How capitation arrangements can be applied to deliver the NHS Sustainability and Transformation Plans

Capitation arrangements are traditionally used as an alternative to fee-for-service reimbursement to facilitate a transfer of risk from the funder to providers of healthcare services. The objective of introducing risk sharing between funders and providers is to encourage the delivery of efficient and patient-centred care by incentivising the integration of services and minimising unwarranted variation in care. This paper by Milliman’s Joanne Buckle and Tanya Hayward explores how the principles of a traditional capitation arrangement may apply in a regional National Health Service system where the stakeholder roles differ and the implementation of various key capitation principles is not possible.

LTC rate increase process for stakeholders to consider

In September 2016, Milliman actuaries Missy Gordon and Amy Pahl published a report entitled “Long-term care rate increase survey.” The results of the survey provide insurers, state regulators, and other stakeholders with some strategies and approaches to filing long-term care (LTC) rate increases. All but two of the 26 companies that participated in the survey filed for at least one LTC rate increase.

Gordon and Shawn Stender recently summarized the report in the April 2017 issue of Long-Term Care News. In the article, the authors highlight several questions that companies and regulators frequently ask regarding LTC rate increases. They also provide answers based on their experience and the LTC survey results, which are group into a three-step process.

How do cost-sharing reduction (CSR) subsidies affect your state?

The fate of the Affordable Care Act’s (ACA) CSR subsidies – or rather, whether they’ll continue to be federally funded – is a highly anticipated decision for healthcare stakeholders nationwide. Cost-sharing reduction subsidies are payments made to insurers that reduce co-pays and deductibles for qualifying individuals and families earning up to 250% of the federal poverty level who purchase health insurance through the insurance marketplaces. Their government funding is currently under legal challenge, awaiting the White House’s decision whether or not to drop the House v. Price lawsuit.

Recently, Politico.com reported that Republicans are inching closer to a decision regarding the fate of CSR funding. As this decision will affect healthcare stakeholders in every state, it is important for policymakers to understand the health and stability of the individual market and how subsidies have affected health insurance consumers. Recently, my colleagues and I at Milliman prepared a profile of the individual health insurance market for each state along with the District of Columbia. The profile summarizes insurer financials, marketplace enrollment, and federal assistance provided to households purchasing insurance coverage through the insurance marketplaces.

We’ve compiled some of our 2017 data into an infographic that takes a closer look at ACA cost-sharing subsidies to enable stakeholders to better understand the population currently receiving assistance and the amount of assistance being provided. The graphic looks at two metrics: the estimated average annual CSR subsidy per qualifying individual and the number of individuals receiving CSRs by state in 2017. Results below provide a clearer picture of which states’ populations more heavily rely on CSR subsidies and by how much. Florida has the largest number of CSR recipients of any state with approximately one million recipients in 2017. On a national level, we estimate that there are 5.7 million individuals covered by CSR subsidies nationally, and the sum of federal CSR expenditures will exceed $5.8 billion in CY 2017.

Cost-sharing reduction

More data and analysis can be found at Milliman.com/hcr.

This blog post first appeared on LinkedIn.

Pharmacy benefits: Carve-in or carve-out?

Employers and other plan sponsors have the option of carving in or carving out their pharmacy benefit program from their medical benefits. There are a number of important factors that should be considered when deciding whether or not to carve out pharmacy benefits. This article identifies the advantages and disadvantages of both options and raises important questions to consider when contemplating a move to carve-out.

Definitions
Carved-in

When the pharmacy carve-in approach is used, the employer contracts directly with the medical health plan vendor for medical and pharmacy benefits. The vendor will either administer the program in-house or contract with a pharmacy benefits manager (PBM) vendor to process pharmacy claims and administer the pharmacy program. Because the employer contracts directly with the medical health plan vendor, there is no direct relationship with the PBM.

A pharmacy carve-in is typically used under the fully insured model. In 2015, the Pharmacy Benefit Management Institute (PBMI) reported 23% of smaller employers (less than 5,000 lives) and 7% of larger employers (greater than 5,000 lives) were fully insured. Under the fully insured model, the employer pays a premium to the insurer and the insurer assumes the risk of the total claims amount rather than the employer.

Carve-out
When the pharmacy carve-out approached is used, employers contract directly with a PBM vendor to administer their pharmacy benefits program.

A pharmacy carve-out is typically used under the self-insured model. In 2015, PBMI reported 77% of smaller employers and 93% of larger employers were self-insured. Under the self-insured model, the employer assumes the risk and benefits from managing costs. Pharmacy stop-loss insurance may be purchased to mitigate the risk of total claims amounts going over a certain threshold. A pharmacy carve-out can also be used with the fully insured model, although this is less common.

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Regulatory roundup

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

CMS chief actuary releases memo on the financial effects related to the American Health Care Act
A new memorandum from the Centers for Medicare & Medicaid Services (CMS) summarizes the Office of the Actuary’s estimates of the financial and coverage effects through 2026 of selected provisions of the American Health Care Act (AHCA) of 2017 (H.R. 1628).

To read the entire memo, click here.

DOL releases information regarding mental health parity
The Department of Labor (DOL) released the following documents related to Mental Health Parity:

Frequently Asked Questions
Draft of Mental Health Parity Disclosure Statement
Request for Information (RIF)

Budget proposal may effect Social Security Disability Insurance

President Donald Trump’s 2018 budget proposal includes potential changes to several Social Security Disability Insurance (SSDI) programs. If approved, these changes could affect claimants, state agencies, insurance companies, and/or employers. The Milliman Insight article “President Trump’s budget proposal calls for disability changes” by Jennifer Fleck explores the financial and administrative implications related to the proposed changes for each of these groups.

Here is an excerpt:

It is not yet clear which of the proposed changes are likely to proceed nor which can be considered benefit cuts as opposed to administrative changes intended to manage the existing program more closely. However, the potential impact is significant for many different constituencies.

• Current claimants or applicants now waiting for their claim decisions could be affected through reduced retroactive payments, increased opportunities for rehabilitation, or potential shifting of the payer of their benefits.
• State agencies should pay close attention to the proposed changes as they could require additional services be performed at the state level.
• Insurance carriers could be required to pay additional benefits to private insurance claimants as costs are shifted. Currently, group insurers offset their payments for SSDI benefits, so reduced SSDI benefits will result in higher payments from insurance companies. This has the additional impact of raising premium rates for everyone who has group disability insurance.
• Employers could be affected by cost shifting of workers’ compensation benefit offsets or by being required to accommodate more employees returning to work from disability. Employers could also face the higher premium payments mentioned above or could have higher benefit costs directly if they self-insure. This could discourage employers from offering coverage, cause a shifting of the cost to the employees, or encourage them to offer lower benefit amounts. A benefit to employers could be a larger potential workforce to draw from.