Employer-sponsored insurance: Looking beyond ACA planning

June 30th, 2015

By Javier Sanabria

As employers look for new ways to offer affordable healthcare benefits to their employees they will have to consider other solutions besides cost-shifting. In this Employee Benefit News article, Milliman’s Dan Bostedt discusses some evolving trends that may shape employer-sponsored healthcare moving forward.

Here is an excerpt:

Rethinking total rewards
Historically, health plans with high benefit levels have been a mainstay of a total rewards package. Going forward, should there be more emphasis on other components, or new components, in the total rewards package? Perhaps it is time to reallocate total rewards spending away from traditional “entitlement” types of benefits. Some goals could be:

Higher percentage of total rewards budget used for performance-based rewards;
Focus on rewards and approaches where costs can be better controlled at the employer level;
Emphasis on rewards that support the current cultural strategy;
More focus on what newer employees value most — tastes and priorities are changing.
As an example, would employees value a performance-based bonus, with lucrative payouts, over the current level of health plan coverage offered? Would that in turn help provide better alignment of total rewards to business goals?….

Private exchanges
…The expansion of private exchanges may require further evolution to more component-based rather than package offerings.

Defining the features and capabilities that would add the most value to an organization may require looking at things differently. For example, some employers may not value a private exchange as a whole, but would find value in purchasing just outsourced administration, enrollment, communications, and participant education. Others may want to use an exchange, but would like greater control over the number and types of options and offer them on a self-funded basis. Regional and national options built on narrower networks may also be valued, but perhaps just with respect to network rental versus a private exchange package.

The key is to define the specific components that would most benefit organizational goals and needs and then to press the private exchange marketplace for the flexibility of component offerings.

Physician-focused consumerism
In the future, more emphasis may be placed on physician-focused consumerism rather than the current focus on employee (participant) consumerism. This is because physicians are often the main decision-makers regarding the use of healthcare services, especially high-cost and/or high-volume services. Physician-focused consumerism will likely develop as a set of initiatives designed to align physician decision-making with high-quality health care outcomes provided in a cost-efficient manner. It can include the redesign of financial incentives for providers, physicians having greater access to broader patient-level data, updated treatment decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. Physician-focused consumerism can be the basis for collaborative efforts among employer health plan sponsors, provider systems, and physicians. Provider network analysis, especially for narrower networks, may expand to include specific audits of the attributes of the providers in the networks.

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Regulatory roundup

June 29th, 2015

By Employee Benefit Research Group

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

Supreme Court upholds ACA subsidies
The U.S. Supreme Court ruled that individuals who get their health insurance through an exchange established by the federal government are eligible for the federal subsidies available under the Patient Protection and Affordable Care Act (ACA). The court’s ruling preserves the benefits for an estimated 6.4 million Americans.

To read the court’s opinion paper, click here.

Supreme Court rules state bans on same-sex marriage are unconstitutional
The Supreme Court held that the Fourteenth amendment requires a state to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when a marriage was lawfully licensed and performed out of state.

To read the court’s opinion paper, click here.

CDC publishes survey on health insurance coverage
The Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) released selected estimates of health insurance coverage for the civilian noninstitutionalized U.S. population based on data from the 2014 National Health Interview Survey (NHIS), along with comparable estimates from the 2009–2013 NHIS. Estimates for 2014 are based on data for 111,682 persons.

To read the entire survey, click here.

CMS to remove authorized representative verification requirement from retiree drug subsidy payment requests
Currently, as a condition of requesting Retiree Drug Subsidy (RDS) payments, plan sponsors are required to submit an Authorized Representative Verification form to the Centers for Medicare & Medicaid Services’ (CMS’) RDS Center acknowledging that the authorized representative listed on the application has the legal authority to bind the plan sponsor to the terms of the plan sponsor agreement. In the coming months, CMS will be removing this requirement. CMS’ RDS Center will provide additional information closer to the time of the change.

For more information, click here.

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Healthcare tab increasing for individuals

June 25th, 2015

By Javier Sanabria

The 2015 Milliman Medical Index (MMI) shows that the cost of employer-sponsored healthcare increased by $1,456 with employees paying more of that increase than employers. This Forbes article cites the MMI and highlights the fact that individuals are increasingly picking up the cost of healthcare.

Here is an excerpt:

Those reporting problems paying their medical bills declined to 17.3% in March of this year compared to 22% in September 2013 before broader coverage under the ACA began.

Still, the health law offers access to subsidized private coverage and the health insurance industry and employers are shifting more and more costs onto subscribers and workers for the better part of the last decade. Cost-shifting makes a health plan subscriber think twice before choosing a more expensive treatment and has slowed medical inflation, but it’s also increased health plan enrollee out-of-pocket costs.

The 2015 Milliman Medical Index reported last week that the annual cost of benefits through an employer-sponsored preferred provider organization (PPO) rose 6.3%, or $1,456, to $24,671 in 2015 compared to $23,215 in 2014. Out-of-pocket costs were rising in that study linked here.

Here’s some more perspective from the MMI:

Employee costs (combined employee contributions and out-of-pocket costs) increased by 8.0% in 2015. This year’s increase is more than in prior years (6.0% in 2014 and 6.5% in 2013). This bad news continues a longer-term trend in which employees continue to bear more of the overall healthcare spending, according to the MMI—rising from 40.6% in 2010 to 42.5% in 2015.

Figures 8 and 9 illustrate how cost sharing has evolved over time. Employers adjust benefits each year in line with their healthcare budget constraints. In 2015, employers assumed $678 of the total increase in the cost of care for the family of four. Employees saw a dollar increase of $778 ($500 from increased payroll deductions and $278 from more out-of-pocket expenses). The employees’ 8.0% increase is composed of a 7.3% increase in employee out-of-pocket costs and 8.5% increase in payroll deductions. In other words, while both employer and employee costs increased, the employee experienced a larger percentage increase.

FIGURE 8

FIGURE 9

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Milliman releases new analysis of Medicaid managed care administrative costs

June 23rd, 2015

By Jeremy Palmer

Milliman today announced new research into the administrative costs associated with Medicaid managed care plans. These plans have become increasingly popular due to the Patient Protection and Affordable Care Act’s Medicaid expansion provisions and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the release of the proposed 2016 CMS capitation rate-setting guidance and the CMS proposed rule for Medicaid managed care. These CMS regulations require greater documentation of Medicaid managed care administrative costs, and may be useful as plans look to establish benchmarks.

We are excited about the addition of the administrative cost report to the annual financial analysis of Medicaid risk-based managed care reporting. This is an area of intense focus for the industry as we look to meet increased expectations of transparency in capitation rate-setting and face regulatory reporting of medical loss ratios.

Among other findings, the analysis demonstrates that Medicaid managed care administrative costs are primarily driven by expenditures for human capital and non-income-based taxes and fees.

The administrative cost report complements Milliman’s annual analysis of Medicaid managed care financial results, which is now in its seventh year. The administrative cost report will be updated annually.

To see the administrative cost report, click here. To view the annual financial analysis, click here.

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Regulatory roundup

June 23rd, 2015

By Employee Benefit Research Group

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

CMS announces national coinsurance rate for 2014 benefit year for transitional reinsurance program
The Centers for Medicare and Medicaid Services (CMS) announced that the national coinsurance rate for the 2014 benefit year for the transitional reinsurance program will be increased from 80 percent to 100 percent for non-grandfathered reinsurance-eligible individual market plans’ covered claims costs between the attachment point of $45,000 and the reinsurance cap of $250,000. HHS will remit payments to issuers starting in August 2015.

For more information, click here.

IRS issues Affordable Care Act information returns
The Internal Revenue Service (IRS) has published the “Affordable Care Act information returns: AIR submission composition and reference guide.” The purpose of this document is to provide guidance to all types of external transmitters about composing and successfully transmitting compliant submissions to IRS.

To read the entire document, click here.

IRS releases several draft forms
The IRS has released draft versions of the following forms:

2015 1095-A – Health insurance marketplace statement
2015 1095-B – Health coverage
2015 1095-C – Employer-provided health insurance offer and coverage
2015 1094-C – Transmittal of employer-provided health insurance offer and coverage information returns

CMS technical guidance on how to elect a federal external review process
The Centers for Medicare and Medicaid Services (CMS) has issued technical guidance which sets forth instructions regarding the election of a Federally-administered external review process using the Health Insurance Oversight System (HIOS).

This technical guidance applies to health insurance issuers offering group and individual health coverage that are using a federally-administered external review process in accordance with Technical Release 2011-02 (TR 2011-02), available on the CCIIO website. This technical guidance also applies to self-insured, non-federal governmental health plans and amends prior technical guidance pertaining to such plans that was released on June 22, 2011. These provisions do not apply to plans and issuers in connection with grandfathered health plans.

To read the technical guidance, click here.

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Integrated benefit programs: The future for dual eligibles

June 19th, 2015

By Javier Sanabria

Nationwide, there are about 9.6 million dual-eligible individuals (those eligible for both Medicare and Medicaid), and average spending for them is about $2,500 per month. Traditionally, the healthcare services that this population needs have been funded in silos. There are many programs and demonstrations under way to test the theory that coordinating all benefits under a single umbrella will lead to better care and lower spending. This paper, authored by Milliman’s Melissa Fredericks and Pamela Pelizzari, focuses on the key features of the existing dual-eligible demonstration programs and offers a view of what the next wave of innovation may look like.

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The price of medical care boosts Consumer Price Index

June 16th, 2015

By Javier Sanabria

A sharp rise in medical care prices contributed to a recent increase in the Consumer Price Index (CPI). Although economists and healthcare experts have not clearly identified the reasons for the spike, the 2015 Milliman Medical Index (MMI) indicates that prescription drugs are driving medical costs upward. MMI co-author Chris Girod offers some perspective in this CNBC article.

The so-called medical care index, maintained by the Bureau of Labor Statistics, rose 0.7 percent in April, “its largest increase since January 2007,” the BLS wrote in a report issued Friday.

The BLS report comes three days after the large actuarial and consulting firm Milliman projected 6.3 percent growth in the costs of health care for a typical family of four on an employer-based plan in 2015. That compares to a low-water mark growth rate of 5.4 percent last year.

Milliman’s report is the latest indication that health-care costs, which saw a historic slowdown in their rate of inflation in the years after the Great Recession of 2008, are headed back up toward the trends seen before the financial meltdown. Before the recession, double-digit inflation in health-care costs was common.

“There’s a correlation between the CPI medical index and the MMI, but they’re very different measures,” said Chris Girod, a principal and consulting actuary at Milliman, who added that the MMI looks at a broader range of prices. “The annual increases [in the MMI] tend to be a lot higher than CPI.”

Milliman’s report blamed resurgent inflation on price increases for prescription drugs, particularly specialty drugs. “The rest of the category, the increases were pretty ho-hum this year,” he said. Prescription drug prices overall are expected to increase by 13.6 percent in 2015, according to Milliman’s index.

In the category of specialty drug prices alone, “the annual increases are around 20 percent right now,” Girod said. Those specialty drugs include Sovaldi, made by Gilead, which in a 12-week course of treatment can cost $84,000.

“The drug trends have actually been coming down in the last four or five years until now,” Girod said.

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Storify: 2015 Milliman Medical Index media roundup

June 10th, 2015

ACA’s influence on the large employer market

June 9th, 2015

By Sue Hart

Hart, SueLast year’s Milliman Medical Index report noted that emerging reforms required by the Patient Protection and Affordable Care Act (ACA) had yet to show material direct impact on the cost of care for our family of four because this family is often insured through large group health plans. Some of the most far-reaching ACA reforms are focused on access to insurance in the individual and small employer markets and have more immediate impacts on premium rates in those markets. While this modest impact continues in 2015, there are a number of influences that the ACA may have on costs in the large employer market over the next few years. Some of these influences will directly affect the large employer market—the Cadillac tax is the most visible such change—while others may be indirect, with spillover from provisions in other markets driving change in the large employer market.

Read more…

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Regulatory roundup

June 8th, 2015

By Employee Benefit Research Group

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

GASB improves reporting for health insurance and other retiree benefits
The Governmental Accounting Standards Board (GASB) has unanimously approved two statements that will significantly improve the accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB) – primarily retiree health insurance.

• GASB Statement No. 74, “Financial reporting for postemployment benefit plans other than pension plans,” addresses reporting by OPEB plans that administer benefits on behalf of governments.

• GASB Statement No. 75, “Accounting and financial reporting for postemployment benefits other than pensions,” addresses reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments.

Statements 74 and 75 will be available for download at no charge from the GASB website in late June. For more information, click here.

Measuring the generosity of employer-sponsored health plans – an actuarial-value approach
The June 2015 version of the Bureau of Labor Statistics’ Monthly Labor Review contains an article entitled “Measuring the generosity of employer-sponsored health plans: An actuarial-value approach.” The article estimates the actuarial values of employer-sponsored health insurance plans using survey data collected from the BLS National Compensation Survey (NCS) and the Medical Expenditure Panel Survey, which is administered by the Agency for Healthcare Research and Quality. The article shows how reliable actuarial values could be useful to consumers – allowing consumers to compare one plan’s value with another – if such measures were to become available in the future.

To read the entire article, click here.

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