Private health exchange reading list

May 16th, 2014

By Javier Sanabria

Employers are increasingly considering the option of offering their employees health insurance through private health exchanges (PHEs). Plan sponsors should understand the financial and administrative implications involved with PHEs before opting into one. The following list of articles from Milliman consultants can help employers evaluate key issues regarding PHEs.

Private exchanges: The future for large plan sponsors or a passing fad?
By Troy Filipek, Gregory Herrle, and Paul Houchens

Private exchanges and plan sponsors: The headlines, facts, opportunities, and potholes
By Robert Schmidt and Suzanne Taranto

Private health exchanges for large employers: Some questions to ask
By Dan Bostedt

Four things employers should know when evaluating private health exchanges
By Mike Williams and Stephanie Noonan

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Medicaid population management

May 16th, 2014

By Rich Moyer

Moyer-RichardIn previous blogs, we’ve discussed population management concepts and given specific examples of pediatrics, accountable care organizations (ACOs), and clinical populations. In this blog we turn to the Medicaid population. Medicaid has unique characteristics because of the nature of the financing and because of the social demographics of the population served. This population is going through big changes because of Medicaid expansion and the advent of programs that may resemble some of the characteristics of Medicaid, such as subsidized rates through the federal and state exchanges.

A key to analyzing this population is to create homogeneous sub-populations. There are several ways to define the subpopulations:

• Program: Children’s Health Insurance Program (CHIP), Temporary Assistance for Needy Families (TANF)/Aid to Families with Dependent Children (AFDC), Aged, Blind, and Disabled (ABD) Medicaid (duals), waiver programs.
• Type of delivery model: Managed care and fee-for-service.
• County: Rates are typically defined at the county level for managed care and care delivery is organized around counties.
• Special populations: Pregnant women, children, mentally ill.

There are specific issues that drive the metrics and analysis for Medicaid recipients, including:

• High levels of emergency room (ER) use: This population has much higher ER usage rates, which often reflect access and sociodemographic issues.
• Maternity: This population has higher rates of maternity and has wider variability in maternity outcomes.
• Behavioral health: Managing behavioral health is a more important component of care.
• Community resource access: Population wellness is much more dependent on additional community resources such as case workers, food banks, and social workers.

It’s important to focus on the key issues that drive the results for the population and to create metrics that reflect these key issues and characteristics. Below are some sample metrics that should be tracked and improvement goals developed.

This article first appeared at Milliman MedInsight.

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Identifying high-risk members under a Medicaid expansion program: Experience in Indiana

May 15th, 2014

By Javier Sanabria

Alternative Benefit Plan (ABP) regulations have created the ability for states to offer benefit plans tailored to the needs of a particular population, such as the Medicaid expansion population. These regulations require exemption for vulnerable populations, including one new exempt population: the “medically frail.” This population includes foster care children and those who meet Social Security disability criteria, but also includes anyone with a serious and complex medical condition or a disabling mental or chronic substance use disorder.

States are seeking a methodology to help them identify the medically frail, one that would be both accurate and administratively efficient. This paper describes a methodology that has been used successfully for identifying a similar population in the Healthy Indiana Plan, a Medicaid expansion program initially authorized in 2008 under 1115 waiver authority.

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Regulatory roundup

May 12th, 2014

By Employee Benefit Research Group

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

IRS final rule on tax treatment of qualified retirement plan payment of accident or health insurance premium
The Internal Revenue Service (IRS) has issued final rules on the tax treatment of qualified retirement plan payment of accident or health insurance premium. The final rules set forth the general rule under section 402(a) that amounts held in a qualified plan that are used to pay accident or health insurance premiums are taxable distributions unless described in certain statutory exceptions. The final regulation does not extend this result to arrangements under which amounts are used to pay premiums for disability insurance that replaces retirement plan contributions in the event of a particular disability.

To read the entire rule, click here.

IRS issues guidance for employers funding retiree health benefits through a wholly owned subsidiary
The IRS issued Revenue Ruling 2014-15 providing guidance to employers funding their retiree health benefits through a wholly owned subsidiary.

The ruling seeks to answer whether a specific arrangement involving a domestic corporation whose stock is widely held, and that provides health benefits to retired employees and their dependents, constitutes “insurance” within the meaning of subchapter L of the tax code. In the guidance, the IRS concluded that the arrangement is insurance for federal income tax purposes.

Revenue Ruling 2014-15 will be published in Internal Revenue Bulletin 2014-22, dated May 27. To read the temporary copy of the rule, click here.

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Introducing physician-focused consumerism

May 9th, 2014

By Javier Sanabria

Physician-focused consumerism is a set of initiatives designed to align physician decision making with high-quality healthcare outcomes provided in a cost-efficient manner. Physician-focused consumerism can include the redesign of financial incentives, greater access to patient data, decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. It can be the basis for collaborative efforts between employer health plan sponsors, provider systems, and physicians to help achieve high-quality care in a cost-effective manner.

Milliman is well-suited to support employers’ collaborative efforts with accountable care organizations (ACOs) and to review current provider networks to identify the status of physician-focused consumerism. Dan Bostedt offers some perspective in his article “Health plan consumerism: Who is the consumer?

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Curtail ACA’s potential impact on self-insurance programs

May 8th, 2014

By Javier Sanabria

The long-tail nature of professional liabilities and workers’ compensation claims make it difficult to gauge the effect that healthcare reform will have on self-insurance. A plan of action is needed though to help organizations value their self-insurance programs. Milliman’s Richard Frese recently authored an article in HFM magazine offering five strategies for lessening the impact of the Patient Protection and Affordable Care Act (ACA) on self-insureds.

Here is an excerpt:

Healthcare leaders will be better prepared to ensure that actuarial estimates will meet loss accruals and forecast needs by implementing these strategies.

Inform all parties of legislation updates and implementation. Although the components of the ACA have been determined, implementation has hit a few snags. Even with a strong effort to explain the proposed changes to the public, there have been multiple interpretations. Further clarification and revisions—and even repeal—are possible. Healthcare leaders should focus on keeping all parties—including the broker, actuary, auditor, third-party administrator, outside defense counsel, and captive management—involved in the self-insurance program apprised of any changes. In return, these parties also should communicate any changes with each other and with the organization’s senior leaders.

Gather opinions from various sources. Senior leaders of each provider organization may not share the same views as leaders of other organizations regarding how the ACA may affect their organization’s role and function. The leaders of each organization will want to ensure the organization’s service providers are on the same page and are working toward its goals and directions, particularly if strategic goals and directions have been revised because of the ACA. During these conversations, leaders also should share their interpretation of what is occurring in the industry.

Monitor loss activity. Healthcare leaders should work closely with risk managers, third-party administrators, and other claims personnel to track any changes in frequency and severity of reported claims. Service providers should be alerted immediately about any noticeable changes. It should be noted whether such changes are believed to be due to the ACA or a different cause, such as a change in claims handling. It will be critical to determine whether any loss change reflects an actual trend and is expected to continue or whether the change is related to a one-time event. Internal meetings also might be held more frequently to better monitor activity.

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Four things employers should know when evaluating private health exchanges

May 7th, 2014

By Mike Williams and Stephanie Noonan

Williams-MikeNoonan-StephanieOver the last year, employers have been inundated with information relating to private health exchanges (PHEs). During this time, three things have become clear: private exchanges are a significant development, interest in them is growing, and, for many, the importance of receiving unbiased information has become a priority.

As employers seek information, a core question continues to be, “How do I evaluate private health exchanges to determine which, if any, is a good fit for my organization, employees, and bottom-line financial goals?” The four considerations below provide a helpful guide to begin this evaluation process.

The PHE landscape
While public exchanges have been in the news since the Patient Protection and Affordable Care Act (ACA) was passed, PHEs have been in existence for several years in various forms. PHEs may be discussed in the same context as the public exchanges, but they are not the same. Unlike public exchanges, PHEs are not affiliated with the ACA and are not eligible for additional cost-sharing or federal premium subsidies. But it is important to note that properly structured PHEs can help employers meet ACA regulations, as long as they satisfy certain requirements and meet the affordability definition.

It is also important to note that not all PHEs are the same. Some are offered only on a fully insured basis or for retiree populations. Others may offer medical coverage only or a full spectrum of coverage types. In addition, PHEs may include a single carrier or multiple carriers. Because of these and other complexities, a comprehensive exchange analysis can be helpful to employers who are evaluating PHEs as part of their overall benefits strategy.

It’s not just the landscape employers need to be aware of; who is managing that landscape is of equal importance. For example, many consulting/brokerage firms offer proprietary PHE platforms. If your trusted advisor is also providing a PHE, it is important to pursue an independent analysis of all the offerings available to you.

The level of strategy support
When considering a PHE, you should take the opportunity to reevaluate your benefits strategy. Think about your desire for plan design control and the role you want to play in pricing and coverage. Moving to a PHE may mean you have less control than you’ve had in the past. Evaluating from a strategic and financial perspective is important.

• Do you see more value in offering a wider array of choices to recruit and retain employees?
• Are you willing to sacrifice control for a benefits package that gives employees more choice?
• Do you want to play a lesser role in healthcare delivery?
• Is your wellness strategy supported by a PHE?
• Are your competitors migrating to a PHE platform?

• Are you more interested in cost predictability over cost savings?
• To what degree are you willing to shift trend risk to employees by adopting a defined contribution strategy?
• Do you plan to fund the employer contribution via a Health Reimbursement Account (HRA) or other funding arrangement?

Having a general idea of the answers to these questions can go a long way in assisting your PHE evaluation efforts. Be sure to take some time and consider them carefully.

The impact to your employee population
From one vantage point, the increase in choice can help employees better tailor a benefits package that fits their particular needs. Some employees may find this prospect appealing, which can have a direct impact on retention and recruiting efforts.

However, more decision-making responsibilities plus more choices can lead to “analysis paralysis.” When people are overwhelmed with choices, they may abandon the process, select the cheapest option, or stay with current options out of habit. Analysis paralysis may lead to uninformed decisions, causing employees not to choose the best election for them or the most efficient option for the employer. Therefore, decision-support tools—such as online technology and call center representatives—are a critical component when introducing a PHE. It is also important to remember that some employee groups have limited access to technology and that customized personal assistance will likely be needed in these situations.

As a final caution, consider employees’ price sensitivities as they begin to pay larger portions of healthcare service costs, which is due to the inclusion of high-deductible health plans in many PHEs. While carriers within a PHE may show differences in how the procedure is covered and which providers are in and out of the network, transparency tools allowing employees to “shop” for lower-cost procedures are not yet the norm. Therefore, employee education about the plan itself and available transparency tools is key to a successful implementation.

The change process for your benefits team
A PHE may be a good alternative for employers looking to outsource day-to-day administration. However, it is important to factor in the transition process for the HR and Benefits teams, as well as the division of labor between your team and the PHE. Take into account tasks such as:

• Coordination of major life events, COBRA administration, and general employee service issues
• Compliance with ACA and other regulations
• Interaction of Human Resources Information System (HRIS) with the PHE’s database
• Employee communication
• Annual enrollment support
• Any additional training that may be required for your benefits service center

Ultimately, only time will tell the full impact PHEs will have on healthcare. However, as they gain traction in the marketplace, many employers are realizing the importance of considering them as a viable option.

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Regulatory roundup

May 5th, 2014

By Employee Benefit Research Group

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

DOL issues proposed rules on healthcare continuation coverage
The U.S. Department of Labor (DOL) has issued proposed rules containing amendments to the notice requirements of the health continuation coverage (COBRA) provisions of ERISA to better align the provision of guidance under the COBRA notice requirement of the Patient Protection and Affordable Care Act (ACA).

The proposed amendment will eliminate the current version of the model general notice and the model election notice, as these model notices are outdated. Additionally, these proposed regulations make technical changes to the instruction language of the notices.

The updated model notices are available in modifiable, electronic from on the DOL’s website:

  • Updated COBRA model general notice
  • Updated COBRA model election notice
  • U.S. Department of Health and Human Services (HHS) bulletin allowing COBRA-qualified beneficiaries to enroll in the health insurance marketplace
  • Updated Children’s Health Insurance Program (CHIP) model notice for employers regarding premium assistance opportunities

For the above notices, click on:

Comments on the proposed regulations are due 60 days after publication in the Federal Register. Publication is scheduled for May 7, 2014.

Federal agencies issue Part XIX FAQs regarding COBRA continuation coverage under ACA
The U.S. Department of the Treasury, DOL, and HHS have issued frequently asked questions (FAQs) on Part XIX regarding COBRA continuation coverage under the ACA.

For more information, click here.

IRS updates COBRA FAQs: Reporting and documentation; administration and eligibility
The Internal Revenue Service (IRS) updated two sets of FAQs regarding COBRA reporting and documentation as well as administration and eligibility.

For the set of questions on COBRA reporting and documentation, click here.
For the set of questions on COBRA administration and eligibility, click here.

House approves bill to exempt “expatriate” health plans from ACA
The House on April 29 voted 268-150 to approve an amended version of the “Expatriate Health Coverage Clarification Act” (H.R.4414), which would exempt certain expatriate health plans from the ACA coverage requirements. The bill would treat employer-sponsored health plans and insurance for Americans living outside the U.S. as “minimum essential coverage.”

CRS report: Patient Protection and Affordable Care Act (ACA): Resources for Frequently Asked Questions
The U.S. Congressional Research Service (CRS) has published a report providing resources to help congressional staff respond to constituents’ FAQs about the ACA. The report lists selected resources regarding consumers, employers, and other stakeholders, with a focus on federal sources. It also lists CRS reports that summarize ACA’s provisions.

To read the entire report, click here.

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Milliman organizing actuarial and underwriting seminar

May 2nd, 2014

By Javier Sanabria

Milliman is conducting an Actuarial and Underwriting Training Seminar in San Diego, Calif., from June 9 to 12. The seminar will be held at the Andaz San Diego.

Each day will feature two distinguished speakers (one speaker on Thursday) with considerable experience in the following topics:

• Claim liabilities and trend analysis
• Underwriting principles
• Basic rating principles
• Healthcare reform—a wide-angle view
• Large group rating and underwriting
• Zooming in on healthcare reform
• Financial forecasting, reporting, and monitoring

Some faculty members will be available throughout the week to interact with attendees and answer questions. For more information about the seminar, including hotel accommodations, visit the registration site.

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Are your pharmacy benefits being adjudicated properly?

April 30th, 2014

By Javier Sanabria

While almost all pharmacy benefit manager (PBM) contracts include audit provisions, many plan sponsors underestimate the value of auditing their PBMs, which can help recover funds lost through overpayments or system errors. Recovered losses mean that a typical pharmacy benefit audit claim can more than pay for itself, but at the very least ensures plan sponsors that they are meeting fiduciary responsibilities in the area of managing their PBM contracts. Milliman’s Brian Anderson offers more perspective in this article.

Reproduced with permission from Benefits Magazine, Volume 51 Number 5, May 2014, pages 22-27, published by the International Foundation of Employee Benefit Plans (, Brookfield, Wisconsin. All rights reserved.

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