How will Prop 46 and ACA affect medical professional liability?

October 23rd, 2014

By Javier Sanabria

The medical professional liability (MPL) industry experienced sustained profitability in 2013. Profits are likely to continue over the next several years. There are a few market uncertainties like healthcare reform and California’s Proposition 46 that will test insurers’ current business models though. In this article, Milliman consultants Richard Lord and Stephen Koca explain how these issues may affect the MPL industry moving forward.

This excerpt provides some perspective:

Physician shortage?
The huge influx of insured individuals, which is expected to top 30 million by the time ACA is fully implemented in 2016, could lead to a shortage of physicians, who may turn over some of their duties to nurse practitioners or physician assistants. Lacking the same expertise as a physician, these providers may fail to diagnose or misdiagnose some condition. On the other hand, they may form more personal relations with patients, and that has been shown to reduce the likelihood of a lawsuit.

Under collateral-source payment rules, the ACA may result in lower awards, since the cost of future medical care would no longer be included in awards, thereby limiting MPL insurers’ exposure to the cost to future health insurance payments in an award, or it might have only a negligible impact, depending on how it is administered and the courts’ decisions.

These scenarios are actually less than a handful of the dozens of possibilities that can arise from the ACA. Any one of the ACA’s provisions is unlikely to upend MPL insurers’ cost structure, but in tandem, the layers and layers of issues stated or implied in the ACA could tip costs in a direction that might prove difficult to absorb.

The ACA, however, is only one of the uncertainties facing MPL insurers.

The California question
In November, California voters will decide whether the state’s landmark statute, which caps non-economic MPL damages at $250,000, will remain intact, as written. Enacted nearly 40 years ago, California’s Medical Injury Compensation Reform Act (MICRA) has withstood a series of constitutional challenges, the last of which was in 1985.

…But MICRA is now being challenged in a ballot proposal [Proposition 46] that would raise the cap on non-economic damages to more than $1 million.

If enacted, the proposal would raise the cap on any claim that is outstanding as of January 1, 2015. MPL insurers and self-insured entities would see their liability increase for any unsettled claim on their books, as well as future claims. In all likelihood, claim severity would increase, but the frequency of claims would almost certainly rise if litigation were viewed as a more attractive means of compensation than it now is.

This development has far-ranging consequences, given the size of the California market, but it could also signal a change in sentiment if other states decide to follow California’s lead—since California has long been a state that’s a bellwether for social and economic change.

According to the National Conference of State Legislatures, 35 states have some type of cap on medical professional awards. How many states might again follow California’s lead and challenge reforms?

These two articles detail the influence that Proposition 46 will have on the future of MPL insurers and healthcare providers:

CA Proposition 46: The end of an era for noneconomic caps?
CA Proposition 46: Undoing tort reform?

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IRS allows more mid-year group health election changes for cafeteria plans

October 21st, 2014

By Employee Benefit Research Group

Sponsors of group health plans under a cafeteria plan (under tax code section 125) may amend the plan to permit participants to make mid-year election changes in two new instances, under recently issued IRS guidance. In Notice 2014-55, the IRS expands the situations under which participants may revoke a group health coverage election mid-year, but does not permit such changes for healthcare flexible spending arrangements (health FSAs).

Notice 2014-55 allows the group health plan sponsor to accommodate participants who want to prospectively revoke an election during a plan year in two situations:

1. The participant’s hours have been reduced to the point where they are expected to work fewer than the Patient Protection and Affordable Care Act’s 30-hour threshold for “full time” work. The change in election is permitted even if the reduction in expected hours worked does not result in the employee ceasing to be eligible under the group health plan.
2. The participant voluntarily choses to drop employment-based coverage to purchase exchange coverage without having a period of dual or no coverage.

In the first situation, participants must represent to the employer that they will be enrolled in “minimum essential coverage” by the first day of the second month following the revocation date. In the second situation, they must represent that they will be enrolled in exchange coverage by the date immediately following the loss of employment-based coverage. A plan sponsor may rely on participants’ “reasonable” representation of their enrollment statements.

An election to revoke coverage on a retroactive basis is prohibited.

In general, section 125 cafeteria plan sponsors must amend the plan by the last day of the plan year for which the change is effective and operate the plan in accordance with the guidance. For 2014, however, Notice 2014-55 permits plan sponsors to adopt the amendment applicable to the start of the 2014 plan year by the end of the 2015 plan year. Notification to plan participants about the amendment is required.

For additional information about the IRS’s guidance permitting these cafeteria plan changes, please contact your Milliman consultant.

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Nov. 5 deadline nears for obtaining a Health Plan Identifier (“HPID”)

October 21st, 2014

By Employee Benefit Research Group

Sponsors of most self-insured group health plans are reminded that, if they have not yet done so, they must obtain a health plan identifying number (“HPID”) by November 5, notwithstanding the lack of clarity in some key areas in the final regulations and related guidance from the Centers for Medicare & Medicaid Services (CMS). The HPID requirement applies to all “controlling health plans,” although those with $5 million or less in annual receipts have an additional year – until Nov. 5, 2015. A controlling health plan controls its own business activities, actions, or policies, or is controlled by an entity, such as an employer, that is not a health plan. An employer may obtain an HPID for each of its controlling health plans using a single-employer identification number (EIN).

Health flexible spending accounts (FSAs), health savings accounts (HSAs), and health reimbursement accounts (HRAs) that cover only deductibles or out-of-pocket costs do not require an HPID. An HRA may require an HPID if they meet the definition of a “group health plan.”

The intended purpose of HPIDs is to streamline and administratively simplify electronic transactions including claims for benefits, premium payments, benefit enrollment/disenrollment, and payment authorizations.

In general, an employer may authorize third-party administrators to obtain an HPID on its behalf for the self-insured group health plan; insurance carriers are responsible for obtaining the HPID for fully insured plans.

For information about obtaining an HPID, see the following CMS web pages:

A Quick Reference Guide to Obtaining a Controlling Health Plan HPID
Frequently Asked Questions
Health Plan and Other Entity Enumeration System Data Elements
HPID User Manual

The CMS guidance thus far leaves many questions unanswered, leaving plan sponsors having to rely on legal counsel or other advisers in attempting to comply in good faith. For example, employers that provide health and life insurance under a single plan (i.e., as filed by one Form 5500) for former employees/retirees will have to consider if only one HPID is necessary for both the current and former employee coverages. Similarly, if a group health plan sponsor tracks different benefit options under a plan, the guidance is not clear if each option is a “subhealth” plan requiring individual HPIDs or if the options must be treated as part of a single plan with one HPID. In addition, the guidance is not clear about single or multiple HPIDs in situations involving an employer that provides coverage in multiple geographic regions through several preferred provider organizations (PPOs) or health maintenance organizations (HMOs).

For additional information about HPIDs, please contact your Milliman consultant.

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Regulatory roundup

October 20th, 2014

By Employee Benefit Research Group

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

Trends in employment-based health insurance coverage
The Bureau of Labor Statistics (BLS) has published an article on its journal, Monthly Labor Review, examining employer-sponsored health insurance trends. The article highlights data from the BLS’s National Compensation Survey which show that access to employer-provided health insurance declined from 1991 to 2002, chiefly because of narrower access among part-time workers. Then, from 2003 to 2012, access exhibited a significant further drop and participation also fell significantly. Over the latter period, non-union workers, part-time employees, and lower wage workers, as well as those employed at small establishments, had a lower incidence of employer-provided health insurance.

To read the entire article, click here.

Benefit news ,

2015 cost-of-living adjustments for Medicare benefits

October 16th, 2014

By Employee Benefit Research Group

The Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) has announced cost-of-living adjusted figures for Medicare Part A and Part B for 2015. In April this year, CMS announced the updated amounts for the Medicare Part D standard prescription drug benefit for 2015. As a convenience, those figures are also provided in this Client Action Bulletin.

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Regulatory roundup

October 13th, 2014

By Employee Benefit Research Group

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

Medicare Parts A and B COLAs for 2015
The Centers for Medicare & Medicaid Services (CMS) has issued the cost-of-living adjustments applicable to components in the Medicare program. For 2015, the rates will be as follows:

• Medicare Part A (Hospital Insurance) payroll tax remains at 1.45% (paid by employers and employees) on all wages, plus an additional 0.9% (for a total of 2.35%) for high-income individuals (earnings over $200,000 for an individual ($250,000 for joint filers)), to be assessed only the employees.

• Medicare Part A inpatient hospital deductible increases to $1,260 (up from $1,216 in 2014).

• Medicare Part A daily coinsurance amounts: $315 for the 61st through 90th days of hospitalization in a benefit period (up from $304), $630 for lifetime reserve days (up from $608), and $157.50 for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period (up from $152).

• Medicare Part A premium to purchase coverage: $407 (down from $426 in 2014), and for those entitled to a reduced monthly premium, $224 (down from $234 in 2014).

• Medicare Part B deductible: $147.00 (unchanged from 2014).

• Medicare Part B standard monthly premium: $104.90 (unchanged from 2014).

The following chart shows the 2015 Medicare Part B monthly premiums based on income tax filing (unchanged from 2014):

Individual Income Joint Income  Part B Premium
$85,000 or less $170,000 or less $104.90
$85,001 – $107,000 $170,001 – $214,000 $146.90
$107,001 – $160,000 $214,001 – $320,000 $209.80
$160,001 – $214,000 $320,001 – $428,000 $272.70
Above $214,000 Above $428,000 $335.70

The figures above are from notices that have been published in the Federal Register of October 10, 2014.

Medicare Part A

Medicare Part A (hospital deductible)

Medicare Part B

CMS issues guidance for small employers to enroll in SHOP coverage
The CMS has issued an announcement with helpful links for employers to enroll online in the Small Business Health Options Program (SHOP). The announcement reminds small employers that starting November 15, 2014, they will be able to begin enrolling their small businesses. To enroll in SHOP coverage, employers must have less than 50 full-time employees and meet certain other requirements.

For more information, click here.

ACA’s FAQs on reference pricing and maximum out-of-pocket limitations
The Departments of Treasury, Labor, and Health and Human Services, and the CMS have issued Patient Protection and Affordable Care Act (ACA) frequently asked questions (FAQs) regarding pricing and the maximum out-of-pocket requirements.

To read the FAQs about ACA implementation (Part XXI), click here and here.

CBO working paper: Assessing the design of the low-income subsidy program in Medicare Part D
The Congressional Budget Office (CBO) released a new working paper entitled “Assessing the design of the low-income subsidy program in Medicare Part D.” The study finds that the rules of the low-income program in Part D create incentives for low-income subsidy plans to be less responsive to the number of plan sponsors, to raise their bids toward the benchmark, and to strategically bid in ways that raise the low-income benchmark and the government’s cost.

To read the entire working paper, click here.

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Regulatory roundup

October 7th, 2014

By Employee Benefit Research Group

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

IRS updates draft ACA forms
The Internal Revenue Service (IRS) has updated draft forms for the reporting of health coverage that employers offer to employees under the Patient Protection and Affordable Care Act (PPACA) in 2014. These draft forms were first released on July 24, 2014.

Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)
This form includes information about the health coverage offered to employees by employers. Part II includes information about the coverage, if any, an employer offered an employee and the employee’s spouse and dependent(s). If individuals purchased health insurance coverage through the health insurance marketplace and would like to claim the premium tax credit, this information will assist in determining whether they are eligible.

Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns)

Form 1095-B (Health Coverage)
This form provides information needed to report on income tax returns that individuals, their spouses, and their dependents had qualifying health coverage (referred to as minimum essential coverage) for some or all months during the year.

Form 1095-A (Health Insurance Marketplace Statement)
This form provides information individuals need to complete Form 8962 (Premium Tax Credit).

CMS launches quick reference guide for obtaining a controlling health plan HPID
The Centers for Medicare and Medicaid Services (CMS) launched a new reference guide with step-by-step instructions for obtaining a controlling health plan (CHP) health plan identifier (HPID) under HIPAA. As explained in the guide, users that need to obtain a CHP HPID will go through the CMS Enterprise Portal, access the Health Insurance Oversight System, and apply for the HPID.

To access the reference guide, click here.

HHS and CMS post FAQs on HPID requirements and procedures
The U.S. Department of Health and Human Services (HHS) and CMS posted frequently asked questions (FAQs) providing guidance on requirements and procedures for obtaining a health plan identifier (HPID). The FAQs address:

• The difference between a health plan and a payor
• The purpose of the Other Entity Identifier and who may apply for it
• Use of a HPID for other business purposes
• Authorization of an individual to obtain a HPID for the health plan
• When a health plan must obtain a HPID
• Definition of a “small health plan” and absence of annual receipts
• Absence of standard terminations
• How to obtain a HPID
• How to obtain a HPID without a North American Industry Classification (NAIC) Code number or Payer ID
• Requirements for self-insured health plans
• Requirements for third-party administrators
• Applicability to fully-insured plans
• Who must obtain HPIDs for fully-insured health plans
• Applicability to flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), wrap-plans, or cafeteria plans

To access the FAQs web page, click here.

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Health data analytics for identifying wasteful services

October 1st, 2014

By Nancy Zoelzer

Zoelzer-NancyEliminating inefficient and unnecessary medical services improves overall healthcare efficiency while reducing costs. In 2009, the Institute of Medicine (IOM) identified $750 billion of wasted spending with unnecessary services accounting for $210 billion. The U.S. Congressional Budget Office (CBO) has estimated that 30% of medical care in the United States is unnecessary care. Removing this waste and unnecessary care from the system will reduce costs, and is an opportunity to improve quality and patient safety.

Health data analytics for identifying wasteful services

There are a number of use cases for analyzing health claims data to find wasteful and likely to be wasteful services.

• Quantify necessary vs. wasteful services
• Identify opportunities for cost savings
• Use provider profiling and pay for performance risk sharing reporting
• Use employer group reporting to convey the value of health plan services provided to employers

In a pilot study of wasteful services, Milliman looked at one health plan’s claims data for Medicare and commercial over a one-year period (November 2012 to October 2013). Observations from that study found that 21% of members had at least one wasteful service, 25% of all services provides were wasteful, and 2.12% of the total claims cost allowed dollars were wasteful. Further data analysis found that 80% of the wasteful dollars came from only four measures:

• Stress cardiac imaging or advanced noninvasive imaging (58%, $8,568,369)
• Annual EKGs or cardiac screening (12%, $1,779,260)
• Lower back pain image (6%, $940,363)
• ED CT Scans for Dizziness (4%, $533,876)

To assist in the identification of wasteful services Milliman, along with VBID Health, has developed the MedInsight Waste Calculator. This analytical tool provides actionable data to support healthcare quality, efficiency, and effectiveness reporting. The calculator brings together clinical expertise and powerful data analytics—allowing healthcare managers to target and reduce wasteful spending.

To learn more about the MedInsight Waste Calculator, click here.

This article first appeared at Milliman MedInsight.

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Regulatory roundup

September 29th, 2014

By Employee Benefit Research Group

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

HHS releases rate review annual report (September 2014)
The U.S. Department of Health and Human Services (HHS) has released a new report showing that, in 2013 alone, consumers benefited from $1 billion in savings from health insurance rates that were lower than originally requested. This includes $290 million in savings for individuals and families, and $703 million in savings for small employers. Combined with refunds consumers received because of the 80/20 rule, consumers saved more than $2.8 billion in 2012 and 2013.

To read the entire report, click here.

HHS issues guidance for same-sex couples under HIPAA
HHS has released new guidance clarifying that same-sex couples who are legally married, even if they live in jurisdictions that don’t recognize the marriages, are afforded the same privacy protections under HIPAA rules as other married couples. This guidance was developed to assist covered entities in understanding how the Windsor decision may affect certain of their privacy rule obligations.

For more information, click here.

Benefit news ,

Evaluating opportunity in the CMMI BPCI program: Comparison of PAC utilization to benchmarks

September 25th, 2014

By Javier Sanabria

The opportunity to reduce Medicare claims cost in the Bundled Payment for Care Improvement Initiative (BPCI) of the Center for Medicare and Medicaid Innovation (CMMI) is typically in the post-acute care (PAC) period. Analyzing the opportunity to reduce Medicare PAC spending requires providers to adopt a payor state of mind—payor tools and approaches will be very helpful. Benchmarking to best practices is one of those tools.

Milliman has developed nationwide average and well-managed (WM) benchmarks for PAC periods of one to 30, 31 to 60, and 61 to 90 days. Milliman’s Bruce Pyenson, Kate Fitch, Michele Barrios, and Tyler Engel provide perspective in this healthcare reform paper.

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