Healthcare Town Hall

The latest Health Reform Week includes an article looking at the minimum loss ratio provisions in the reform law. The article offers perspective on how these requirements may affect commercial insurers, and particularly Medicare Advantage plans:

[Robert] Laszewski has a slightly different view. Commission cuts, he says, will depend on what is in the forthcoming MLR regulations. If insurers wind up with a half- or one-point gap to meet the minimum required MLR, “broker commissions are likely to be at the top of the list” of administrative expenses to reduce, he maintains. This may also occur in the MA market, particularly since plans in that sector will incur big payment cuts, he adds, even though MA plan MLRs now typically are close to the 85% level mandated for 2014 and beyond.

Commission-cut decisions are likely to vary among MA insurers on a plan-by-plan basis, says Pat Dunks, a principal and consulting actuary at Milliman. He points out that some MA plans don’t even use brokers and contends that while some cuts in MA commissions (which already are capped by CMS) could occur, non-MA sectors stand to get hit harder on commissions.

For most MA organizations, Dunks tells HRW, the 85% MLR requirement “isn’t going to be a huge deal.” He complains, though, of the one-sidedness of the requirement. If an MA plan has a poor year, “nobody gives you anything back…. They’ve taken away the upside” since if plans perform better than targeted, they have to give the excess back.

He cites a specific problem for the MA plans. Since their bids for the next year are due to CMS in June, they must assess “political things” beyond their control, such as this year what Congress will do about scheduled Medicare physician payment cuts. If plans are conservative in their forecasts and they wind up doing better than expected, Dunks says, they could trip over the MLR provision once it takes effect.

At what level and on what period of time an MLR requirement is applied makes a big difference to national MA carriers, according to Dunks. The more variation they have from location to location or year to year, he explains, the more likely they are going to have to rebate.

Medicare Medicare Advantage, Minimum loss ratios, Pat Dunks

A new healthcare reform briefing paper by Brian Anderson and Troy Filipek looks at the reform provisions affecting Medicare Part D. The paper is available here.

Medicare, Reform Brian Anderson, Medicare Part D, Troy Filipek

Medicare Advantage News examines possible changes to Medicare Advantage (MA) plans if the president’s proposal is enacted. Here is an excerpt from the AIS analysis:

The proposal, designed for use in the Feb. 25 “summit” with congressional leaders on health reform, includes only two paragraphs under the heading “Improve Medicare Advantage Payments.” The first paragraph asserts that MA plans are significantly overpaid.

The second paragraph states, “The president’s Proposal represents a compromise between the House and Senate bills, blending elements of both bills, while providing greater certainty of cost savings by linking to current fee-for-service costs. Specifically, the president’s Proposal creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area. It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area.”

The paragraph continues, “It provides bonuses for quality and enrollee satisfaction. It adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating; plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate). Finally, the president’s Proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggests is warranted, based on actuarial analysis. This is the primary source of additional savings compared to the Senate proposal.”

Industry consultants and executives were muted in their comments on that section because of the lack of details. Pat Dunks, a consulting actuary in the Milwaukee office of Milliman, for instance, says it is unclear how big a pay cut might result and where.

The full article is here.  Here is an article about MA plan profitability.

And remember this is not the first time Medicare Advantage has faced a big change, as evidenced by this 2005 article by Pat Dunks.

Medicare, Reform Medicare Advantage, Pat Dunks

Milliman principal Pat Dunks comments in Medicare Advantage News about an impending change to private fee-for-service plans:

Seeking to begin what is likely to be a major transition process to the end of “deeming” for providers in most private-fee-for-service plans effective Jan. 1, 2011, CMS issued on Jan. 15 a detailed memo with instructions for PFFS contractors. And it strikes what could be a fatal blow against nationwide employer PFFS plans by saying all employer PFFS plans will need a network starting in 2011.

This is a “big deal,” Pat Dunks, a principal and consulting actuary in Milliman’s Milwaukee office, tells AIS. Previously, he explains, the situation was like that in non-employer plans, where a plan sponsor doesn’t need a network in non-network areas. Now, if an employer wants to offer a nationwide product, it must put together a nationwide network, which represents a “pretty high bar,” Dunks says. If it’s doable at all, it will require using either the largest carriers or a combination of products rather than a single product, he adds. Dunks says leased commercial networks aren’t a feasible option for MA since they pay providers much more than is feasible.

Medicare Pat Dunks, PFFS

Through “secondary payer” laws, Medicare is examining when it is required to pay for workers’ compensation claims and when the obligation lies with others. Insurers are beginning to feel the effect of these laws, as described in this article from Business Insurance. Here is an excerpt:

[E]stimating reserves for long-term medical claims is a difficult challenge even for seasoned workers comp professionals, said Bob Briscoe, a senior consultant, principal and head of the workers compensation claims practice in New York for Milliman Inc.

With many CMS workers lacking substantial workers comp experience, it’s understandable employers are seeing inconsistent decisions that often increase expenses, Mr. Briscoe said.

“It’s absolutely unpredictable (when) you send in an MSA for $30,000 whether it comes back at $20,000 or $60,000,” Mr. Briscoe said. “To the extent that the average result is higher than submitted, then obviously the price has gone up.”

Read more…

Medicare Bob Briscoe, secondary-payer, workers compensation

Medicare Part D has not yet been the focus of much reform-related media attention, but as a program that serves millions of seniors, any changes bear watching. A new healthcare reform briefing paper by Troy Filipek looks at the reform concepts related to Part D that are currently on the table. These reforms include proposed price controls, efforts to fill the much-publicized donut hole, possible formulary changes, and various efforts at standardization and simplifiction.

Medicare, Pharma Medicare Part D, Troy Filipek