Effectively communicating plan design

Stoddard-DavidAs multiemployer plans focus on delivering health benefits to their members in a cost-effective and efficient way, a key component is clearly and concisely communicating the thought process behind plan design and plan design changes.

Given the limited amount of money available to spend on benefits, multiemployer plans must avoid unnecessary services and reduce waste in an effort to contain costs. As a result, increased member cost-sharing, restrictions on certain services, and more tightly-managed benefits are often implemented to manage the plans’ spending.

However, despite these changes mainly being made for the “greater good of the plan,” they will be interpreted in different ways (generally negatively) by the membership. For example, a plan with high emergency room use (for non-emergencies) may increase the emergency room copayment (and perhaps lower the primary care physician copayment as an offset). For a member who legitimately needs to use the emergency room, an increased copayment will feel like a punishment. But if the change is communicated effectively, along with the reason(s) for the change, members may be more likely to be amenable to the change.

Effective communication to members includes delivering the message via email, pamphlets, mailings, bulletin board postings, or meetings – any mode of communication that reaches the membership. The message should be concise – the fewer the words, the more likely members will listen – and it should be repeated often. For example, if the plan wishes to emphasize preventive care to avoid higher cost services in the future, the headline could be “The Importance of Preventive Services,” and members should have multiple opportunities – at least once every three to six months – to receive the message until the plan is sure that the message has been heard. If the membership understands the plan’s goals in administering benefits, the plan is more likely to achieve or even surpass these goals.

This article first appeared on LaborPress.org.

Structuring a PBM vendor process to reduce costs

Plan sponsors who routinely review the selection and contracting process they use to hire a pharmacy benefits manager (PBM) can cut costs. An experienced consultant can help by customizing the process to meet the plan sponsor’s needs and provide critical assistance throughout the process. Milliman’s Brian Anderson and Alex Johnson offer some perspective in the article “Staying competitive in the pharmacy benefits manager selection process.” The authors also provide an overview of PBM contract negotiations and market checks.

Here’s an excerpt:

When selecting a PBM, a plan sponsor should follow a well-structured RFP process. It is imperative that the process involves individuals with extensive experience and knowledge in reviewing, implementing, managing, and auditing PBM arrangements. Their experience will play an important role in achieving the best available PBM arrangement for the plan sponsor, including optimal financial terms and concise contractual language.

Most plan sponsors partner with a pharmacy benefits consultant to guide them through the process and help them achieve the best results. It is vital to develop a proven, objective, and tailored grading process to evaluate the PBM vendor responses and make valid financial and administrative comparisons across vendors. An experienced consultant or advisor can help in this regard.

The steps required in the PBM vendor selection process include:

• Preparing the RFP
• Distributing the RFP to prospective PBMs
• Conducting a bidders’ conference call
• Analyzing financial bids and grading responses
• Summarizing analysis and choosing finalists
• Finalizing PBM selection
• Drafting the contract

Overview of the Merit-Based Incentive Payment System

As part of the Medicare Access and CHIP Reauthorization Act (MACRA), the Merit-Based Incentive Payment System (MIPS) seeks to tie Medicare payments to provider performance within the fee-for-service (FFS) system.

In her article “MIPS adjustment overview,” Milliman’s Pamela Pelizzari discusses the MIPS inclusion criteria and the MIPS Composite Performance Score (CPS). She also demonstrates how the CPS leads to the determination of the MIPS adjustment factor and explores the effect of changing practices on both the CPS and MIPS adjustment factor.

The article is part of a series examining the impacts of MACRA on providers, alternative payment models, and health plans. To read other articles in the series, click here.

How is ACA’S health insurance coverage impacting employer plans?

Coates-SarahIn the shifting landscape of the Affordable Care Act (ACA), where do employers currently stand, where are we headed—and what is it going to cost? In March, the Congress of the United States Congressional Budget Office (CBO) published its Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026, highlighting health insurance enrollment projections, subsidy amounts, and the impact of the ACA on health insurance. The report encompasses all types of coverage for those under 65; the following summary focuses mainly on the impacts associated with employer-based coverage.

The CBO and Joint Committee on Taxation (JCT) currently estimate that in 2016 total federal subsidies, taxes, and penalties associated with health insurance coverage for those under 65 will result in a net subsidy from the federal government of $660 billion—3.6 percent of gross domestic product (GDP). This is expected to rise at an average annual rate of 5.4 percent, reaching $1.1 trillion (4.1 percent of GDP) in 2026.

The two major culprits in terms of costs are the federal subsidies associated with employment-based coverage, and federal spending for Medicaid and CHIP benefits. Respectively, they take up 41 percent and 43 percent of the total net subsidy for people under age 65.

Who is covered and how?
According to the report, healthcare coverage is more prevalent now than prior to the ACA.

• In 2016, of the total estimated population (272 million lives), approximately 155 million people are covered by employer-sponsored insurance.
• In 2026, of the total estimated population (280 million lives), the CBO estimates that approximately 152 million people will be covered through employer-sponsored plans.

Currently, the number of uninsured is approximately 27 million. This is expected to increase slightly to 28 million in 2026. According to the CBO report, if the ACA had not been enacted, the total number of uninsured would have been 49 million this year and would have reached 52 million by 2026.

Chart 3

Chart 4

What are the ACA’s subsidies costing taxpayers?
The CBO and JCT have estimated the costs of federal subsidies associated with health insurance coverage for people under age 65. Shown below, these include the tax exclusion for employment-based coverage (of this, $1 billion per year is attributed to small-employer tax credits), and subsidies offered through the Healthcare Marketplace and related spending.

Chart 5

Health insurance taxes and penalties are projected to reduce total subsidies by $15 billion in 2016 and to grow
to $59 billion in 2026:

Chart 6

This article first appeared in the September 2016 issue of Health and Group Benefits News and Developments.

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Open vs. minimally invasive hysterectomy: Commercially insured costs and readmissions

In the United States, approximately 600,000 hysterectomies are performed each year. Several surgical approaches are used to perform hysterectomy. Open abdominal hysterectomy is the most common and invasive approach. All other approaches are classified as minimally invasive procedures. In this paper, Milliman’s Kate Fitch and Andrew Bochner analyze commercial payer differences in the average costs and readmission rates between inpatient open hysterectomies and three types of outpatient hysterectomies: laparoscopic, laparoscopic assisted, and vaginal.

This article was originally published in the August 2016 issue of Managed Care.

Advanced APM considerations for clinicians

Two value-based reimbursement models exist under the Medicare Access and CHIP Reauthorization Act (MACRA) that tie Part B payments to clinician performance: the Merit-Based Incentive Payment System (MIPS) and the Advanced Alternative Payment Model (Advanced APM) track. The Advanced APM track encourages groups of clinicians to shift from fee-for-service to delivery models in which clinicians assume more accountability and risk for the cost and quality of care. In the initial years of the program, MACRA provides incentive payments to early APM adopters.

This paper written by Milliman’s Lynn Dong and Pamela Pelizzari explores the definition of an Advanced APM, how providers can qualify to be paid under the provisions of the Advanced APM track instead of under MIPS, and why that might be desirable. In addition, the authors highlight the need for careful evaluation regarding APM participation because there is often a complex interaction between the risk inherent in an Advanced APM and the benefits under MACRA.

The article is part of a series examining the impacts of MACRA on providers, alternative payment models, and health plans. To read other articles in the series, click here.

Regulatory roundup

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

Results of GAO study on undercover testing for ACA coverage
The Government Accountability Office (GAO) recently released “Results of recent undercover testing for Patient Protection and Affordable Care Act coverage, and review of market concentration in the private insurance markets” (GAO-16-882T).

For its undercover testing of the 2015 coverage year, GAO submitted fictitious applications for subsidized coverage through the federal Marketplace in New Jersey and North Dakota, and through state-based marketplaces in Kentucky and California.

For the 2016 coverage year, GAO submitted fictitious applications through the federal Marketplace in Virginia and West Virginia, and through the state-based marketplace in California. The results of these undercover tests, while illustrative, cannot be generalized to the full population of enrollees.

To review market concentration, GAO examined data reported by issuers to CMS for fiscal years 2011 through 2014, the latest data available.

To download the entire report, click here.

Health insurance coverage in the United States
The U.S. Census Bureau report “Health insurance coverage in the United States: 2015” presents statistics on health insurance coverage in the United States based on information collected in the 2014, 2015, and 2016 Current Population Survey Annual Social and Economic Supplements (CPS ASEC) and the American Community Survey (ACS).

Here are some of the report’s highlights:

• The percentage of people with health insurance coverage for all or part of 2015 was 90.9 percent, higher than the rate in 2014 (89.6 percent).
• In 2015, private health insurance coverage continued to be more prevalent than public coverage, at 67.2 percent and 37.1 percent, respectively. Of the subtypes of health insurance, employer-based insurance covered 55.7 percent of the population for some or all of the calendar year, followed by Medicaid (19.6 percent), Medicare (16.3 percent), direct-purchase (16.3 percent), and military coverage (4.7 percent).
• Increases in both private health insurance coverage and government coverage contributed to the overall increase in coverage between 2014 and 2015. The rate of private coverage increased by 1.2 percentage points to 67.2 percent in 2015 (up from 66.0 percent in 2014), and the government coverage rate increased by 0.6 percentage points to 37.1 percent (up from 36.5 percent in 2014).

To read the entire report, click here.

CMS announcement shapes MACRA implementation

norris-colleenOn September 8, Andrew Slavitt, Acting Administrator of the Centers for Medicare & Medicaid Services (CMS), made a significant announcement regarding the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) implementation timeline on the CMS blog.

According to the CMS, providers will be allowed to “Pick their pace” with respect to the Quality Payment Program (QPP) in the first year of MACRA implementation. Mr. Slavitt has outlined four proposed “pace” levels in which providers can enter the QPP.

Colleen Norris graph

The blog post is light on specifics; however, the way options 1 through 3 are described indicates that the financial penalties in the QPP may be substantially lessened in the first year of program implementation.

CMS is scheduled to release the final rule by November 1. We will provide more details on this change, and what it means for the market at that time.

Benchmarking provider cost using Medicare allowed

There are many reliable research statistics from the private sector and the federal agencies that support the evidence that medical costs are rising and the current pace is unsustainable. Medical cost trend has two primary components, the number of services provided to patients (utilization) and the cost of each of those services (unit cost). While utilization management can be important for achieving cost savings, some employers are now giving further attention to the significant price variation in unit cost. Chart 1 below provides an example of the price variation using the average reimbursement as a percentage of Medicare in Buffalo, NY, Indianapolis, IN, Ventura, CA, and nationwide. As shown, going from Buffalo to Indianapolis reflects an 80% increase in cost, based on unit price alone.

Benchmarking provider cost using Medicare allowed_Figure 1

We regularly encounter employers who don’t fully understand the impact of provider reimbursement variation on their medical plan’s financial performance. This comes as no surprise given the limited transparency and complexity of current provider reimbursements.

Limited transparency of provider reimbursement (allowed charges)
For employers, the industry standard technique of benchmarking commercial allowable charges has historically been traditional discount analyses, which compare discounts to billed charges. However, these approaches do not provide the required rigor and precision to understand medical service reimbursement analysis—both across markets and within a given market. This is because billed charges are not standardized across providers or different services. As a result, the exact same discount could mean very different things depending on the provider and service—in some cases, price differences of over 300%. In addition, providers often optimize their billed charges to enhance reimbursement on contracts based on billed charges.

Employers generally have had a difficult time measuring unit cost solely due to the complexity of various medical procedures. There is a large amount of price variation within each inpatient Diagnosis Related Group (DRG) and outpatient type of service. Chart 2 below provides a powerful illustration of how reimbursement can vary significantly across even a single inpatient DRG or outpatient service category. The chart compares the commercial reimbursement for inpatient joint replacement and an outpatient MRI in three different metropolitan areas compared to what the government would pay under Medicare allowable. The variation in inpatient joint replacements, a large bundle of complicated services, is much lower than outpatient MRIs, which reflects a specific service that generally has little variation in intensity compared to a joint replacement.

Benchmarking provider cost using Medicare allowed_Figure 2

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Regulatory roundup

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

Early release of estimates from the National Health Interview Survey
A new report from the National Center for Health Statistics (NCHS) presents selected estimates of health insurance coverage for the civilian noninstitutionalized U.S. population based on data from the January–March 2016 National Health Interview Survey (NHIS), along with comparable estimates from previous calendar years.

Estimates for 2016 are based on data for 24,317 persons. Estimates of public and private coverage, coverage through exchanges, and enrollment in high-deductible health plans (HDHPs) and consumer-directed health plans (CDHPs) are also presented. Detailed appendix tables at the end of this report show estimates by selected demographics.

To read the entire report, click here.

IRS schedules two ACA webinars
The IRS scheduled two free webinars on issues related to the Affordable Care Act (ACA): Determining full-time status; and Overview of retirements for charitable hospitals.

I. Overview of Requirements for Charitable Hospitals under ACA (September 19 at 2 p.m. ET)

The ACA added additional requirements that affect tax exempt hospitals. Learn about:

• Community benefit standard for 501(c)(3) hospitals
• Community health needs assessment and implementation strategy
• Financial assistance and emergency medical care policy
• Limitation on charge requirements
• Billing and collection requirements

To register for this webinar, click here.

II. Determining full-time employees for purposes of the Employer Shared Responsibility Provisions (September 22 at 2 p.m. ET)

• Determining full-time employees for purposes of the Employer Shared Responsibility Provisions
• How to determine full-time status for employees who are seasonal, part-time or work non-traditional schedules
• Using the look-back method and the monthly measurement method
• Initial measurement, stability, standard measurement and administrative periods

To register for this webinar, click here.