Regulatory roundup

July 21st, 2015

By Employee Benefit Research Group

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

GAO observations of ACA’s enrollment controls for coverage and subsidies
The U.S. Government Accountability Office (GAO) has issued a report entitled “Patient Protection and Affordable Care Act: Observations on 18 undercover tests of enrollment controls for health-care coverage and consumer subsidies provided under the Act.” The GAO was asked to examine controls for application and enrollment for coverage through the federal marketplace.

To read the entire report, click here.

JCT issues present law and background information on federal excise taxes
The U.S. Joint Committee on Taxation (JCT) released a report entitled “Present law and background information on federal excise taxes” (JCT Report JCX-99-15). The document provides a description of present-law federal excise taxes and, when applicable, background information on trust funds financed with excise tax revenues.

The document contains information on excise taxes related to employee pension and benefit plans and excise taxes related to healthcare.

The entire report can be downloaded here.

IRS issues answers regarding PCORI fee
The Internal Revenue Service (IRS) has issued 16 questions and answers regarding the Patient-Centered Outcomes Research Institute (PCORI) trust fund fee.

To read the questions and answers, click here.

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Will the increase in the coinsurance rate offer insurers relief?

July 20th, 2015

By Javier Sanabria

The Centers for Medicare and Medicaid Services (CMS) recently announced that the 2014 transitional reinsurance program’s coinsurance rate would be 100% rather than 80% as originally stated. This is good news for insurers in the health exchange’s individual market whose reimbursement requests will be paid in full (and then some). In this article, Milliman’s Daniel Perlman, Doug Norris, and Hans Leida discuss the financial implications this change could have on insurers.

For issuers of ACA-compliant plans in the individual market, the increased coinsurance has a fairly obvious direct positive impact on 2014 financial performance: more will be collected than many issuers likely assumed when preparing annual statements for 2014. Any issuer that had computed its transitional reinsurance recovery accruals at year-end 2014 based upon the originally announced coinsurance parameter will now receive an additional 25% (because 100% / 80% = 1.25) given the change in coinsurance. The impact of this change will vary significantly by insurer, but could be material in relation to overall individual ACA market claim costs for many insurers. It may not be uncommon to see reductions in net paid claims of 2% to 4% as a result of this change.

The CMS announcement suggests that the reimbursement requests made by insurance companies may be low enough that the transitional reinsurance program could pay 100% of the coinsurance rate and carry a surplus into 2015. The authors estimated that this surplus would be between $1 billion and $2 billion. In fact, based on new information released by CMS on June 30, 2015, it is now known that the surplus carried forward will be approximately $1.8 billion, in the range the authors predicted.

If, even after the increase in coinsurance, total payouts are less than the $9.7 billion in reinsurance assessments collected, there will be additional funds to roll forward into 2015. These additional funds could help create the same (or similar) outcome for the 2015 plan year by increasing the size of the reinsurance pool by any amount carried forward from 2014. (This could conceivably happen for the 2016 plan year as well, for similar reasons.)

Is there a surplus available to carry forward to 2015, and if so, how big is it? We don’t know for sure…however…[there may be] somewhere between $1 billion and $2 billion unspent.

…The bottom line is that there would be more money available to make reinsurance payments for the 2015 plan year. This is good news for issuers of ACA-compliant individual market plans. However, issuers should be cautious about relying on further enrichment in the 2015 program parameters, as (among other concerns) it is possible that the current parameters have already assumed some amount of carryover.

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Regulatory roundup

July 14th, 2015

By Employee Benefit Research Group

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

IRS releases interim guidance regarding expatriate health plans
The Internal Revenue Service (IRS) released Notice 2015-43, which provides interim guidance based in part on the definition of expatriate health plans set forth in the temporary relief under Patient Protection and Affordable Care Act (ACA) Implementation Frequently Asked Questions (FAQs) Part XIII (issued March 8, 2013) and Part XVIII (issued January 9, 2014). Additionally, the notice provides guidance on the requirements for certain individuals to be considered qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA). The notice does not apply to the health insurance providers fee imposed by § 9010 of the ACA.

To read the entire notice, click here.

ACA Assurance Testing System (AATS) information
The IRS has posted information regarding the ACA Assurance Testing System (AATS), which is now open for the testing of information returns that will be processed in 2015.

For more information, click here.

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How can insurers optimize their risk transfer payments?

July 10th, 2015

By Javier Sanabria

In this article, Milliman’s David Liner and Jason Siegel analyze data from the Centers for Medicaid and Medicare Services (CMS) on risk adjustment transfers for the 2014 benefit year. The article examines some components of the risk adjustment program and proposes strategies that issuers of new and existing plans should consider to ensure optimal risk transfer payments.

Here is an excerpt:

New health plans face a number of competitive disadvantages related to risk adjustment as discussed in this paper. However, these disadvantages can be mitigated with effective optimization strategies. Note that many of these strategies apply to existing health plans as well and should be explored by any issuer in the ACA markets.

There are at least three components to an impactful risk adjustment optimization strategy:

1. Robust administrative system

2. Coding accuracy initiatives

3. Provider and enrollee engagement

An optimization strategy that does not include each of these components will not optimize risk adjustment outcomes.

A robust administrative system serves as the foundation for risk adjustment optimization strategies. A sound administrative system is required for valid data submission and enables health plans to effectively pursue coding improvement initiatives. System audits are an effective technique for validating a recently implemented administrative system.

…Another best practice involves developing elaborate algorithms on top of large commercially available datasets, using all possible elements from a health plan’s data to identify potentially missed diagnoses. This approach relies on identifying patterns among at least medical procedures, comorbidities, specialist office visits, and prescription drug utilization. Best in class models are set up to handle numerous interactions between these data elements and maximize the extrapolation power of these data through machine learning techniques.

Provider engagement is also a key strategic component because diagnosis coding starts with providers. Levels of engagement may range from education only to elaborate compensation schedules. Educating providers on the importance of valid diagnosis coding may improve risk adjustment outcomes. An additional level of provider engagement may be achieved by incentivizing optimal coding through reimbursement arrangements. Achieving a high level of provider engagement may require more effort in the short term than other strategies, but can also produce benefits over a longer horizon.

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HR fatigue: Realities and solutions

July 8th, 2015

By Sue Reed

Reed-SueHuman resources (HR) professionals experience job fatigue that is due to constantly changing organizational and regulatory environments. This continuation of the HR fatigue series explains three realities facing HR professionals in today’s climate and offers a solution that can benefit them.

Reality 1: HR is a cost center, not a profit center.
HR has a critical role to play in the success of an organization, but HR must be extremely stringent in the allocation of resources because it is not a money-earning department. This means HR must allocate resources to the areas that can drive company profitability and streamline administrative time and resource-consuming activities.

Reality 2: Attracting and retaining key talent is a challenge.
As technology continues to increase in all aspects of work and life, critical technical resources are becoming more difficult to recruit and retain. HR professionals need to spend more time strategizing about the most effective attraction and retention drivers for their organizations.

Reality 3: Administrative costs must be carefully managed.
Healthcare reform adds an administrative burden to an already stretched HR organization. In addition, the continued rise in healthcare costs shifts a greater burden to HR professionals to find ways to reduce costs administratively.

Outsourcing health and welfare benefits administration can begin to solve HR fatigue and allow HR professionals to focus on business issues. Outsourcing benefit administration includes:

• Programming business rules to ensure accurate, consistent interpretation and implementation of eligibility rules, waiting periods, and documentation to prove employees meet requirements. HR professionals are no longer required to be experts to navigate this complicated process.

• Administering welfare benefits such as life, accidental death and dismemberment, and disability insurance, which is often complex and can be administratively burdensome, resulting in hidden costs for the employer. Benefit administrators work with the insurance carrier to interpret and program contingent benefits and evidence of insurability rules to streamline the administration of these benefits.

• Implementing electronic transmission of carrier and payroll files to enable efficient, accurate, and prompt benefit information for employees while eliminating administration for HR and finance departments.

• Interpreting and programming new regulatory requirements, such as the Patient Protection and Affordable Care Act (ACA), which can eliminate new administrative responsibilities for HR professionals.

When implemented correctly, outsourced benefit administration can reduce HR fatigue and increase an organization’s productivity. For more information about Milliman’s benefit administration services, click here.

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U.S. Supreme Court rules in favor of same-sex marriages and the Affordable Care Act subsidies

July 3rd, 2015

By Employee Benefit Research Group

The U.S. Supreme Court has handed down decisions on two significant cases that have direct or indirect implications for employer-sponsored retirement and healthcare benefit plans. This Client Action Bulletin summarizes these cases of interest for employers that sponsor such plans.

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Employer-sponsored insurance: Looking beyond ACA planning

June 30th, 2015

By Javier Sanabria

As employers look for new ways to offer affordable healthcare benefits to their employees they will have to consider other solutions besides cost-shifting. In this Employee Benefit News article, Milliman’s Dan Bostedt discusses some evolving trends that may shape employer-sponsored healthcare moving forward.

Here is an excerpt:

Rethinking total rewards
Historically, health plans with high benefit levels have been a mainstay of a total rewards package. Going forward, should there be more emphasis on other components, or new components, in the total rewards package? Perhaps it is time to reallocate total rewards spending away from traditional “entitlement” types of benefits. Some goals could be:

Higher percentage of total rewards budget used for performance-based rewards;
Focus on rewards and approaches where costs can be better controlled at the employer level;
Emphasis on rewards that support the current cultural strategy;
More focus on what newer employees value most — tastes and priorities are changing.
As an example, would employees value a performance-based bonus, with lucrative payouts, over the current level of health plan coverage offered? Would that in turn help provide better alignment of total rewards to business goals?….

Private exchanges
…The expansion of private exchanges may require further evolution to more component-based rather than package offerings.

Defining the features and capabilities that would add the most value to an organization may require looking at things differently. For example, some employers may not value a private exchange as a whole, but would find value in purchasing just outsourced administration, enrollment, communications, and participant education. Others may want to use an exchange, but would like greater control over the number and types of options and offer them on a self-funded basis. Regional and national options built on narrower networks may also be valued, but perhaps just with respect to network rental versus a private exchange package.

The key is to define the specific components that would most benefit organizational goals and needs and then to press the private exchange marketplace for the flexibility of component offerings.

Physician-focused consumerism
In the future, more emphasis may be placed on physician-focused consumerism rather than the current focus on employee (participant) consumerism. This is because physicians are often the main decision-makers regarding the use of healthcare services, especially high-cost and/or high-volume services. Physician-focused consumerism will likely develop as a set of initiatives designed to align physician decision-making with high-quality health care outcomes provided in a cost-efficient manner. It can include the redesign of financial incentives for providers, physicians having greater access to broader patient-level data, updated treatment decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. Physician-focused consumerism can be the basis for collaborative efforts among employer health plan sponsors, provider systems, and physicians. Provider network analysis, especially for narrower networks, may expand to include specific audits of the attributes of the providers in the networks.

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Regulatory roundup

June 29th, 2015

By Employee Benefit Research Group

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

Supreme Court upholds ACA subsidies
The U.S. Supreme Court ruled that individuals who get their health insurance through an exchange established by the federal government are eligible for the federal subsidies available under the Patient Protection and Affordable Care Act (ACA). The court’s ruling preserves the benefits for an estimated 6.4 million Americans.

To read the court’s opinion paper, click here.

Supreme Court rules state bans on same-sex marriage are unconstitutional
The U.S. Supreme Court held that the 14th Amendment requires a state to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when a marriage was lawfully licensed and performed out of state.

To read the court’s opinion paper, click here.

CDC publishes survey on health insurance coverage
The National Center for Health Statistics (NCHS) of the Centers for Disease Control and Prevention (CDC) released selected estimates of health insurance coverage for the civilian noninstitutionalized U.S. population based on data from the 2014 National Health Interview Survey (NHIS), along with comparable estimates from the 2009–2013 NHIS. Estimates for 2014 are based on data for 111,682 persons.

To read the entire survey, click here.

CMS to remove authorized representative verification requirement from retiree drug subsidy payment requests
Currently, as a condition of requesting Retiree Drug Subsidy (RDS) payments, plan sponsors are required to submit an Authorized Representative Verification form to the RDS Center of the Centers for Medicare and Medicaid Services (CMS) acknowledging that the authorized representative listed on the application has the legal authority to bind the plan sponsor to the terms of the plan sponsor agreement. In the coming months, CMS will be removing this requirement. The RDS Center will provide additional information closer to the time of the change.

For more information, click here.

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Healthcare tab increasing for individuals

June 25th, 2015

By Javier Sanabria

The 2015 Milliman Medical Index (MMI) shows that the cost of employer-sponsored healthcare increased by $1,456 with employees paying more of that increase than employers. This Forbes article cites the MMI and highlights the fact that individuals are increasingly picking up the cost of healthcare.

Here is an excerpt:

Those reporting problems paying their medical bills declined to 17.3% in March of this year compared to 22% in September 2013 before broader coverage under the ACA began.

Still, the health law offers access to subsidized private coverage and the health insurance industry and employers are shifting more and more costs onto subscribers and workers for the better part of the last decade. Cost-shifting makes a health plan subscriber think twice before choosing a more expensive treatment and has slowed medical inflation, but it’s also increased health plan enrollee out-of-pocket costs.

The 2015 Milliman Medical Index reported last week that the annual cost of benefits through an employer-sponsored preferred provider organization (PPO) rose 6.3%, or $1,456, to $24,671 in 2015 compared to $23,215 in 2014. Out-of-pocket costs were rising in that study linked here.

Here’s some more perspective from the MMI:

Employee costs (combined employee contributions and out-of-pocket costs) increased by 8.0% in 2015. This year’s increase is more than in prior years (6.0% in 2014 and 6.5% in 2013). This bad news continues a longer-term trend in which employees continue to bear more of the overall healthcare spending, according to the MMI—rising from 40.6% in 2010 to 42.5% in 2015.

Figures 8 and 9 illustrate how cost sharing has evolved over time. Employers adjust benefits each year in line with their healthcare budget constraints. In 2015, employers assumed $678 of the total increase in the cost of care for the family of four. Employees saw a dollar increase of $778 ($500 from increased payroll deductions and $278 from more out-of-pocket expenses). The employees’ 8.0% increase is composed of a 7.3% increase in employee out-of-pocket costs and 8.5% increase in payroll deductions. In other words, while both employer and employee costs increased, the employee experienced a larger percentage increase.



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Milliman releases new analysis of Medicaid managed care administrative costs

June 23rd, 2015

By Jeremy Palmer

Milliman today announced new research into the administrative costs associated with Medicaid managed care plans. These plans have become increasingly popular, which is due to the Medicaid expansion provisions of the Patient Protection and Affordable Care Act (ACA) and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the release of the proposed 2016 Centers for Medicare and Medicaid Services (CMS) capitation rate-setting guidance and the CMS proposed rule for Medicaid managed care. These CMS regulations require greater documentation of Medicaid managed care administrative costs, and may be useful as plans look to establish benchmarks.

We are excited about the addition of the administrative cost report to the annual financial analysis of Medicaid risk-based managed care reporting. This is an area of intense focus for the industry as we look to meet increased expectations of transparency in capitation rate-setting and face regulatory reporting of medical loss ratios.

Among other findings, the analysis demonstrates that Medicaid managed care administrative costs are primarily driven by expenditures for human capital and non-income-based taxes and fees.

The administrative cost report complements Milliman’s annual analysis of Medicaid managed care financial results, which is now in its seventh year. The administrative cost report will be updated annually.

To see the administrative cost report, click here. To view the annual financial analysis, click here.

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