A decade of profitability: 2013 year-end results for medical professional liability specialty writers

April 15th, 2014

By Javier Sanabria

The medical professional liability (MPL) market has sustained favorable financial results again in 2013. This article reviews the 2013 results overall, attempts to glimpse what the year-end results might have in store, and works to detect changes in the current trends that continue to produce stellar financial results for the MPL segment of the insurance industry.

MPL specialty writers, as a whole, enjoyed yet another outstanding year financially. Though the continuation of these outstanding financial results is unsustainable long-term, there is still no clear indication from the year-end 2013 financial statement data that suggests these trends are subsiding.

This article was originally published in the April 2014 issue of the Medical Liability Monitor.

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Regulatory roundup

April 14th, 2014

By Employee Benefit Research Group

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

HHS releases HIPAA security risk assessment tool
The Office of the National Coordinator for Health Information Technology (ONC) of the U.S. Department of Health and Human Services (HHS) has released an interactive, downloadable “Security Risk Assessment” (SRA) tool to help “covered entities”—including group health plans—perform and document their security risk assessments, as required under HIPAA.

The law’s security rule requires most covered entities and business associates to conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of their electronic protected health information.

To access the SRA tool, click here.

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Transitional policy for canceled plans brought into focus

April 10th, 2014

By Javier Sanabria

In November 2013, President Barack Obama extended canceled health insurance policies sold in the small group and individual markets for one year. The three-part series below addresses subsequent federal guidance concerning the administration’s transitional policy for canceled health plans, including changes to the risk mitigation programs of the Patient Protection and Affordable Care Act (ACA).

President Obama’s transitional policy for canceled plans
The president’s announcement that health insurance issuers would be permitted to renew certain canceled health insurance policies raises new questions for the individual and small group marketplaces in 2014.

Update on canceled plans: Will changes to 2014 reinsurance and risk corridor programs provide financial relief?
Proposed modifications to the risk corridor and reinsurance programs are designed to stabilize the fledgling reformed markets on and off the exchanges.

Canceled plans, part III: An extension, an expansion, and more changes to 2014 rules
Premium rates filed for 2014 might not cover claims costs if healthier individuals retain their noncompliant plans rather than seeking coverage in the ACA-compliant market.

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Insurers adjust to paradigm shift

April 8th, 2014

By Javier Sanabria

Health insurers can no longer use health underwriting to determine who they will insure. This change has caused a shift in how insurers approach the individual market. The Wall Street Journal (subscription required) quotes Milliman’s Tom Snook providing some perspective on the paradigm shift:

Health plans need to know the health status of those signing up for coverage so they can project whether the costs are likely to outrun the premiums coming in. That information will be critical in figuring out prices for next year, among other things. But, under the law’s new rules, enrollees don’t have to disclose pre-existing conditions to buy insurance.

…”In the past, the whole game was about risk selection,” said Tom Snook, an actuary with Milliman Inc. who works with insurers offering plans on public exchanges. “Now the game’s all about risk management.”

The new paradigm introduces a new question for insurers: What is the risk mix of the insurance pool? While the health exchange marketplace has reportedly seen an uptick in enrollment by younger individuals recently, age alone is not a clear indicator of an insurer’s potential risk.

Here’s what Snook told The Wall Street Journal in a recent article concerning younger enrollees:

Insurance officials also caution that age doesn’t always indicate health status–younger people may have serious, expensive conditions, while some older people rarely need medical services. Age is a “pretty good predictor,” said Tom Snook, an actuary with Milliman Inc. who works with insurers offering plans on public exchanges, but “it’s not even close to a perfect measure.”

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Tort overhaul: Patient compensation system legislation raises more questions than answers

April 4th, 2014

By Javier Sanabria

In recent legislative proposals in Florida and Georgia, lawmakers have sought to establish a patient compensation system (PCS) as an alternative to litigation for compensating patients with injuries that could have been avoided under alternative healthcare (referred to as “medical injuries” within the legislation).

Proponents say offering a PCS as an alternative to litigation could lead to faster outcomes with claims. Advocates claim that faster claim resolutions and less attorney involvement would ultimately reduce overall costs, while providing access to compensation for more patients. They also argue that this system would benefit claimants with minor injuries, who are frequently excluded under the current system, because their claims generally do not result in the kind of large monetary awards that make taking a medical professional liability (MPL) case cost-effective for plaintiff attorneys.

Can PCSs really provide the many benefits, in cost savings, fairness, greater access, and efficiencies, that their proponents claim? This article by Christine Fleming, Eric Wunder, and Susan Forray offers some perspective.

This article was originally published in Inside Medical Liability, First Quarter 2014.

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S&P: Healthcare expenditures for commercial plans up 3.5% in the 12 months ended November 2013

March 31st, 2014

By jeremy.engdahl-johnson

Data released today for the S&P Healthcare Claims Indices show healthcare costs rose 3.5% in the 12 months ended November 2013 compared to the 4.9% rise for the 12 months ended November 2012. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.7% and prescription drugs rose 2.6% over the same period. All rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 3.5% compared to 4.5% in the earlier period while outpatient fee-for-service costs rose 5.2% compared to 8.0% in the earlier period. Prescription drug expenditures were up 2.6% versus 2.9% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended November 2013.

Because of standard industry lags in invoicing claims and resolving disputed charges, it is not possible for the indices to be calculated without a lag. Trends in healthcare expenditures are calculated as the average index level in the 12 months ended November 2013 compared to the average index level in the 12 months ended November 2012 and stated as a percentage, in accordance with the usual practice with healthcare cost analyses.

“The growth in healthcare spending continues to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The key question in the slowdown is whether we are seeing a shift in healthcare cost trends that is sustainable or whether we are merely observing the slower pace of overall inflation and weak economic growth. One way to gain some insight is to look at unit cost measures for healthcare derived from the S&P Healthcare Claims Indices.”

“The data show that prescription drug trends tend to lag shifts in inflation while trends in inpatient unit costs don’t show any obvious relation to inflation shifts,” continues Blitzer. “The pattern in prescriptions may reflect consumer preferences towards generic drugs. While the general rate of inflation may affect trends in inpatient medical care, it is probably not the dominant factor. The current low inflation rate is a factor in slowing growth in healthcare expenditures, but low inflation alone will not control the growth in healthcare costs.”

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IRS final rule for employers to “pay or play” under the ACA

March 27th, 2014

By Employee Benefit Research Group

The Internal Revenue Service (IRS) recently issued a final rule for large employers (50 or more full-time employees) to “pay or play” under the Patient Protection and Affordable Care Act (ACA), providing them more time to comply with the ACA’s requirement to offer affordable, qualifying healthcare coverage or pay a penalty under certain circumstances. For employers with 50 to 99 employees, the final rule delays the mandate until the 2016 plan year, while for employers with at least 100 employees, the requirement applies on a phased-in basis so that in the 2015 plan year, 70%—rather than 95%—of the workers must be offered coverage. Large employers must meet the 95% threshold in 2016 and later plan years. The final rule provides guidance on the delay and phase-in, and also address a broad range of related employer “shared responsibility” requirements considered in previous pronouncements.

For employers contributing to multiemployer plans, the final rule extends, indefinitely, the proposed rule’s relief from penalties for employers contributing to a multiemployer plan if the contributions are made pursuant to a collective bargaining agreement, coverage is offered to full-time employees and their dependents, and coverage is affordable and provides minimum value.

For more information about the IRS ruling, please contact your Milliman consultant.

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Will gender ratio related to ACA enrollment affect rates?

March 26th, 2014

By Javier Sanabria

U.S. Department of Health and Human Services (HHS) data shows that 55% of individuals who have enrolled in a health exchange plan are women. Men, who make up 53% of the uninsured population, account for 45% of exchange plan enrollees.

Citing an America’s Health Insurance Plans (AHIP) report by Milliman, this Washington Post article considers how banned gender rating rules may be influencing men’s enrollment decision. Here’s an excerpt from the article:

Before the Affordable Care Act’s major insurance market reforms took effect this year, gender rating was allowed – meaning insurers could charge women more than men. A 2012 report from the National Women’s Law Center found that gender rating cost women $1 billion more than men, even before maternity costs were taken into account. The law now requires insurers to ignore gender when they price plans, meaning women will get a better deal. It also means that men, particularly young adults who were already purchasing insurance in the individual market, could face higher costs this year.

A Milliman report prepared for America’s Health Insurance Plans last year projected that the ACA’s new gender rules would drive down premiums between 13 percent and 19 percent for women younger than 40. The actuarial firm also found men in the same age bracket would see premiums go up 18 percent to 31 percent.

The Post also quotes Jim O’Connor discussing the possible effects gender ratios could have on rates in 2015.

If women can no longer be charged more and women are signing up at higher rates, does that mean we can expect an increase in insurance rates next year?

We already know that rates are going up in 2015, just like any other year. How much they’ll go up depends on a number of factors beyond gender, including how accurately insurers were able to predict their 2014 enrollment mix. Remember, the health law also includes several premium stabilization programs intended to head off massive rate hikes.

Actuaries I talked with had predicted different gender ratios for the 2014 enrollment period. Milliman’s Jim O’Connor, who authored the report for AHIP, said he had expected a 52:48 female-to-male ratio in 2014. He said it’s not clear how that will factor into 2015 rates.

“It’s hard to say what [insurers] will think,” O’Connor said. “The expectation is if young males sat out in 2014, maybe more of them will come in 2015 especially when they see they’re getting the tax penalty for sitting out.”

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Regulatory roundup

March 24th, 2014

By Employee Benefit Research Group

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

IRS posts information regarding consequences of unreasonable assumptions in actuarial certifications of post-retirement medical benefits
The Internal Revenue Service (IRS) has recently posted information regarding consequences of unreasonable assumptions in actuarial certifications of post-retirement medical benefits. Employee plans actuaries generally review the actuarial certifications of reserves for post-retirement medical benefits. Some of the certifications reviewed were clearly determined using unreasonable assumptions.

For example, in one case, the actuary assumed that plan participants would incur $50,000 in medical costs above those provided by Medicare every year of their lives. In another case, the actuary failed to consider the time value of money. In a third case, the actuary assumed that plan participants would incur over $500,000 of medical benefits on their first day of retirement.

Actuarial certifications based on unreasonable actuarial assumptions may result in:

• Disallowance of deductions for contributions to a welfare benefit fund
• Penalties under Internal Revenue Code Section 6701 for the actuary and the actuary’s firm
• Referral to the Joint Board for the Enrollment of Actuaries for actuaries enrolled under ERISA

For more information, click here.

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IRS releases final rule on information reporting under the ACA

March 21st, 2014

By Employee Benefit Research Group

The Internal Revenue Service (IRS) has published two sets of final rules on the information reporting requirements of the Patient Protection and Affordable Care Act (ACA), providing guidance on the reporting of minimum essential coverage and of healthcare coverage. The minimum essential coverage reporting requirement under tax code Section 6055 applies to employers that sponsor self-insured group health plans, group health insurance issuers, and the boards of trustees, association, or committees of multiemployer plans that provide minimum essential coverage. The healthcare coverage reporting requirement under Section 6056 applies to large employers (with at least 50 full-time or equivalent workers, except that for 2015 only the threshold is 100 full-time or equivalent workers) that are subject to the ACA’s employer “shared responsibility” (also known as “pay or play”) provisions. In general, the reporting entities must collect the information beginning January 1, 2015, and include the information on a single, consolidated form submitted to the IRS and given to employees in 2016.

Separately, the Centers for Medicare and Medicaid Services (CMS) released a final rule governing insurance on the exchanges in 2015, but also providing guidance on the transitional risk reinsurance program (TRRP) fee that insurance issuers and self-funded plans must pay to help offset the costs of non-grandfathered individual coverage.

For Milliman’s perspective read this Client Action Bulletin.

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