Insurers have a new MLR formula to learn

Medicare Advantage (MA) carriers must file medical loss ratio (MLR) reports with the Centers for Medicare and Medicaid Services (CMS) by December 4. Commercial carriers that also offer MA or prescription drug plans (PDP) may already have experience reporting MLR requirements, however, differences exist in the MA/PDP formula that carriers need to know about. Milliman consultant Courtney White offers some perspective in his article “The Medicare Advantage medical loss ratio requirement.”

2016 cost-of-living adjustments for Medicare benefits

The Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) has announced cost-of-living adjusted (COLA) figures for Medicare Part A and Part B for 2016. In April, CMS announced the updated amounts for the Medicare Part D standard prescription drug benefit for 2016. This Client Action Bulletin provides the new COLA and Part D drug benefit figures.

Getting ready for IRS Form 1095-C

Clark-CharlieOne of the following will be a fact when the sun sets on Sunday, February 7, 2016. Which one do you think it is?

1. The New York Jets will be NFL champions after dispatching the New York Giants in Super Bowl 50 in Santa Clara.
2. Your employees will have received Internal Revenue Service (IRS) Form 1095-C from you, which they need to complete their 2015 federal Form 1040 individual tax return.
3. Your employees will be completely knowledgeable about the information on Form 1095-C and will not confuse it with the 2015 Form W-2 you also sent them (perhaps in the same envelope).

If you picked 1, you are a wearing a Joe Namath jersey and have limited knowledge of football. If you picked 2, you are fine as long as they received it by February 1, 2016. If you picked 3, you still have enough time to make it happen if you start planning and working on it now.

Let’s review Form 1095-C, which provides employees eligible for employer-sponsored health insurance under the Patient Protection and Affordable Care Act (ACA) with information about their  options, and why an Applicable Large Employer (ALE) such as your company needs to prepare it and distribute it to employees.

The ACA mandated that ALEs must provide evidence that 70% of your employees were offered minimum essential coverage (MEC) in an employer qualified health plan (QHP) during 2015. The QHP can be self-funded by you as the employer, or you could have fully insured the plan with a health insurance provider. This task is required under IRC Section 6056. Form 1095-C (along with the companion Form 1094-C, a cover sheet a reporting employer must send the IRS) is used in determining whether an employer owes a payment under the employer shared responsibility provisions of IRC Section 4980H.

This new administrative task comes with a complete new set of instructions from the IRS, and the ALE has the choice of preparing the form using its own human resources (HR) information system or hiring a third-party administrator to do so.

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Regulatory roundup

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

Medicare Parts A and B COLAs for 2016
The Centers for Medicare & Medicaid Services (CMS) has issued the cost-of-living adjustments (COLAs) applicable to components in the Medicare program. For 2016, the rates will be as follows:

• Medicare Part A 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 $1,288 (up from $1,260 in 2015).
• Medicare Part A daily coinsurance amounts: $322 for the 61st through 90th days of hospitalization in a benefit period (up from $315), $644 for lifetime reserve days (up from $630), and $161 for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period (up from $157.50).
• Medicare Part A premium to purchase coverage: $411 (up from $407 in 2015), and for those entitled to a reduced monthly premium, $226 (up from $224 in 2015).
• Medicare Part B deductible: $166.00 (up from $147.00 in 2015).
• Medicare Part B standard monthly premium: $121.80 (up from $104.90 in 2015).

For more information, click here.

IRS provides AIR tax tip; ACA electronic filers must use AIR program
Health coverage providers and applicable large employers – and those assisting them in preparation for electronically filing the 2015 health care information returns – need to understand the IRS ACA Information Return (AIR) electronic filing process. Publication 5165 entitled “Guide for electronically filing Affordable Care Act Information Returns for software developers and transmitters” outlines the communication procedures, transmission formats, business rules and validation procedures for returns transmitted electronically through the AIR system.

For more information, click here.

New RDS common plan sponsor questions
CMS’ Retiree Drug Subsidy (RDS) Center has added a list of top plan sponsor questions to the Common Questions section of the RDS Program website. The page contains answers to the inquiries CMS’ RDS Center most frequently receives from the plan sponsor community.

To access the webpage, click here.

Different benefit richness models affect carriers and consumers

The Affordable Care Act (ACA) established different metallic tiers—bronze, silver, gold, and platinum—that convey benefit richness. These tiers are assigned using the Actuarial Value Calculator (AVC), while costs are determined by an insurer’s pricing model, creating a potential disparity between how a plan is marketed and its actual richness. Milliman actuary Pedro Alcocer highlights the issue in his article “Actuarial value, benefit richness, and the implications for consumers.”

Here is an excerpt:

Although the AVC is the official HHS tool for designating a plan’s benefit richness for the purpose of helping consumers make informed purchasing decisions, carriers generally do not use the Actuarial Value Calculator to determine a plan’s benefit richness for pricing purposes. Rather, carriers use pricing models with data that is either representative of their own experience, or has been adjusted to reflect their unique single risk pool characteristics….

Our analysis showed that roughly half of all plans tested had a benefit richness value outside the designated AV ranges. This means that a significant number of consumers may be unknowingly purchasing plans with actuarial values that when measured with the pricing model are outside the AVC ranges. Consequently, two plans that are supposedly equivalent and comparable (e.g., two silver plans) may not be so equivalent in reality. In the absence of this information, consumers may not be making the most informed choices when shopping for plans in the market places….

Furthermore, along with the annual limitations on the maximum out-of-pocket amount, the AVC places restraints on the plan designs that carriers can offer… The nature of the AVC combined with the annual limitation on the maximum out-of-pocket amount makes it very difficult to create bronze plan designs with copays on select services. The lower the AV, the less flexibility carriers have in creating plan designs that pass the AVC test. This means fewer choices for consumers, as there appears to be less diversity of plan designs at the lower AV levels.

In the article, Pedro also offers a potential solution centered on a two-tier scheme to increase the plans carriers can offer under the ACA.

Ultimately, the only metallic tier that matters for subsidy purposes is the silver tier. A way to restore choices to pre-ACA levels would be to simply have two plan tiers: eligible for subsidies and not eligible for subsidies. Plans eligible for subsidies would essentially replace the current silver tier, and would be used to determine the second-lowest plan in this category for the purpose of determining the advanced premium tax credit. Furthermore, only plans that pass the designated AVC subsidy range (either the current silver range or something else) would be eligible for cost share reduction subsidies. Any other plan outside the subsidy-eligible AVC range could still be offered in the marketplaces as long as it stays within a defined global range of permissible AVC values (0.55 to 0.95 for instance). Carriers would then be required to publish each plan’s benefit richness using a common measure among all carriers instead of using the current metallic tiers to identify a plan’s perceived level of coverage.

Rates changing on the ACA marketplace

Premium rates for plans in the 38 federally facilitated and state partnership health insurance marketplaces have increased overall in 2016 as compared to 2015. A new Milliman analysis shows states with fewer carriers tended to have higher rate increases. Other known factors that have contributed to overall rate increases include increases in the transitional reinsurance program’s attachment point and government fees. In this article, Milliman’s Samuel Bennett highlights each marketplace average rate and unique carrier change by state. Figure 1 below shows the comparisons between 2015 and 2016.

Figure 1: Individual Market Comparison Between 2015 and 2016

State Second-Lowest-Cost Silver Plan Premium Rate (27-year old)*
Number of Carriers Offering Plans in the State Percent
(c) = (a)/(b) – 1
2016 2015 2016(a) 2015(b)
Alaska $590 $449 32% 2 2 0%
Alabama $244 $216 13% 3 3 0%
Arkansas $244 $235 4% 4 3 33%
Arizona $189 $161 18% 8 10 -20%
Delaware $292 $247 18% 2 2 0%
Florida $237 $235 1% 8 9 -11%
Georgia $236 $228 4% 9 8 13%
Iowa $245 $217 13% 4 3 33%
Illinois $203 $192 6% 8 7 14%
Indiana $235 $268 -12% 8 8 0%
Kansas $217 $187 16% 3 4 -25%
Louisiana $290 $267 9% 4 4 0%
Maine $260 $263 -1% 3 3 0%
Michigan $212 $209 1% 12 12 0%
Missouri $257 $233 10% 6 6 0%
Mississippi $230 $255 -10% 3 3 0%
Montana $264 $196 35% 3 3 0%
North Carolina $318 $259 23% 3 3 0%
North Dakota $270 $248 9% 3 3 0%
Nebraska $272 $243 12% 4 2 100%
New Hampshire $215 $205 5% 5 4 25%
New Jersey $272 $259 5% 4 5 -20%
New Mexico $205 $163 26% 3 5 -40%
Nevada $235 $217 8% 3 4 -25%
Ohio $221 $218 1% 15 14 7%
Oklahoma $251 $185 36% 2 3 -33%
Oregon $226 $183 23% 10 10 0%
Pennsylvania $214 $193 11% 7 9 -22%
South Carolina $247 $223 11% 3 3 0%
South Dakota $270 $216 25% 2 3 -33%
Tennessee $236 $191 23% 4 3 33%
Texas $220 $211 4% 14 13 8%
Utah $245 $212 16% 4 6 -33%
Virginia $240 $230 4% 7 6 17%
Wisconsin $262 $251 5% 16 15 7%
West Virginia $294 $248 18% 2 1 100%
Wyoming $379 $359 6% 1 2 -50%
Hawaii*** $213 n/a n/a 2 n/a n/a

* ASPE premium rates represent the average monthly premiums prior to the application of tax credits.
** Percent change numbers represent those calculated by ASPE.
*** Hawaii started using the federal application system for its state-based individual medical marketplace in 2016. No 2015 data is available for comparison. Note that Hawaii only has one rating area, so no ASPE plan enrollment equivalent was needed to calculate the overall statewide average second-lowest-cost silver plan rate.

A chain reaction

Previously, the medical professional liability (MPL) industry could afford to be less attentive to changes in the healthcare delivery system because the business of healthcare and practice of medicine had been very stable during the course of recent decades. That changed with the passage of the Patient Protection and Affordable Care Act, which created a chain reaction throughout the entire healthcare industry. The MPL industry is now responding to the broad effects of healthcare reform. Milliman consultant Susan Forray provides more perspective in this article.

This article was originally published in the October 2015 issue of the Medical Liability Monitor.

Milliman launches new features in Hospital Performance Index

Milliman today announced that its Hospital Performance Index (HPI) software, a benchmarking tool for payers and providers that uses statistical methods to identify opportunities for increased efficiency in patient populations, has added two new capabilities.

The first new feature involves observation status benchmarks, which have become more important over the last two years with the institution of the 72-hour rule. HPI can now produce national and regional averages for observation statistics, allowing for quick comparison of individual facilities to national, regional, and state norms. Custom reporting is also available. With such wide discrepancy in rates regarding observation status by facility throughout the U.S., this tool can now shed light on the relative performance of every facility in the country.

The second new feature involves readmission rate benchmarks by DRG. HPI now provides data on the relative readmission rate performance of each hospital in the country, information that is crucial for both hospitals and payers. This new feature will enhance the existing functionality around potentially avoidable admissions and potentially avoidable in-patient days.

“These additions to HPI were very much driven by market demand,” said John Cookson, a principal at Milliman. “Hospitals and payers want more and better data so that they can make smarter decisions, improve efficiency, and contain costs. Now that HPI has information on observation status and readmissions rates, they are in a much better position to accomplish those goals.”

Healthcare provider performance metrics

Organizations that employ provider performance metrics can position themselves better for long-term success as provider reimbursement continues to transition from pay-for-volume to pay-for-value. In her article “Evaluating healthcare provider performance,” Milliman’s Jill Herbold discusses how healthcare organizations can select the best metrics to increase the overall performance of their organization.

Here is an excerpt:

There are many types of providers involved in the delivery of healthcare—tertiary hospitals, primary care and specialty physicians, skilled nursing facilities, and home health providers, to name a few—and each plays a unique role. Though there are commonalities, a unique set of metrics is often useful to evaluate the performance of different provider types.

The specific metrics selected should depend upon the quality and robustness of available data, the ability of providers to control or influence the metric, and the ability to compare the metric across providers in an objective manner. Ideally, metrics address each component of the triple aim (cost, quality, and access) and are aligned with the organization’s financial and other goals. It is important to ensure metrics are appropriate for the particular value-based payment arrangement, the organization’s circumstances, and the population that care is being provided to. For example, skilled nursing facility utilization is an important metric for an aged Medicare population but not for a pediatric Medicaid population. It is helpful to use metrics that can be compared over time so changes can be monitored. Comparison of metrics across peer groups and to targets or benchmarks can potentially be helpful to motivate and drive performance improvements….

To achieve financial and other goals, some organizations are using performance metrics when selecting preferred providers to partner with and driving performance improvements across the organization. More specifically, adjusted performance metrics can be useful as part of:

• Evaluating physician groups and other providers for participation in a narrow network, accountable care organization (ACO), or other affiliation of providers
• Identifying post-acute care and other providers with whom to develop preferred relationships
• Identifying preferred specialty physicians to whom primary care physician can refer patients
• Rewarding participating providers via incentive compensation programs
• Driving performance improvement across hospitals, primary care physicians, specialty physicians, and other providers

Eight essentials to ACO contracting

Accountable care organizations (ACOs) must analyze the risks associated with each aspect of a shared risk and population-based payment contract to be successful. Attention to detail and data-driven decisions can help ensure that ACOs enter into a sustainable and cost-effective agreement. In this article, Milliman consultant Kim Hiemenz identifies the following eight elements critical to analyzing and understanding these payment contracts.

1. Understanding the attribution model.
2. Projecting population size and contract volume.
3. Modeling the impact of random variation.
4. Analyzing data.
5. Quantifying risk through specific modeling.
6. Setting utilization or financial targets.
7. Forward-thinking contracts.
8. Building trust.