2014 year-end results for medical professional liability specialty writers

April 14th, 2015

By Javier Sanabria

There were no distress signals for medical professional liability writers in 2014, and the year adds to what has now become more than a decade of continuous profitability. Direct written premium declined in 2014 for the eighth straight year. The total is down 28% from its high of almost $7.1 billion in 2006. And last year represents the eleventh consecutive year of positive operating profit. Milliman consultants Brad Parker and Chuck Mitchell provide some perspective in this article.

This article was originally published in the April 2015 issue of the Medical Liability Monitor.

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Regulatory roundup

April 13th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

CMS finalizes 2016 payment and policy updates for Medicare health and drug plans
The Centers for Medicare & Medicaid Services (CMS) has released final Medicare Advantage (MA) and Part D Prescription Drug program changes for 2016 that provide fair and accurate payments to plans, and encourage the delivery of high-quality care for all populations.

The finalized policies fully consider the many comments received during the public comment period. Particular care is being taken to ensure that plan sponsors have the right incentives to care for dual eligible populations over the long term. The rate announcement finalizes changes in payments that will affect plans differently depending on the characteristics of those plans.

In the final call letter, CMS continues to update the star ratings measures to drive improved quality for Medicare Advantage and Part D enrollees. To enhance program integrity and payment accuracy, Medicare Advantage plans will continue to be provided stringent oversight for improper payments, just like other providers in the Medicare program.

Lastly, the final policies will provide enrollees with greater information to make informed and timely decisions about their care and their coverage. The final call letter takes steps to require Medicare Advantage plans to maintain accurate provider directories in a timely manner and make those directories widely available. These steps will help enrollees better understand the providers and choices available to them. CMS will also ensure that Part D sponsors provide clear and accurate access to information on preferred cost sharing pharmacies in their networks so that all beneficiaries have access to affordable coverage.

To view a fact sheet on the 2016 rate announcement and final call letter, click here.

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Benefit design and the rush, hush, and crush cycles

April 8th, 2015

By Ajanthan Balasinkam

Balasinkam-AjanthanEmployer-provided medical plans have seen significant benefit design changes in the past few years, which is due to rising healthcare costs and the Patient Protection and Affordable Care Act (ACA). As actuaries analyze historical medical cost trend in order to forecast future trend and analyze the impact of benefit design changes, the effect of the member behavioral phenomena known as “benefit rush,” “benefit hush,” and “trend crush” should be considered. This cycle of behavior was explained by Joan C. Barrett in a Health Watch article called “Timing’s everything: The impact of benefit rush.”

As Barrett’s article points out, when notified toward the end of the plan year of impending reductions to their medical plans for the upcoming plan year, savvy members often “rush” off to get deferred elective medical care in order to take advantage of the current richer plan design. For example, if there is an elective knee surgery that needs to be done, the rational member will get this done in the plan year with favorable member cost sharing. The magnitude of this rush will depend on the severity of the benefit design change and how benefit savvy the member is. Small increases to copays will result in less rush than the plan implementing a full replacement high-deductible health plan. The timing of this rush will depend on when participants are notified of the impending changes. The ACA requires that notifications to participants related to benefit design changes be made at least 60 days before implementation. Further, this rush must be considered in conjunction with the mini-rush that occurs even without any impending benefit design changes. Mini-rushes are due to members satisfying out-of-pocket limits toward the end of the plan year and taking advantage of fully paid plan services before the cost-sharing limits are reset again in the next year.

Subsequently, if more elective medical procedures are performed in the last quarter of the previous year during this rush period, there is a slowdown or “hush” in medical care in the first few quarters of the new plan year. This hush is further magnified as participants get to know their new benefit plan designs before getting medical care. The magnitude of this hush must be understood and even quantified separately from the decrease in costs that is due to the actual reduction in plan benefits. In the second year of the new plan, as costs return back to normal levels there is a trend “crush” compared with the previous year because it’s compared with a lower base level of claims from the first year of the new design. The impact of this trend crush must be considered if the plan experiences higher trends in the second year of the new plan.

Figure 1: Benefit Design and Usage Patterns


As actuaries evaluate historical trend, this rush, hush, and crush cycle should be evaluated and normalized to estimate future trends. This cycle must be kept in mind as projections with impending plan design changes are made. Knowledge of this cycle is also useful when actual results are compared with initial projections. Further, this cycle must be explained to plan sponsors to help them make sense of their cost experiences and for actuaries to maintain credibility regarding their trend and projection estimates.

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Regulatory roundup

April 6th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

DOL issues annual report on self-insured group health plans
The Department of Labor (DOL) has released the 2015 Report to Congress-Annual Report on Self-Insured Group Health Plans.

According to the report, in 2012, 21,000, or 41 percent, of the approximately 50,000 private sector employer-sponsored group health plans that filed a Form 5500 can be categorized as self-insured. Of the remaining 30,000 group health plans, approximately 4,000, or 8 percent, can be categorized as mixed-insured, and 26,000, or 51 percent, can be categorized as fully-insured. Of these 50,000 group health plans, 83 percent offered other welfare benefits in addition to health benefits (such as dental, vision, life, disability, etc.). Fifty-three percent of all private sector single employer group health plans that filed a 2012 Form 5500 provided fully-insured health benefits to their employees. More than 19,000 of the group health plans categorized as self-insured are single employer plans; the remaining 1,000 are multiemployer plans.

To read the entire report, click here.

Agencies issue FAQ on summary of benefits and coverage under ACA
The Departments of Treasury, Labor, and Health and Human Services (HHS) have issued a new Patient Protection and Affordable Care Act (ACA) related frequently asked question regarding summary of benefits and coverage. On December 30, 2014, the agencies published a notice of proposed rulemaking, as well as a new set of proposed summary of benefits and coverage (SBC) templates, instructions, an updated uniform glossary, and other materials. Changes to the SBC regulations, template, and associated documents were proposed to apply beginning September 1, 2015.

To read the entire FAQ, click here.

IRS notice provides guidance on expatriate health plans
The IRS has issued Notice 2015-29 which provides guidance on how the special rule for expatriate health plans applies to the health insurance provider fee under ACA § 9010 for the 2014 and 2015 fee years. Under the notice, a covered entity will receive a reduction in its 2015 fee liability for expatriate health plans, as defined by HHS’s medical loss ratio final rule, that are attributable to the 2014 and 2015 fee years.

To read the entire notice, click here.

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Supporting patient-centered medical homes through healthcare analytics

April 2nd, 2015

By Lili Hay

Hay-LiliAlthough the concept of patient-centered medical homes (PCMH) has been around for more than 50 years, the last decade has seen a revitalization of the PCMH model and an increase in its presence across the nation. The model’s popularity hinges on an approach to providing comprehensive primary care and redesigning healthcare delivery processes. This is accomplished through an emphasis on team-based care delivery, a whole-person approach to patient care, collaborative relationships between individuals and their physicians, and the use of evidence-based medicine and clinical decision support tools.

In 2007, four nationally recognized physician organizations identified seven principles considered foundational to the PCMH model:

1. Personal physicians
2. Physician directed medical practices
3. Whole person orientation
4. Coordinated/integrated care
5. Quality and safety
6. Enhanced access
7. Payment reform

Although the foundational principles of the PCMH have been largely agreed upon, there is no clear mode for how to create a successful PCMH. One of the most widely recognized models in place today is sponsored by the National Committee for Quality Assurance (NCQA), though there are numerous different demonstration and pilot projects in process across the country. As stated in the Journal of General Internal Medicine paper “Defining and measuring the patient-centered medical home:”

“…The context for operationalizing the PCMH is still evolving based on what is being learned in many ongoing demonstrations,” underscoring the importance of evaluating and incorporating unique geographic, demographic, and economic considerations into the design of any new care model.

Successful care delivery transformation projects, especially PCMH implementation and sustainment activities, require significant emphasis on healthcare analytics to inform quality improvement activities in addition to managing cost and utilization control efforts. The use of structured and routine analysis of healthcare claims-based information enables both established organizations and newly developed PCMHs to receive ongoing feedback on process effectiveness and health outcomes, facilitating rapid-cycle process improvement across the organization.

PCMHs typically focus their analytic resources on operational process improvements and patient outcomes, with the goal of driving improvements in support of the “Triple Aim.” Successful organizations understand that routine and actionable information is the key to driving improvements. Examples of PCMH-focused analytic approaches being used across the country, which typically focus on cost, utilization, and quality, include but are not limited to the following:

Read more…

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Regulatory roundup

March 30th, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

House passes “doc fix” bill with means testing of higher-income Medicare beneficiaries
The House voted to approve the Medicare Access and CHIP Reauthorization Act of 2015 (H.R.2). The bill has been sent to the Senate. A short-term extension—to be approved by the House and the Senate—will be necessary to keep physician payments from being reduced by 21% starting April 1.

Early evidence finds premium tax credit likely contributed to expanded coverage
The U.S. Government Accountability Office (GAO) has released a study entitled “Private health insurance: Early evidence finds premium tax credit likely contributed to expanded coverage, but some lack access to affordable plans” (GAO-15-312). The study came about as a result of a mandate by the Patient Protection and Affordable Care Act (ACA) for the GAO to review the affordability of health insurance coverage. The GAO examined: (1) what is known about the effects of the advance premium tax credit (APTC), and (2) the extent to which affordable health benefits plans are available and individuals are able to maintain minimum essential coverage.

To download the entire study, click here.

IRS issues private letter ruling on VEBA income used to pay benefits
The Internal Revenue Service (IRS) released a private letter ruling on the treatment of income received by a voluntary employees’ beneficiary association (VEBA) to pay plan benefits. The IRS ruled that a VEBA established by an earlier collective bargaining agreement between a union and a liquidating company to provide health insurance for retired union members is maintained pursuant to a collective bargaining agreement for the purposes of Section 419A(f)(5) of the tax code. Also, employer contributions and any income received by the VEBA and set aside to pay plan benefits is exempt function income under Section 512 and therefore won’t constitute unrelated business taxable income within the meaning of that section.

To read the entire private letter ruling, click here.

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Fixed offer or competitive bid? Choosing the right Medicaid managed care contracting methodology for your state’s needs

March 25th, 2015

By Javier Sanabria

Medicaid revenue to risk-based managed care plans has increased significantly in recent years, and there’s now mounting pressure on state Medicaid agencies to deliver quality care and contain costs. Agencies must consider the long-term stability of their Medicaid programs through changes in population, cost trends, and care practices. How Medicaid contracts are awarded to managed care plans can have a major impact on how well they support strategic outcomes and can have unintended consequences if agencies don’t carefully consider their specific markets and regulatory realities. This Medicaid briefing paper authored by Milliman consultants Jeremy Palmer and Rob Damler provides more perspective.

Ikaso Consulting’s Reiko Osaki and Tom Arnold also contributed to the paper.

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Regulatory roundup

March 23rd, 2015

By Employee Benefit Research Group

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

“Doc fix” bill to call for means testing of higher-income Medicare beneficiaries
A bipartisan, bicameral agreement on legislation to permanently repeal the Medicare physician payment formula—the “sustainable growth rate” (SGR)—was introduced in the House and Senate on March 19, with House and Senate leaders hoping to clear the proposal before the April 1 date when doctors would otherwise face a 21% cut to the reimbursements they receive under Medicare. The “doc fix” has been extended numerous times in the past via temporary patches without revenue offsets; the new proposal (unnumbered) reportedly includes some revenue raisers, in the form of “means testing” for more affluent Medicare recipients. The agreement is expected to cost about $200 billion (over 10 years), but only about $70 billion would be offset.

The initial legislative language released does not include the revenue provisions. However, documents released earlier from the bill’s negotiating team indicated that the $70 billion in offsets would be split between Medicare providers and beneficiaries. On the beneficiary side, the documents suggested phasing in a requirement that higher-income beneficiaries (possibly, for example, individuals/families with incomes of $133,000/$260,000) pay more for Medicare Parts B and D benefits and that beneficiaries pay more out-of-pocket expenses before Medigap supplemental policies pay out (i.e., it would prohibit first-dollar Medigap policies).

House approves bill exempting volunteer firefighters from ACA mandate
On March 16, the U.S. House voted 415-0 to approve the Protecting Volunteer Firefighters and Emergency Responders Act (H.R.1191), sending the bill to the Senate.

The bill would amend the tax code to exclude services rendered by bona fide volunteers providing firefighting and prevention services, emergency medical services, or ambulance services to a state or local government or a tax-exempt charitable organization from the category of “employees.” The Patient Protection and Affordable Care Act (ACA) mandates that large employers provide minimum essential healthcare coverage.

The bill defines “bona fide volunteer” as having compensation only in the form of reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of volunteer services; or reasonable benefits (including length-of-service awards) and nominal fees customarily paid by similar entities for the services of volunteers.

By regulations, the Internal Revenue Service (IRS) already does not count volunteer fire departments or ambulances as employers under the ACA mandate, so the bill puts into law what the regulations provide.

Treasury, DOL, HHS release final rule on excepted benefits
The U.S. Departments of the Treasury, Labor (DOL), and Health and Human Services (HHS) have issued a final rule on excepted benefits to specify requirements for limited wraparound coverage to qualify as an excepted benefit.

The final rules permit group health plan sponsors, in limited circumstances, to offer wraparound coverage to employees who are purchasing individual health insurance in the private market, including in the health insurance marketplace. The rule sets forth two pilot programs for limited wraparound coverage. One pilot allows wraparound benefits only for multistate plans in the health insurance marketplace. The other allows wraparound benefits for part-time workers who enroll in an individual health insurance policy or in basic health plan coverage for low-income individuals established under the ACA. These workers could, under existing excepted benefit rules, qualify for a flexible spending arrangement (FSA) alternative to this wraparound coverage.

The final rules give employees who otherwise may not be able to get employer-based benefits access to high-level benefits.

To read the entire final rule, click here.

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Challenges with measuring savings in shared savings arrangements

March 20th, 2015

By Javier Sanabria

Shared savings arrangements attempt to tie provider reimbursement to performance or quality measures and reductions in the healthcare expenditures for an assigned population of patients. The most common form of these arrangements involves networks of providers that form accountable care organizations (ACOs). The practical task of measuring improvements by providers isn’t easy, especially measuring reductions in expenditure levels that are due to actions by providers. Milliman consultants Anders Larson and Jill Herbold provide more perspective in this healthcare reform paper.

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Possible changes to Medicare Part D reinsurance programs

March 17th, 2015

By Javier Sanabria

The Medicare Payment Advisory Committee (MedPAC) has previously suggested changes to the Medicare Part D reinsurance and risk corridor program. But several factors—the current state of the Part D market, recent attempts to curtail Medicare spending, and large increases in reinsurance payments—may increase the likelihood that MedPAC and the Centers for Medicare and Medicaid Services (CMS) will implement changes to Part D. Putting these changes in place will not necessarily result in decreased program spending and could cause an increase in the prevalence of private-sector reinsurance in the Part D market. Milliman’s Nicholas Johnson provides perspective in this paper.

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