Is This Payment Real? CMS Launches Policy-based FFM payments Through the HIX 820 in 2016

If you think your organization has been working from a fire hose these past few years since the launch of the Health Insurance Marketplace, wait until the Centers for Medicare & Medicaid Services (CMS) rolls out policy-based payments to Federally-facilitated Marketplace (FFM) Issuers beginning in 2016.  It’s not as if the accuracy of member data wasn’t significant before, but now with a direct payment from CMS to the Issuer, your enrollment discrepancy rate will be transparent in real dollars.

 For the first time, Issuers will be able to quantify the financial impact of enrollment discrepancies simply because CMS will be making payments directly to Plans through Advanced Premium Tax Credits (APTCs), Cost Sharing Reductions (CSRs), and User Fee (UF) charges based on effectuated subscribers within the federal system, not the Issuer system.  This ups the ante for synchronization of data between the Issuer and the Marketplace.

In January 2016, CMS will begin paying Issuers at a policy-based level through a transaction called the HIX 820 complimented by the Preliminary Payment Report, or PPR.   Aside from the typical challenges and workarounds Issuers are confronted with during open enrollment season, the timing of policy-based payments creates somewhat of a twist or a renewed focus on the financial impact of enrollment data being out of synch with the government.

Issuers are anticipating more work ahead in 2016 with a long list of inherited issues and newfound challenges such as 2016 renewals, ongoing Health Insurance Case System (HICS) activity, continued FFM lags with system updates, and continued interim processes.  Yet, one can view the implementation of the HIX 820 as a new opportunity to review and build upon your operations and reconciliation practices simply based on your Chief Financial Officer’s (CFO’s) perspective.

If your CFO hasn’t asked you before, he/she will. 

• If we have an expected payment of $100 million based on effectuated members on our books, why is our payment $120 million this month?
• Is this a real payment or an overpayment based on lags with the FFM applying member updates such as cancels and terminations?
• Aside from timing and adjustment activity, what should the prospective payment for next month be?  Let’s review and find out why your estimate differs once the HIX 820 arrives.
• What does this high volume of adjustment activity in May 2016 applied to January and February 2016 coverage months represent?  How do we build an expected adjustment each payment cycle so there are no surprises?
• How many monthly cycles will it take to be paid accurately for January 2016?

With the goal of measuring the overall financial impact of your enrollment and payment discrepancies, you will be able to build a strategy around successful reconciliation.  Some key drivers are fundamental and important to highlight.  Your organization can simply calculate your expected payment to your actual payment by comparing your PPR/820 monthly payment files to your plan data (RCNI) as a first step.  At the end of the day, your CFO will not be interested in a partial picture — he/she will want to understand if the payment is real and whether it will change retroactively.  Understanding the complete financial impact of all discrepancies should be your first step.  The operations surrounding the resolution of discrepancies should be secondary, albeit a huge undertaking.  So, how do you get there?

Recommendations for Issuer’s HIX 820 Strategy:

• Be audit ready.
  • Understanding CMS will pay you based on the FFM system signifies your daily enrollment processing oversight and the audit of those processes in the form of reconciliation practices go hand in hand.  In an audit, you never want CMS to identify you are being paid for non-members or not paid for members consuming the benefit and everything in between.
• See the big picture.
  • On a weekly or monthly basis, your organization needs to understand its discrepancy rate and the formula the rate represents.  Is it 2%, 8%, 12%?  Measure it, and work that rate downward.
  • If you have a 5% FFM orphan discrepancy rate in January 2016, what is your January discrepancy rate in April 2016?  Monitoring by coverage month each report month is critical to being paid accurately and other downstream issues impacting revenue.
• Put your CFO hat on.
  • Institute a monthly review of your organization’s discrepancy rate with your CFO.
  • Be able to tell a story on the difference between expected and actual payment along with your retroactivity predictions.  Now that the 820 will be paying prospectively and retroactively back to 1/2016, Issuers will be able to measure the swings in payment activity.
  • Track discrepancy drivers within your organization and look for process improvement opportunities you can operationalize along with aligning resources more effectively.
• Track CMS-defined payment issues and submit timely through the Payment Dispute template.  Remember, these are discrepancies sourced to an FFM system issue since your Issuer data matches the FFM data (Pre-Audit File).
• Summarize, work, and measure success of the FFM Recon Outbound File (RCNO).
  • Update your enrollment system or dispute Issuer action flags.
  • Track and monitor the FFM action flags as well as ensure CMS is applying corrections to the FFM database in conjunction with Issuer corrections.  This is a two-pronged approach.
• Track orphan discrepancies (both Issuer and FFM) by coverage month through the FFM Pre-Audit file and resolve each subscriber case.
  • Categorize the causal such as FFM BAR error, missing 834, Issuer processing error.
  • When you know your data, you are able to answer every audit question that arises.
• At a maximum, when monthly orphan identification is working well, move to weekly discrepancy tracking by comparing the authoritative Pre-Audit file to your Issuer data.  This allows you to detect internal issues more timely before interfacing with the government.

While none of this is new for government programs as history always repeats itself, it is clear you can apply the same guiding principles.  Positioning your organization to succeed in this new environment is directly tied to an optimal reconciliation approach so you can answer the question, “Is this payment real?”

To learn more about Gorman Health Group’s reconciliation solution, Valencia™, and how it supports enrollment and payment reconciliation for Issuers, please contact ghg@ghgadvisors.com or Diane Fischer at dfischer@ghgadvisors.com.

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