Regulatory roundup

March 3rd, 2014

By Employee Benefit Research Group

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

CMS issues report to Congress on the impact on premiums for individuals and families with employer-sponsored health insurance
The Patient Protection and Affordable Care Act (ACA) requires all non-grandfathered health insurance coverage in the individual and group markets to be guaranteed issue and guaranteed renewable. In addition, all non-grandfathered insurance plans and policies in the individual and group markets can vary premium rates based only on age, family status, geography, and tobacco use—the variation in the age and tobacco use factors is limited.

This new premium rating requirement will impact the premiums paid by individuals and families working for small employers who offer health insurance. Specifically, the Centers for Medicare and Medicaid Services (CMS) has estimated that the premium rates for roughly 11 million people will increase and that about 6 million people are expected to experience a premium rate reduction that will be due to sections 2701 through 2703 of the Public Health Service (PHS) Act.

To read the entire report, click here.

CMS issues notice to employers about 2014 SHOP marketplace enrollment
Starting in fall 2014, you and your employees may be able to apply for and enroll in the Small Business Health Options Program (SHOP) online for coverage that starts January 2015. That’s also when you’ll have the option to offer your employees a choice of qualified health plans and be able to make a single monthly payment to insurance companies, no matter how many plans your employees have selected.

Since you can’t apply for SHOP coverage on HealthCare.gov at this time, you don’t have to create an online account. But if you’ve already created an online account, you can use it as soon as SHOP online enrollment is available for coverage starting in 2015. Until then, you should enroll directly with an agent, broker, or insurance company that offers a SHOP-qualified health plan.

For more information on 2014 SHOP marketplace enrollment, click here.

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Medicare ACO Shared Savings plans: Grading on a curve

February 26th, 2014

By Javier Sanabria

The Medicare Shared Savings Program is a mechanism for providers to create or participate in accountable care organizations (ACOs) that serve Medicare fee-for-service (FFS) beneficiaries. The program provides incentives for providers to reduce the trend in healthcare cost increases and improve care. A key incentive for ACOs enrolled in the program is the bonus they can receive if their trends are lower than a calculated benchmark.

There are many factors involved in the bonus calculation, but generally speaking it’s based on a benchmark that is calculated using historical cost data for the ACO, with some adjustments for trend. The trend adjustments are based on the increase in medical costs for all Medicare FFS recipients (i.e., not including those enrolled in Medicare Advantage). Because Shared Savings ACOs are counted in this trend, they are to a certain degree being “graded on a curve.” If the program works, trend growth will be driven down. This is good news for medical costs, but it will likely lead to downward pressure on ACO bonuses, all other things being equal. In other words, ACOs will be competing against other ACOs in other service areas to lower trend—a form of competition that is all too familiar in the business world but brand new to most medical providers.

In this Healthcare Reform paper, Milliman’s Kenton Roepke and Leigh Wachenheim look at how small changes in Medicare FFS trend can result in significant changes in bonus payments.

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Regulatory roundup

February 25th, 2014

By Employee Benefit Research Group

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

Government agencies issue final and proposed rules implementing the 90-day waiting period limitation under ACA
The U.S. Departments of Treasury, Labor (DOL), and Health and Human Services (HHS) issued final and proposed regulations implementing the 90-day waiting period limitation under section 2708 of the Public Health Service Act, as added by the Patient Protection and Affordable Care Act (ACA), as amended, and incorporated into ERISA and the Internal Revenue Code. The final regulations also finalize amendments to existing regulations to conform to the ACA provisions. Specifically, these rules amend regulations implementing existing provisions such as some of the portability provisions added by HIPAA regulations because those provisions have become superseded or require amendment as a result of the market reform protections added by the ACA.

The final regulations are effective 60 days after publication in the Federal Register on February 24, 2014. The 90-day waiting period limitation provisions of these final regulations apply to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2015.

Also released were proposed rules that would clarify the maximum allowed length of any reasonable and bona fide employment-based orientation period, consistent with the 90-day waiting period limitation.

To read the entire proposed rule, click here.

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Health and welfare nondiscrimination testing: The calm before the storm

February 21st, 2014

By Jeff Bradley

Bradley_JeffAs evidenced by this recent news story, the Obama administration is delaying enforcement of the nondiscrimination provisions of the Patient Protection and Affordable Care Act (ACA), which prohibits employers from providing better health benefits to highly compensated employees than to other employees.

While plan sponsors anxiously await regulations regarding ACA’s nondiscrimination requirements with respect to non-grandfathered, fully insured health plans, they must also be mindful of compliance with regard to existing nondiscrimination rules as they apply to self-insured health plans, cafeteria plans, and flexible health and dependent care reimbursement plans.

Specifically, plan sponsors should have answers to the following questions:

• Do my current self-insured health plans satisfy the nondiscrimination requirements of Section 105(h) of the Internal Revenue Code (IRC)?
• Do my cafeteria arrangements satisfy the nondiscrimination requirements of Section 125 of the IRC?
• Do my healthcare flexible spending arrangements (FSAs) satisfy the nondiscrimination requirements of both Sections 105(h) and Section 125 of the IRC?
• Do my dependent care reimbursement accounts satisfy the nondiscrimination requirements of Section 129 of the IRC?
• Do I have documentation of compliance with the above?

If the answer to any of these questions is “I don’t know” or “I’m not sure,” then now is the perfect time to get your house in order. When there is a failure, the penalties under 105(h), 125, and 129 generally cause amounts that were received tax-free by highly compensated or key employees to become taxable and could result in several years of amended Federal tax returns.

How would my fully insured plans fare under the current 105(h) rules?
While the penalties under 105(h), 125, and 129 are onerous to plan participants, the penalties under ACA are staggering—plan sponsors could face an excise tax of $100 for each day the plan is not in compliance for each non-highly compensated employee who is not eligible for the health plan, up to a maximum penalty of $500,000.

While we are still guessing at what the regulations will hold, we have been told that they will be “similar” to the existing rules under 105(h).

Again, now may be a prudent time to take inventory.

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Gender disparity in ACA enrollment

February 20th, 2014

By Javier Sanabria

The U.S. Department of Health and Human Services (HHS) recently published a report showing that 3.3 million individuals have selected plans offered on health exchanges. According to this Bloomberg BNA article, insurers may—contrary to public opinion—face greater cost implications from the gender mix than they do from the age mix. Milliman’s Jim O’Connor, who was interviewed for the article, provides some perspective:

There’s been improvement in the numbers,” James O’Connor, a principal and consulting actuary in the Chicago office of Milliman Inc., told Bloomberg BNA. “The most noteworthy thing, though, is the gender difference.”

In a report released Feb. 12, the Department of Health and Human Services said that 55 percent of the nearly 3.3 million people who selected qualified health plans in the marketplaces from the beginning of open enrollment Oct. 1, 2013, to Feb. 1, 2014, are female and 45 percent are male. The first open enrollment period under the ACA lasts until March 31.

“You would expect something closer to 50-50,” O’Connor said. “Probably carriers may have assumed that more females would be coming in than males. But probably not a 10-point difference.”

Costs for Women Higher

The ACA bars insurers from discriminating against people based on gender as of 2014. Previously, women were charged more because their healthcare costs are considerably higher than men’s, particularly costs for women between the ages of 25 and 45, O’Connor said. “We see that a young female could be twice the cost of a young male,” he said.

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Regulatory roundup

February 18th, 2014

By Employee Benefit Research Group

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

IRS issues final employer shared responsibility regulations
The Internal Revenue Service (IRS) has issued final regulations providing guidance to employers that are subject to the shared responsibility provisions regarding employee health coverage under section 4980H of the Internal Revenue Code. These regulations affect employers referred to as applicable large employers (generally meaning, for each year, employers that had 50 or more full-time employees, including full-time equivalent employees, during the prior year).

Generally, under section 4980H an applicable large employer that, for a calendar month, fails to offer its full-time employees health coverage that is affordable and provides minimum value may be subject to an assessable payment if a full-time employee enrolls for that month in a qualified health plan for which the employee receives a premium tax credit.

According to the final regulation, employers with more than 100 employees will be subject to a phase-in: they must cover 70% of their employees in 2015 to avoid a penalty and 95% in 2016. For employers with 51 to 99 employees, they will be required in 2015 to report on the health coverage they offer to employees and become subject to penalties in 2016.

The final regulations are published in the Federal Register. For a copy of the final regulation, click here.

IRS issues 46 questions and answers on employer shared responsibility under the ACA
The IRS has issued 46 questions and answers on the employer shared responsibility provisions under the Patient Protection and Affordable Care Act (ACA). The final regulations were issued by the IRS and Treasury on February 10 regarding the employer shared responsibility provisions under section 4980H of the Code. These questions and answers provide additional guidance on the regulation.

To read the entire 46 questions and answers, click here.

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Private health exchange considerations for large plan sponsors

February 14th, 2014

By Javier Sanabria

Private health exchanges (PHEs) have attracted attention from some large employers sponsoring healthcare benefits. In the latest issue of Benefits Perspective, Milliman’s Troy Filipek, Gregory Herrle, and Paul Houchens discuss three key issues large plan sponsors should evaluate regarding PHEs: risk selection, quality, and cost perspective.

Here is an excerpt considering each issue:

Risk selection
…When considering private exchange options, plan sponsors should evaluate how the private exchanges are balancing greater employee choice with limits on the potential for adverse selection. For example, are employees permitted to change from a lower-cost to higher-cost benefit option in a single year, or is plan selection movement restricted in some manner? Unmanaged risk selection may result in unsustainable employee healthcare cost increases, which may unravel an employer’s defined contribution strategy or result in benefits that are perceived by employees as below average relative to industry norms.

Quality
With the introduction of guaranteed issue coverage to the individual market through the Patient Protection and Affordable Care Act (ACA), some employers believe they have a diminished incentive to offer healthcare coverage to employees. However, in addition to avoiding penalties for not offering coverage, employers have strategic reasons to offer healthcare benefits to employees. Specifically, healthy employees generally translate into minimized absenteeism, as well as greater productivity. Health coverage has also been a critical benefit in terms of attracting and retaining the best employees. Therefore, quality healthcare is an important part of the value proposition offered by employers….

Cost considerations relative to self-funded plans
Plan sponsors should also remember some of the advantages available to self-funded plans (whether inside or outside of private exchanges), including, for example:

• Eliminating or substantially limiting insurer profit margins;
• Lowering administrative costs, in general;
• Avoiding state premium taxes and certain ACA provisions, such as the health insurer tax;
• Providing benefit flexibility by avoiding state benefit mandates and allowing for other options better suited to a specific workforce when designing benefit plans; and
• Allowing more control over benefit management.

Large employers interested in offering their employees health plans through PHEs should also consider the questions asked by Dan Bostedt in this paper.

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Medicaid benefits for the developmentally disabled is going DISCO

February 11th, 2014

By Javier Sanabria

The model for delivering care to the developmentally disabled (DD) population is likely to undergo fundamental change, financially impacting the agencies and healthcare providers serving this market. One of the strategies New York state is developing in response to the high cost of Medicaid benefits for DD beneficiaries is the establishment of licensed managed care organizations that will coordinate care for this population on a capitated basis. These organizations will be called Developmental Disabilities Individual Support and Care Coordination Organizations (DISCOs).

In this paper, Milliman consultants describe the upcoming changes to the Medicaid benefit framework and some of the challenges facing the managed care organizations and providers serving this population. Here is an excerpt:

There has been much speculation about the financial structure of the DISCO program, and the state has not released many details. One possibility, consistent with New York’s other Medicaid managed care programs, is a system of capitation payments. Capitations are predetermined amounts paid to the managed care plans to cover the full amount of benefits, regardless of the amount of services a particular individual uses. These capitation payments are often risk-adjusted based on risk-assessment tools, in the case of the Managed Long-Term Care (MLTC) program,2 or based on members’ health claim diagnosis codes and other data, in the case of the Medicaid Managed Care program.

Although the state has been testing various risk-assessment tools over the past few years, there is currently no risk-adjustment mechanism for DD Medicaid beneficiaries in New York. Without a proven risk-adjustment tool, DISCOs may incur a great amount of risk because benefit costs vary widely among individuals, as seen in Table 1. Until such a mechanism can be developed, some experts suggest that DISCO premium rates should be based on member characteristics such as age, residential needs, and other factors that will more accurately predict their benefit costs. A major drawback of this approach, however, is that too many premium variations (or rate cells) could provide little incentive for DISCOs to truly transform the system.

A risk corridor program is another approach that could mitigate the risk for DISCOs until a risk-adjustment mechanism is in place. This approach has been used as part of the New York’s MLTC program for new members under mandatory enrollment. CMS is also using risk corridors as part of the individual and small group exchange programs in the commercial market. A typical risk corridor program establishes a per-member-per-month
(PMPM) budget, and if a plan’s actual costs are less than the budget, the plan retains a percentage of the savings, and the remainder is paid back to the state (or CMS). If actual costs are greater than the budget, then the state (or CMS) will share a portion of the losses with the plan.

Capital requirements for DISCOs are also a matter of speculation, given the high average cost of benefits per member. In New York, both start-up and ongoing capital requirements for Article 44 managed care plans are based on a percentage of premium or capitation revenue. In the case of MLTC plans, the capital requirement is set at a fixed rate of 5% of premium. However, other managed care plans are required to hold 5% of premium in the initial year of operation, and the required percent of premium increases by one percentage point each subsequent year until reaching 12.5%. The state has hinted that the capital requirement for DISCOs may be less than other types of managed care plans, but actual details have not been released.

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Regulatory roundup

February 10th, 2014

By Employee Benefit Research Group

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

Ways and Means Committee approves bills on definition of full-time employee for ACA
On February 4, 2014, the U.S. House Committee on Ways and Means marked up and passed two bills that seek to narrow the definition of “full-time” employee under the Patient Protection and Affordable Care Act (ACA).

The Save American Workers Act (H.R.2575), introduced by Congressman Todd Young (R-IN) on June 28, 2013, would amend the Internal Revenue Code, as amended by the ACA, to redefine “full-time employee” for purposes of the mandate, requiring employers to provide healthcare coverage for employees who are employed on average at least 40 hours a week. The ACA requires employers with at least 50 full-time-equivalent workers to offer health coverage to full-time employees (currently 30 hours a week) or pay a penalty. Critics claim the requirement is prompting employers to shift some employees to part-time work. The Ways and Means Committee approved the bill on a 23-14 vote.

The Protecting Volunteer Firefighters Emergency Responders Act (H.R.3979), introduced by Congressman Lou Barletta (R-PA) on January 31, 2014, amends the Internal Revenue Code to provide that a qualified emergency services volunteer shall not be counted in determining the number of full-time employees for the purpose of shared responsibility requirements with respect to health coverage under the ACA. The bill defines “qualified emergency services volunteer” as a bona fide volunteer performing firefighting and prevention services, emergency medical services, or ambulance services. Because the IRS already considered volunteer emergency personnel as employees for federal tax purposes, there was a concern that volunteers would be included in the full-time employee calculation. The bill was approved by a unanimous vote.

Both bills included amendments altering their titles (please see amendments below). The amendment to the Save American Workers Act also changed its effective date to December 31, 2013.

The bills will move now to the House floor.

EEOC issues correction to interpretive guidance on Title I of the Americans with Disabilities Act
The Equal Employment Opportunity Commission (EEOC) has issued a correction to Title 29 of the Code of Federal Regulations, Interpretive Guidance on Title I of the Americans with Disabilities Act, to include in the list of most common types of accommodations an employer or other entity may provide. The correction states:

…Other accommodations could include permitting the use of accrued paid leave or providing additional unpaid leave for necessary treatment, making employer provided transportation accessible, and providing reserved parking spaces. Providing personal assistants, such as a page turner for an employee with no hands or a travel attendant to act as a sighted guide to assist a blind employee on occasional business trips, may also be a reasonable accommodation.

For more information, click here.

BLS chart: Employer health benefits costs rise 3.0% in year ending December 2013
The U.S. Bureau of Labor Statistics (BLS) has issued a chart that shows employer health benefit increases in the year ending December 2013. According to the chart, employer costs for health benefits in private industry increased 3.0% from December 2012 to December 2013. In the prior year, the increase was 2.1%.

The 12-month increases in employer costs for health insurance for private industry workers ranged from 2.1% to 3.0% in 2012 and 2013. That compares with increases that ranged from 3.4% to 11.4% from 2001 to 2011.

For more information, click here.

Read more…

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What data is needed to support population health management?

February 4th, 2014

By Nancy Zoelzer

Zoelzer-NancyIn our series of blogs on the topic of population health management, we have discussed how to define populations in “Analytics for population health management,” and we have looked at the types of analytic tools available for analysis of populations in “Identifying appropriate metrics for population management.” In this blog, we will focus on types of data, both traditional and nontraditional, that can assist in the performance of a robust population health analysis.

Many healthcare organizations have access to a wealth of data. However, this data has not historically been brought together in an organized manner. An emerging concept in data management is “big data,” an approach where all data relevant to an individual’s healthcare—including those data that may exist outside an individual organization’s walls—are gathered and linked for analysis.

To effectively gather and link these data for population health management, the enterprise data warehouse needs to be flexible enough to accept data from traditional and nontraditional sources. Data sources that can be accessed and linked for robust population health analysis include:

• Insurance administration data (e.g., claims, pharmacy, enrollment data): Insurance administration data is by far the most commonly used data for analysis.
• Clinical data (e.g., electronic medical records, lab results, registries): Clinical data increases the richness of data available about an individual and a population. This type of data is starting to make its way into the enterprise data warehouse.
• Medical management data (e.g., health risk assessment, authorization, disease/case management data): Most health organizations have medical management data readily available, but most have not yet brought this data into an enterprise database.
• Provider administrative data (e.g., physician practice management, hospital billing, admissions discharge, and transfers data): Provider administrative data is generally available in a more timely manner, allowing for data analysis that is nearer to real-time.
• Public data (e.g., state discharge data sets, immunization registries): Public data has not typically been accessible in an enterprise data warehouse, yet it can provide additional insight for population health analysis.

Why incorporate all these data?
Access to a wide variety of data allows for broader population health analysis, which can lead to new and earlier insights to help identify improvements, efficiencies, and effectiveness of the healthcare delivery system. A population health management strategy with a robust data warehouse can help answer the question, “Who will benefit from which programs?”

For more information download the paper entitled “Population health management concepts.”

This article first appeared at Milliman MedInsight.

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