ACA premium rate reading list

May 29th, 2013

By Javier Sanabria

There has been a lot of talk about whether healthcare premiums are going to increase or not under the Patient Protection and Affordable Care Act (ACA). With that in mind we’ve put together a list of articles and studies that should help increase awareness of how health reform may affect premium rates.

KearneyHub.com – Will next year’s insurance premiums go up or down?
Many individuals are interested to know if health exchange premiums are going to increase or decrease in 2015. This article quotes Milliman’s Jim O’Connor discussing how 2014 rates will influence next year’s rates. The article also points out certain variables that may increase rates.

Columbia Journal Review – What’s health insurance really going to cost?
CJR reporter Trudy Lieberman identifies seven tips to help individuals understand factors that will contribute to the setting of health exchange rates in 2015.

Wall Street Journal – Health Plans Rush to Size Up New Clients (subscription required)
This Wall Street Journal article provides perspective on how insurers are gathering data from health plan enrollees to help set future premiums. The article quotes Milliman’s Tom Snook:

“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.”

Columbia Journalism Review – Untangling Obamacare: Rate shock
This article considers several issues of interest to the public related to “rate shock” and the affordability of premiums.

Columbia Journalism Review – Untangling Obamacare: What’s behind the rate increases?
The Columbia Journalism Review (CJR) aims to help individuals understand factors that are affecting how health coverage is priced.

Read more…

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Rulings from the U.S. Supreme Court: Fiduciaries, ACA, and union fees

July 29th, 2014

By Employee Benefit Research Group

The U.S. Supreme Court in late June decided three cases that while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the Patient Protection and Affordable Care Act’s (ACA) requirement that certain preventive healthcare benefits – which include coverage for contraceptives – be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.

For Milliman perspective regarding the three rulings, read this Client Action Bulletin.

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The proposed federal exchange auto-enrollment process: Implications for consumers and insurers

July 29th, 2014

By Javier Sanabria

The U.S. Department of Health and Human Services (HHS) has proposed, for the federal health exchange, that the majority of policyholders receiving premium subsidy assistance will be automatically reenrolled in the same plan unless they elect otherwise during the 2015 open enrollment period. State-run exchanges may follow this guidance but also have the option of requiring consumers to reenroll through the exchange or proposing an alternative reenrollment methodology. Approximately 83% of enrollees on the exchanges receive federal subsidies. Policyholders who are automatically reenrolled will receive the same dollar-amount subsidy for 2015 as they did in 2014. In most cases, this will be less than the advanced subsidy that would be applicable if the policyholder enrolls through the exchange in 2015 through the “redetermination” process.

The proposed federal exchange auto-enrollment process only impacts a policyholder’s net premium contribution—total premium less Advanced Premium Tax Credit (APTC)—prior to the reconciliation process. Regardless of how a policyholder enrolls in a plan in 2015, the final premium subsidy will be reconciled with enrollees’ 2015 tax returns to ensure consistency with the prescribed subsidy formula of the Patient Protection and Affordable Care Act (ACA).

This Milliman healthcare reform briefing paper by Paul Houchens and Susan Pantely summarizes the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.

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Regulatory roundup

July 28th, 2014

By Employee Benefit Research Group

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

IRS releases draft forms for reporting employer health coverage under ACA
The Internal Revenue Service (IRS) has released draft forms that employers should use to report the health coverage they offer their employees. The draft Form 1095-B, Health Coverage, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, were posted to the IRS’s website.

Form 1095–B collects information under tax code Section 6055, which under the Patient Protection and Affordable Care Act (ACA), sets the standards for reporting information on whether plans meet minimum essential coverage. Form 1095–C falls under the jurisdiction of Section 6056, which lays out the requirements that must be followed by employers with the equivalent of at least 50 full-time employees to report whether they offer employees coverage that meets minimum value and affordability standards.

The reporting ties into the ACA’s employer mandate, which, when it fully goes into effect, will require such employers to offer such coverage or potentially face penalties.

The IRS also released draft versions of two related forms, Form 1094-B, Transmittal of Health Coverage Information Returns, and 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.

To access draft Form 1095-B, click here.
To access draft Form 1095-C, click here.
To access draft Form 1094-B, click here.
To access draft Form 1094-C, click here.

GAO issues testimony on the ACA
The Government Accountability Office (GAO) has released a report entitled “Patient Protection and Affordable Care Act: Preliminary results of undercover testing of enrollment controls for healthcare coverage and consumer subsidies provided under the Act” (GAO-14-705T).

The GAO was asked to examine issues related to controls for application and enrollment for coverage through the federal marketplace. This testimony discusses preliminary observations on (1) results of undercover testing in which we obtained health care coverage; (2) additional undercover testing, in which we sought to obtain consumer assistance with our applications; and (3) delays in the development of a system needed to analyze enrollment.

To read the entire testimony, click here.

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Medicaid risk-based managed care: Analysis of financial results for 2013

July 18th, 2014

By Javier Sanabria

Most states require that contracted managed care organizations (MCOs) file annual statements with state insurance regulators. The statements are typically based on a standard reporting structure developed and maintained by the National Association of Insurance Commissioners (NAIC), with prescribed definitions enabling comparisons across reporting entities.

This report by Christopher Pettit and Jeremy Palmer provides a summary of benchmarking financial metrics for the calendar year 2013 based on these statements, including medical loss, administrative loss, underwriting, and risk-based capital ratios. The target audience includes state Medicaid agencies and MCO personnel responsible for reviewing and monitoring the financial results of risk-based managed care programs.

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First quarter financial results for medical professional liability specialty writers

July 16th, 2014

By Javier Sanabria

Based on the collective financial results of 81 insurers specializing in medical professional liability (MPL) coverage, another good year appears to be in the offing for 2014, even as profit margins will likely decline relative to the levels seen in recent years. Pricing pressure continues to be fueled by increasing surplus levels and the desire to maintain exposures against increasing competition and the potential migration of physicians to self-insured employment settings. The largest remaining uncertainty lies in the likelihood that prior-year reserve releases can be sustained to the extent observed in recent years.

For more perspective download and read this article.

The article was originally published in the July 2014 issue of the Medical Liability Monitor.

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Regulatory roundup

July 15th, 2014

By Employee Benefit Research Group

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

IRS updates overview of PCORI fee
The Internal Revenue Service (IRS) has updated its overview of the Patient-Centered Outcomes Research Institute Fee (PCORI). The Patient Protection and Affordable Care Act (ACA) imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.

The fee applies to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. The Patient-Centered Outcomes Research Institute fee is filed using Form 720, Quarterly Federal Excise Tax Return. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31.

The web-posting provides information on how to calculate the fee for specified health insurance policies and applicable self-insured health plans, as well as provides more detail on the reporting and paying of the fee. Links are also provided to the final regulations, questions and answers, a chart summary and the Form 720.

For more information, click here.

GAO report: Early effects of MLR requirements and rebates on insurers and enrollees
The Government Accountability Office (GAO) has released “Private health insurance: Early effects of medical loss ratio requirements and rebates on insurers and enrollees” (GAO-14-580). The report was published after the GAO was asked to review the effects of the ACA’s MLR requirements on insurers and enrollees and how rebates would change if agent and broker payments were excluded from the MLR formula. The report examined:

• The extent to which insurers met the PPACA MLR standards, and how much they spent on the MLR components of claims, quality improvement activities, and non-claims costs.
• The amount of rebates insurers paid and how this amount would have changed with agents’ and brokers’ commissions and fees excluded from the MLR.
• The perspectives of insurers on the effects of the MLR requirements on their business practices.

To read the entire GAO report, click here.

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Auditing a health plan’s claims can reduce costs

July 11th, 2014

By Javier Sanabria

Employers looking to manage the cost of their healthcare plans should think about the value of conducting a claims audit. In this Employee Benefits News article (subscription required), Milliman consultants Brian Anderson and David Cusick consider how routine audits can detect flaws in a plan’s design, leading to better claims handling procedures and reductions in plan costs.

Here is an excerpt:

If feasible, it is a good idea to have claims audited every one or two years. At least as important, however, is the implementation audit. An implementation audit takes place shortly after a plan has been set up. A good time frame is 90 days after beginning work with a new vendor or any substantially new contract. Implementation audits are akin to taking off the training wheels. They help ensure that a plan has been set up correctly and that the plan sponsor is getting all of the benefits it contracted for during the implementation process. They happen after enough time has passed to gain a body of experience data but still soon enough to head off a major course change requiring extensive retroactive corrections.

Expect an audit to take three to six months. After that the recovery effort begins, in twofold fashion: recovering any money that the plan may have overpaid, and the equally important work of correcting errors in the system that were identified in the audit. Plan sponsors may engage an overpayment recovery vendor, or choose to handle it in-house.

The benefits of proactive auditing for the plan sponsor should be evident: to verify the integrity of vendor contracts and to meet fiduciary responsibilities. As with anything, there is no guarantee an audit will pay for itself every time. But it is not unusual for an audit to have findings about 3% to 5% of paid claims costs, with recoveries of about 1% to 2%. Today, for many reasons, claims audits are more effective than ever. They can be relied on to uncover something in the working of a plan that can be improved, isolated issues as well as systemic and redundant errors, contractual compliance questions, or basic data entry problems.

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Agencies issue final rule on the ACA’s orientation period

July 10th, 2014

By Employee Benefit Research Group

Employment-based orientation periods for group health plan eligibility under the Patient Protection and Affordable Care Act’s (ACA) 90-day waiting period limitation must not extend beyond one month before counting the 90-day period, according to a final rule released by the Departments of Labor, Treasury, and Health and Human Services. The final rule applies to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after Jan. 1, 2015. Plan sponsors will be deemed in compliance through the end of this year by satisfying the provisions of the proposed rule that was published Feb. 20, 2014 – read this Client Action Bulletin for more perspective.

Under the 90-day waiting period requirement, group health plans and health insurance issuers offering group health insurance coverage may not impose a waiting period longer than 90 days for employees and their dependents. A waiting period is the time that must elapse before an individual who is otherwise eligible to enroll can become covered under the group health plan. Being “otherwise eligible” requires the employee to have satisfied plan-specified conditions, such as being in a certain job classification or obtaining a job-required certification.

The newly released final rule allows plan sponsors to apply a one-month orientation period for an employee to be eligible to enroll in a plan and thus, before counting the 90-day waiting period. The orientation period is measured by adding one calendar month and subtracting one calendar day, beginning with the eligible employee’s starting date. During this orientation period, the agencies “envision that an employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin,” according to the final rule’s preamble.

The agencies also caution that compliance with the final rule will not be determinative of an employer’s compliance with the ACA’s shared responsibility provisions that require large employers (with 50 or more full-time-equivalent workers) to offer affordable, minimum value coverage.

For additional information about the newly issued final rule on the ACA’s orientation period, please contact your Milliman consultant.

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Regulatory roundup

July 7th, 2014

By Employee Benefit Research Group

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

Increased coverage of preventive services with zero cost-sharing under the ACA
The Department of Health and Human Services’ (HHS) Office of Assistant Secretary for Planning and Evaluation has published its report “Increased coverage of preventive services with zero cost-sharing under the Affordable Care Act.” The report shows that about 76 million Americans in private health insurance plans are newly eligible to receive expanded coverage for one or more recommended preventive health care services, such as a mammogram or flu shot, with cost sharing, because of the ACA.

Under the ACA most health plans must cover a set of recommended preventive services like screening tests and immunizations at no out-of-pocket cost to consumers. This includes marketplace private insurance plans. The data are broken down across states, age, race and ethnic group.

To read the entire report, click here.

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Top-down cost-allocation approach to universal healthcare

July 7th, 2014

By Javier Sanabria

A top-down cost-allocation approach may help developing countries set appropriate bundled rates for providers to participate in universal healthcare coverage. Such an approach focuses on averaging the costs of current utilization and actual expenses for hospital groups. One advantage of this practical approach is that it is feasible in situations with limited data.

In this new paper, Milliman consultants discuss their experience utilizing this top-down approach under India’s Meghalaya Health Insurance Scheme (MHIS). The following excerpt highlights the scheme’s objective:

In its first phase of rollout, the Meghalaya Health Insurance Scheme (MHIS) had limited benefits. The government wanted to expand its scope to better serve the population by providing a wider breadth of procedures, including tertiary care specialist procedures in oncology, neurosurgery and cardiac surgery. However, to make its second phase a reality, the Meghalaya scheme needed greater participation by private healthcare providers offering such specialist services. The state needed to offer realistic pay rates to private healthcare providers to attract participants.

Milliman helped the state identify the potential demand and gaps in benefits by conducting an extensive review of hospital utilization data, publications about disease burden and disease registries in the state. This was the basis of recommendations for additional surgical procedures that needed to be included in the scheme to ensure comprehensive coverage.

Milliman was asked to develop indicative prices for recommended additional surgical procedures under expanded benefits. To determine rates, Milliman used a top-down cost-allocation approach to estimate the cost of each procedure, using local hospital utilization and financial information. We developed specific tools to collect data from a representative group of hospitals.

Here are the outcomes and important considerations:

Using the top-down costing approach, we were able to estimate the costs of the following:

• Per-bed-day department cost for the five hospitals in the study
• Cost of 20 common surgeries in MHIS Phase I as a reference point for comparison with existing package rates
• Cost of 160 surgical and 20 medical conditions for tertiary care benefit expansion in Phase II

Developing the final package rates involves additional parameters, making adjustments for inflation trend, capacity utilization, quality, profit margins and specific variations among the participating hospitals. MHIS will need to apply various adjustments for these parameters to arrive at the final cost of each procedure for the social insurance scheme.

If providers are not keeping reimbursements in line with their expenditures to manage a clinical condition, there will be a tendency to pass on the shortfall to the members and deny or avoid admissions for procedures, potentially compromising the quality of care. This makes it critical that frameworks for costing are regularly updated. These frameworks also need to seek wider participation from providers. Apart from recurring medical inflation, wider provider participation and cost impact of new practices should be consolidated in updates.

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