable to manage the cuts, there are a large number of plans available in the market so beneficiaries will not have to return to FFS Medicare. But more importantly, for the foreseeable future, the FFS program is expected to remain unmanaged and inefficient and thus most MA plans, even if they have to raise premiums and reduce extra benefits, will be able to successfully compete with FFS and its unpredictable high out of pocket costs or FFS with high priced Medigap supplemental policies
Resources
Visit our website to learn more about how Gorman Health Group can help support your Medicare Advantage goals.
No matter what delivery system arrangement you currently have, or what course you intend to pursue, GHG can help. Visit our website to learn more.
New in our Reality Check Webinar Series!
Complimentary Webinar June 25: "How Medicare ACOs and Other Risk-bearing Provider Organizations can Transition to Medicare Advantage"
Health Care Innovation Awards Round Two
For those of you who applied for the Innovations Awards Program Round One and were denied, or for those of you who didn't apply, CMS/CMMI is providing you with another opportunity to do so. The program is open to virtually any health organization (the exception is that CMS will not entertain proposals that are primarily focused on inpatient hospital based programs) interested in proposing innovative service delivery and payment models focused on the Medicare, Medicaid and Children's Health Insurance program (Chips) eligible populations. CMS will fund those proposals that have the greatest potential for driving health care delivery transformation and innovative pricing methodologies. There is approximately $900 million in available funding.
Interested organizations can apply in four different "Innovation" categories including; a) models designed to rapidly reduce costs in outpatient and post acute care settings; b) models that improve care for specialized populations such as persons living with Alzheimer's; c) models that test by provider type approaches for clinical and financial transformation (for example, a new approach to treatment and financing of Cardiology Services); and d) models that improve the health of populations defined as wellness or comprehensive care programs which go beyond the clinical service delivery settings.
Any proposals submitted should address how payment and service delivery models being tested will relate to benefit designs and/or new payment approaches that CMS intends for broader application.
To apply, be aware of the following dates:
Letter of Intent is due on or before June 28, 2013
Application Due date is August 15, 2013 by 3:00 pm EST
Anticipated Awardee Announcements is January 15 & 31, 2014
Anticipated performance period is April 1, 2014- march 31, 2017
As usual, filing a Letter of Intent gets you a seat at the table but does not obligate you to proceed with an application.
We specialize in helping organizations considering participating in CMS/CMMI sponsored demonstration program assess the strategic implications of participating. We are experts at helping organizations file applications successfully. If you think the Innovations Awards Round Two Program is for you, contact us today.
Resources
To find out how Gorman Health Group can help ensure you have a smooth application process, visit our website.
No matter what delivery system arrangement you currently have, or what course you intend to pursue, GHG can help. Visit our website to learn more.
Health Insurance Premium Guessing Game
Health insurance issuers are generating enough fodder for a good guessing game. Will Obamacare increase rates for individual insurance or not? And if so, will the increase be modest or catastrophic. Writing in the April 25 edition of the Washington Post, Ezra Klein reports that the Blues plan that serves the national capital area is warning of big increases in individual premiums. The cause? More sick people are going to get health insurance, now that the pre-existing condition limitations have been removed by the Affordable Care Act. But is that the whole story? Klein also reports that insurance companies in Vermont and Rhode Island are projecting a more modest impact in announcing their proposed 2014 rates. But in Massachusetts, where "Obamneycare" has been in place since 2006, individual premiums are the highest in the nation.
The individual mandate, which gives people the choice of either getting insurance or paying a tax, is supposed to stimulate enrollment of healthy people who might otherwise go without coverage until they get sick. Why not, since they can't be denied due to preexisting conditions? But the tax is less than the premium, so its anybody's guess how effective the mandate will be in bringing low risk people into the insurance market.
Until we see how enrollment pans out this fall, and how many healthy people dive into the risk pool, there's no way to know how big an impact the sick will have on premiums.
One thing Klein overlooked is that individual insurance will be sold both in the new health insurance exchanges (which the Feds are now calling "marketplaces," a terminology change the rest of us are ignoring), and in the open market. Klein rightly points out that the impact of higher premiums will be ameliorated for many people by the subsidies that they get through the exchanges. But those who don't qualify for the subsidies, whether they buy through exchanges or in the marketplace outside, will bear the full brunt of any premium increase. These are the folks who, if they are healthy, may well prefer to pay the tax and go without.
The Administration is gearing up for a major public relations campaign to publicize how health insurance will work for individual purchasers in 2014. We hope they will include a strong message about the importance of buying health insurance, even if you are healthy. While you may not be denied due to a preexisting condition, lack of insurance still leaves you open to catastrophic costs due to accident or unforeseen acute illness.
Health insurance: It's not just a good idea, it's the law!
Resources
Gorman Health Group policy expert Jean LeMasurier provides a summary of proposed rules from the Department of Treasury, IRS and OPM regarding the implementation of health reform.
The Exchanges will create a large risk pool that will allow risk to be managed more effectively with reduced administrative costs, read this white paper for estimates from the Congressional Budget Office (CBO) and more.
To learn how Gorman Health Group can help your organization get involved in the Exchanges or other government programs, visit our website.
Attend the GHG Forum, June 13-14 in DC, and hear from the nation's recognized leaders in health reform implementation and ongoing development of exchanges about the challenges facing both the government and private partners pre-launch, plus what lies before us in 2014 and beyond.
Providers Eying Medicare Advantage
The March 28 edition of Medicare Advantage News cites a possible trend for provider organizations to sponsor their own Medicare Advantage plans. In the waning days of the old Medicare+Choice program, many provider-sponsored plans came on hard times, so this may seem like an unusual reversal. However, Medicare Advantage lives up to its name, and offers advantages to sponsors as well as members. This includes risk adjusted capitation payments, the option to offer drug coverage that is subsidized by Medicare, and bonus payments for achieving quality targets. Even with the payment reforms imposed by the Affordable Care Act, Gorman Health Group is hearing from a number of provider organizations that the predictable capitation revenue under MA is looking preferable to the fee-for-service treadmill. Medicare fee-for-service reimbursement is becoming increasingly complex, and fee-for-service margins are eroding. The prospect of moving up the food chain is especially appealing to organizations whose costs are largely fixed. MA matches predictable fixed revenue to fixed costs, while FFS requires a constant scramble after variable revenues to achieve necessary margins.
Resources:
Learn how Gorman Health Group can help you reengineer your health care delivery system.
From strategy to operations, from revenue management to compliance, learn how GHG can support your Medicare Advantage goals.
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Reengineering Service Delivery: Tinkering or redesign?
I am old enough to remember cast iron automobile engines, massive, performance driven by basics such as carburators, distributors and spark plugs. No computer assists, no electronic fuel injection and no computer to monitor and identify performance problems. If the engine ran rough, we adjusted fuel and air mixture.Today's engines are smaller, and have more software/technology embedded than the first and second generation desktop computers.
So what does this have to do with health care? Until quite recently we tinkered with health care services delivery--a little tweak here and there and just like the old automobile engine we did just enough to keep the engine running smoothly.
Unlike the design evolution of the automobile we have not followed suit in the way we deliver and price health care services.
We need to take a new approach to health care services delivery. Our responsibility as a nation is to create a health care environment where care is provided in a team setting delivering comprehensive care -- the quality of which is measured in terms of treatment outcomes tied to the patients' return to health. It is an approach where provider compensation is tied to results and where patient clinical information is widely shared amongst all care givers involved in the patient's treatment. The message to take away from the health care reform approved by Congress is this: reengineering the health care delivery system is necessary and here are some tools to work with.
Accountable Care Organizations, (ACO's) are one of those tools. When done right ACO's replace silo medicine with coordinated patient throughput, volume based reimbursment with outcomes-driven compensation and passive patient "doctors orders" adherence with active patient participation in treatment.
With the proper infrastructure, appropriate clinical protocols, value based compensation and decision support, ACOs can be successful long term.
Take the first step by deciding to redesign. Then contact us. We will help.
Resources:
Learn how Gorman Health Group can help you reengineer your health care delivery system.
Read more on ACO opportunities in our white paper on the topic.
Read about how three Gorman Health Group clients were approved by CMS to become Operating Accountable Care Organizations
Selling Season is Nearly Here, Now what?
Most plans are in the process of onboarding their agents and preparing them to sell. Meanwhile, they've invested marketing dollars across various channels and different media. Now it's time to turn marketing dollars into members. With another AEP just around the corner, here are a few GHG best practice tips to keep in mind this season to help get the most bang for your buck out of those incoming leads.
- Cut down on lead distribution times as much as possible. This is one area that cannot be stressed enough; beneficiaries are not waiting for follow ups, if leads are not quickly & efficiently being converted into appointments another carrier could potentially get that all-important first meeting on the schedule faster. The industry is much too competitive, and the cost per lead is far too expensive to let any leads sit in today's marketplace. Statistics show that close ratios improve the faster the lead can be converted to an appointment and the quicker that meeting can be conducted by the agent. In an industry where the little details can matter, if this process is managed effectively there are additional members to be had.
- Once agent in-home appointments are in full swing, make sure to collect and document a disposition from the agent for EVERY meeting. A lot of good information can be collected about why a potential beneficiary chose to enroll or not enroll in a particular plan. That information doesn't only apply to the sales team. Share it with the benefit design team too, it will provide a real world perspective on why beneficiaries join, or more importantly, why they don't. Most plans are good at tracking dispositions for their employed sales force, but lack integrated systems to capture this for some independents. Consider adopting a mobile technology to capture the rest of the picture from the independent agents.
- Make every possible enrollment avenue available for potential beneficiaries. This means having a telesales unit, deploying a nimble sales force in the field, and finally in today's world, utilizing (hopefully creating one if not) the online enrollment process. The aging in Baby Boomer population requires us to provide a diverse number of channels for prospects to enroll. Missing one avenue could be detrimental to your sales numbers!
- Learn from your successes….and your mistakes! Improvement in years to come is only possible if there is an understanding of the effectiveness of current marketing campaigns, where enrollments are coming from, what return on investment various channels have yielded, and many more variables in play. Track…measure…assess….adjust…repeat!
As always, stay tuned to the GHG Blog and to the Point for more selling season tips later this month.
Sales Oversight & Thoughts on CMS Updated Agent Training Guidelines
As you likely noticed, CMS recently released its updated Guidelines for Agent Broker Training and Testing for CY 2013 on August 21. Our in-house compliance experts have cross-walked the new regulations with the old ones from last year and here's our take: for the most part, the updated guidelines should be business as usual. However, it is interesting to take note of where CMS is going to greater lengths to provide additional clarity or requirements.
Here's our take on a few additions:
- Under the Beneficiary Protections section, new requirements were added on the education of agents on Aggressive Marketing. More specifically, you'll see requisites on things like what the potential consequences will be for engaging in Aggressive Marketing activities, report requirements, plan disciplinary actions, termination rules, and compensation forfeiture guidelines. Again, while this isn't new, it's now part of the training requirements and necessitates additional preparation, as plans now need to inform the agents about their specific disciplinary process up front. Agents now need to be educated on scenarios that clearly define, "if agent does X, the penalty is X." Plans should take the time to create an offense ranking matrix and a disciplinary scale that escalates based on number of infractions or severity, and educate their agents ahead of time. Of course there will always be new situations that pop up, but this is not a process that should be created on the go.
- There are quite a few updates focused on "do's and don'ts". We saw these added under Marketing for things such as scripts, health screenings, and contact information and again under a new section on Rewards and Incentives. This is in place to educate agents on what the process should look like in order to help identify any plans that try to get a little too "creative" in some of these areas.
Both of these additions are all about starting to compare processes across some of the (historically) more challenging areas for sales & marketing and compliance departments to manage. CMS fully encourages plans to forge their own respective path when it comes to agent oversight. They recognize it's not a one-size-fits-all solution, but with information like this now more accessible, it also allows them to start identifying more instances of what's working and what's not.
Stay tuned for the latest analysis on the updated training and testing guidelines. As always, contact us with questions and be sure to check out the Point -- launching in October.