Regulatory roundup

August 25th, 2014

By Employee Benefit Research Group

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

Bureau of Labor Statistics issues annual health and retirement plan provisions survey
The U.S. Bureau of Labor Statistics has issued the National Compensation Survey: Health and Retirement Plan Provisions in Private Industry in the United States, 2013. The National Compensation Survey (NCS) provides comprehensive measures of compensation cost trends, the incidence of benefits, and detailed benefit provisions. This bulletin presents estimates of the detailed provisions of employer-provided health and retirement plans in private industry in 2013.

To read the entire survey, click here.

Benefit news ,

Do not overlook the value of claims auditing

August 20th, 2014

By David Cusick and Brian Anderson

When seeking ways to keep expenses under control, healthcare plan sponsors may overlook the value of claims auditing. Auditing fees may not be inconsequential, but the fact is that an accurate audit including both pharmacy and medical claims has the potential to pay back the investment many times over.

The more members a plan has enrolled and the more complex the plan’s benefit setup, the more likely a plan is to have a greater number of claims payment errors. Every plan will have claims paid in error. It is often tempting simply to assume claims have been paid with a certain degree of accuracy, and then move on without verifying whether the assumption is correct. Nevertheless, there will always be instances of duplicate billing, wrong or missing discounts and rebates, mistakes in member eligibility, incorrect plan setup, or other problems.

Regular audits of medical and pharmacy claims can find these discrepancies, leading to the recovery of overpayments. Even more importantly, audits can identify problems in the way a plan is set up and point the way to eradicating inaccuracies, reducing cost, and preventing waste in the future. Auditing can give plan sponsors vital information for revising and improving contracts with third-party administrators (TPAs) and pharmacy benefit managers (PBMs), which can lead to significant reductions in costs.

Many engagements begin with auditing one plan year, and then extend to multiple plan years based on the results of the first audit. Some plans have implemented processes that include monthly oversight reporting, which provides ongoing auditing and trend metrics. The monthly reporting is set up as an online service so that the reports can be automatically emailed to the health plans and accessed via an encrypted web portal.

Auditing is applicable to all types of healthcare plans, including self-insured plans, Medicaid, Medicare, Taft-Hartley funds, and commercial plans. In our opinion, any organization that is at risk for paying medical or pharmacy claims must consider the value of claims auditing.

Read more…

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Actuarial practices help continuing care retirement communities deal with unique risks

August 12th, 2014

By Javier Sanabria

Continuing care retirement communities (CCRCs) offer seniors numerous housing and healthcare options. The unique fee structure and full range of healthcare services provided by CCRCs expose them to risks that other types of senior living communities do not face.

Actuarial practices can help CCRCs evaluate and manage such risks through population projections, actuarial balance sheet calculations, pricing analyses, accounting calculations, and other analyses. Milliman’s Gregory Zebolsky provides more perspective regarding these services in his article “An introduction to continuing care retirement communities.”

What type of work do actuaries do for CCRCs? In general, actuaries help these communities manage and analyze risk. Possible actuarial assignments for CCRCs include the following:

Population projections – These projections of the resident population at a CCRC—including independent living, assisted living, and skilled nursing—provide a valuable planning tool for management. Key projection results include independent living units released for resale each year, numbers of deaths (mortality) in each level of care, and numbers of transfers (morbidity) between ILU, ALU, and SNF. These projections also provide an actuarial basis for performing other financial analyses (below). Both open group (includes existing and future new residents) and closed group (existing residents or new entrant cohort only) population projections are performed as of a starting (valuation) date.

Actuarial balance sheet – The purpose of the actuarial balance sheet is to evaluate the CCRC’s ability to satisfy all its obligations to current residents and thus remain a viable operating concern. The actuarial balance sheet provides an analysis of the long-term relationship between the community’s assets and liabilities. The existing resident closed group population projection forms the basis of this financial analysis. The actuarial balance sheet varies from the GAAP (accounting) balance sheet and generally recognizes all income and expenses at the times they occur. No deferral of recognition of entrance fees or expenses occurs. Actuarial calculations include the present value of future monthly fees and other revenues, the present value of future allocated operating expenses in each level of care, and the actuarial values of fixed assets and capital depreciation expenses.

Actuarial pricing analysis – The purpose of this analysis is to evaluate the adequacy of the current pricing structure for new entrants at a CCRC. A theoretical cohort (new entrant model) is projected from entry through the end of the lifetime of all residents in the cohort. This new entrant closed group population projection forms the basis of the actuarial pricing analysis. Actuarial calculations include the present value of all income and expenses incurred over the lifetime of the cohort of residents, including a charge for depreciation of fixed assets.

Actuarial cash flow projection – This basic financial forecasting tool estimates future sources and uses of funds on an open group basis and includes key items such as monthly fees, attrition income, entry fee refunds, health center fee income, operating expenses (separately for independent living, assisted living, and skilled nursing), and others that depend on actuarial estimates. The open group population projection forms the basis of the actuarial cash flow projection.

Accounting calculations – CCRCs are required (under current American Institute of Certified Public Accountants guidance) to calculate the “obligation to perform future services” related to current residents as of the valuation date. They are also required to amortize non-refundable entrance fees into income over the life of the resident and to determine the related deferred entrance fee liability. Actuaries often assist with these calculations.

By utilizing one or more of the above analyses, actuaries assist CCRCs in meeting regulatory requirements, pricing new or alternative residency agreements, evaluating the future need for nursing beds, strategic planning, and many other tasks.

To learn about Milliman’s CCRC consulting services, click here.

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Regulatory roundup

August 11th, 2014

By Employee Benefit Research Group

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

Updated procedures and requirements for HIPAA exemption election
The Centers for Medicare and Medicaid Services (CMS) has provided regulatory guidance updating procedures and requirements for HIPAA exemption election by nonfederal governmental plans that are self-insured.

For more information, click here.

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Analytic basics: Completeness and outlier episode flags

August 4th, 2014

By Doug Bates

Bates-DougAnalysts working with episode of care groupers for the first time often have questions about how to use the various value-added flags assigned to episodes. Episode of care groupers link together all of the claims that pertain to the treatment of a particular condition for a particular patient, to create a powerful unit of analysis. For example, a patient with a condition such as diabetes may receive multiple types of services from multiple providers and provider types for the treatment of their diabetes. An episode of care grouper will combine all of the individual claims from the different providers so that the full cost of treatment can be assessed.

Two of the value-added flags commonly assigned to episodes include completeness flags and outlier flags. Both of these flags enable analysts to filter out, or include, types of episodes to optimize their reporting. How to apply filters using these flags depends on the analysis being performed. A brief summary of these flags, and their use, is described below.

Completeness flags
Many episodes in a data set will not be complete, meaning there are still outstanding claims related to those episodes that were not available when the data were grouped. Typically, episodes that start toward the end of your grouping period are more likely to be incomplete. For instance, if you are grouping data incurred from January 2011 through December 2013 and an episode begins on December 19, 2013, there is a lower probability that all claims for this episode will be available in the data than if the episode had started in January 2013.

Episode groupers use different logic when assessing completeness for acute and chronic conditions. For acute conditions, most groupers determine that an episode is complete if there are no incurred professional claims for that condition for a predefined number of days. Chronic conditions such as diabetes are never cured, so technically those episodes never end, but in order to support analyses, chronic conditions are often divided into annual periods and may be defined as complete when a full year of data is available for the members with those episodes.

When comparing costs to benchmarks, incomplete episodes should be excluded because incomplete episodes are excluded from cost benchmarks.

If you are comparing the average length (days) or average cost of episodes across various populations or provider groups, then you should also exclude incomplete episodes. It is impossible to accurately assess average costs per episode if every claim for every episode is not included.

If the purpose of your analysis is to evaluate the prevalence of episode conditions, then include all episodes (complete and incomplete) in your reports.

Table 1 displays the distribution of complete and incomplete diabetes episodes from a sample data set. The average cost for incomplete episodes is usually lower than the average cost for complete episodes.

Table 1

Outlier flags
Episodes that have atypically higher costs or atypically lower costs compared with other episodes within the same class are flagged as high or low outliers. There are multiple methodologies for defining outlier episodes, but commonly the flags are based on statistical variance (i.e., a number of standard deviations from the mean). In and of themselves, outlier flags are not a measure of efficiency or quality, but the magnitude of the variance in their cost indicates there is something atypical about these cases.

When comparing with benchmarks, outliers should be excluded because most benchmarks will exclude outliers for consistency.

When comparing average costs across populations or provider groups, many analysts may choose to exclude all outliers, because a few outliers for a given group may skew their results. That being said, it is also important to assess if any given population of patients has significantly more episodes flagged as high outliers compared with others. A higher percentage of high outliers might warrant the need for further investigation.

For many episode classes, all that is needed to start an episode is a professional encounter with a primary diagnosis relevant to that episode class. In some cases, very short episodes may represent visits to rule out a specific diagnosis or other situations that don’t really represent full treatment for a condition. Excluding low outliers can help remove those types of episodes from your analysis.

Table 2 displays a sample of diabetes episodes by outlier status.

Table 2

Episode completeness and outlier flags can, of course, be used together. For most comparative analyses (to benchmarks or across populations), only complete non-outlier episodes are included. Table 3 displays the distribution of diabetes episodes when both flags are used as report dimensions.

Note that an analysis based solely on complete non-outlier episodes from these sample data would reduce the number of episodes from 57,193 to 34,250, removing 40% of the episodes from the analysis. When analyzing episode classes with a limited number of episodes, applying these filters may reduce your sample size to volumes that are too small to produce statistically significant results, so it is important to assess how many episodes are in your sample before you begin.

Table 3

Episodes of care provide a useful unit of analysis for evaluating healthcare utilization and cost. The episode completeness and outlier flags allow users to include, or exclude, types of episodes to further refine their analysis.

This article first appeared at Milliman MedInsight.

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Regulatory roundup

August 4th, 2014

By Employee Benefit Research Group

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

Medicare Trustees Report projects solvency until 2030
The Medicare Trustees recently projected that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2030, four years beyond what was projected in last year’s report. In part because of cost controls implemented in the Patient Protection and Affordable Care Act (ACA), per capita spending is projected to continue to grow slower than the overall economy for the next several years.

The report points to a number of factors contributing to the improved outlook including lower-than-expected spending in 2013, and lower projected utilization in the types of healthcare needed by Medicare patients.

To read the entire report, click here.

CRS report: Implementing the ACA: Delays, extensions, and other actions taken by the administration
The U.S. Congressional Research Service (CRS) has issued the report “Implementing the ACA: Delays, extensions, and other actions taken by the administration.” The report, which is updated periodically to reflect significant changes taken by the White House in the administration of the Patient Protection and Affordable Care Act (ACA), contains a table that summarizes selected administrative actions taken by the Centers for Medicare and Medicaid Services (CMS) and the Internal Revenue Service (IRS) to address ACA implementation. The table entries, which are grouped under general topic headings, are not organized in any particular priority order. Each entry includes a brief summary of the action and some accompanying explanatory material and comments to help provide additional context. Where available, links are provided to relevant regulatory and guidance documents online.

To read the entire report, click here.

CMS offers webinar recap article on preparing for the Medicare Part D open enrollment period
The Centers for Medicare and Medicaid Services (CMS) has posted a recap of the recent Retiree Drug Subsidy (RDS) Community Information Group (CIG) webinar on preparing for the Medicare Part D open enrollment period. The webinar covers the following topics to help the RDS community get beneficiaries ready for the 2015 application plan year:

• Impact of the Medicare Part D open enrollment period on qualifying covered retirees
• Educating retirees about creditable coverage
• Establishing qualifying covered retirees early
• Monitoring and managing qualifying covered retirees
• CMS’s RDS center help line hot topics

To access the entire webinar, click here.

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Rulings from the U.S. Supreme Court: Fiduciaries, ACA, and union fees

July 29th, 2014

By Employee Benefit Research Group

The U.S. Supreme Court in late June decided three cases that, while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the requirement of the Patient Protection and Affordable Care Act (ACA) that certain preventive healthcare benefits—which include coverage for contraceptives—be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.

For Milliman perspective regarding the three rulings, read this Client Action Bulletin.

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The proposed federal exchange auto-enrollment process: Implications for consumers and insurers

July 29th, 2014

By Javier Sanabria

The U.S. Department of Health and Human Services (HHS) has proposed, for the federal health exchange, that the majority of policyholders receiving premium subsidy assistance will be automatically reenrolled in the same plan unless they elect otherwise during the 2015 open enrollment period. State-run exchanges may follow this guidance but also have the option of requiring consumers to reenroll through the exchange or proposing an alternative reenrollment methodology. Approximately 83% of enrollees on the exchanges receive federal subsidies. Policyholders who are automatically reenrolled will receive the same dollar-amount subsidy for 2015 as they did in 2014. In most cases, this will be less than the advanced subsidy that would be applicable if the policyholder enrolls through the exchange in 2015 through the “redetermination” process.

The proposed federal exchange auto-enrollment process only impacts a policyholder’s net premium contribution—total premium less Advanced Premium Tax Credit (APTC)—prior to the reconciliation process. Regardless of how a policyholder enrolls in a plan in 2015, the final premium subsidy will be reconciled with enrollees’ 2015 tax returns to ensure consistency with the prescribed subsidy formula of the Patient Protection and Affordable Care Act (ACA).

This Milliman healthcare reform briefing paper by Paul Houchens and Susan Pantely summarizes the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.

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Regulatory roundup

July 28th, 2014

By Employee Benefit Research Group

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

IRS releases draft forms for reporting employer health coverage under ACA
The Internal Revenue Service (IRS) has released draft forms that employers should use to report the health coverage they offer their employees. The draft Form 1095-B, Health Coverage, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, were posted to the IRS’s website.

Form 1095–B collects information under tax code Section 6055, which under the Patient Protection and Affordable Care Act (ACA), sets the standards for reporting information on whether plans meet minimum essential coverage. Form 1095–C falls under the jurisdiction of Section 6056, which lays out the requirements that must be followed by employers with the equivalent of at least 50 full-time employees to report whether they offer employees coverage that meets minimum value and affordability standards.

The reporting ties into the ACA’s employer mandate, which, when it fully goes into effect, will require such employers to offer such coverage or potentially face penalties.

The IRS also released draft versions of two related forms, Form 1094-B, Transmittal of Health Coverage Information Returns, and 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.

To access draft Form 1095-B, click here.
To access draft Form 1095-C, click here.
To access draft Form 1094-B, click here.
To access draft Form 1094-C, click here.

GAO issues testimony on the ACA
The U.S. Government Accountability Office (GAO) has released a report entitled “Patient Protection and Affordable Care Act: Preliminary results of undercover testing of enrollment controls for healthcare coverage and consumer subsidies provided under the Act” (GAO-14-705T).

The GAO was asked to examine issues related to controls for application and enrollment for coverage through the federal marketplace. This testimony discusses preliminary observations on “(1) results of undercover testing in which we obtained health care coverage; (2) additional undercover testing, in which we sought to obtain consumer assistance with our applications; and (3) delays in the development of a system needed to analyze enrollment.”

To read the entire testimony, click here.

Benefit news , ,

Medicaid risk-based managed care: Analysis of financial results for 2013

July 18th, 2014

By Javier Sanabria

Most states require that contracted managed care organizations (MCOs) file annual statements with state insurance regulators. The statements are typically based on a standard reporting structure developed and maintained by the National Association of Insurance Commissioners (NAIC), with prescribed definitions enabling comparisons across reporting entities.

This report by Christopher Pettit and Jeremy Palmer provides a summary of benchmarking financial metrics for the calendar year 2013 based on these statements, including medical loss, administrative loss, underwriting, and risk-based capital ratios. The target audience includes state Medicaid agencies and MCO personnel responsible for reviewing and monitoring the financial results of risk-based managed care programs.

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