Healthcare Town Hall

By Safder Jaffer

Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the eighth article in our series.

Background to healthcare in the Middle East
The Middle East is going through rapid health reform with the transformation of a historical publicly funded health system into a hybrid public-private insurance model. The governments in these countries are facilitating the development of the provider community through the legislation of compulsory health insurance coverage, thus shifting the onus of the development of healthcare from the public sector to a public-private partnership, with the help of the private provider community and insurance industry.

Though no more than 10% of the population of any one Gulf Cooperation Council (GCC) country is currently covered by insurance, this is expected to change quickly. Workers covered under these plans can choose care at either public or private institutions, a system that has the benefit of ensuring that public providers must learn to generate claims in order to be reimbursed by the government. Once private health insurance takes hold, patient volumes for private providers will rapidly increase, as patients are allowed to pursue reimbursed care at private institutions.

Depending on the country, the health insurance opportunity could either be to enter as a stand-alone private player, or to form a joint venture with the government to establish and manage a national insurer.

United Arab Emirates (UAE)
UAE is a typical hybrid public-private insurance model. By regulation, UAE nationals and citizens of other GCC countries receive free inpatient and outpatient healthcare at government hospitals and clinics, fully funded by the state. However, UAE nationals can also opt to purchase private medical insurance coverage through state-subsidized premiums.

The leading health insurance company in Abu Dhabi is Daman National Health Insurance Company, owned by the government, offering health insurance to expatriates and their families. Daman commenced writing business on May 1, 2006, and has a cooperation agreement with Munich Re, which provides reinsurance and direct underwriting and claims expertise. Daman will provide insurance services for all government expatriate employees for a period of 10 years from July 1, 2006.

Daman also provides private medical insurance for all UAE nationals through its Thiqa plan. As of April 2009 there were about 500,000 members in the Thiqa plan. Members receive a Thiqa card with which they can obtain private medical treatment within the Daman preferred provider network, subject only to on-the-spot cash payment at the clinic or hospital by the individual in respect of member coinsurance. Otherwise the services are paid for directly by Daman, subject to production of the Thiqa card at clinics and hospitals.

A change to the Thiqa plan was announced in 2009 by Daman, which introduced a 50% coinsurance payment for all dental treatment and for pharmaceuticals sourced in the private sector. Pharmaceuticals sourced in the public sector remain free of charge for all UAE nationals. Salamat, an extended plan similar to Thiqa, is now also available for UAE nationals, providing medical expenses coverage on an optional regional or worldwide basis.

Resident expatriates, who received free healthcare in the past, now have to pay for treatment at government medical facilities, albeit at a subsidized rate. However, compulsory health insurance for expatriates is now fully implemented in Abu Dhabi, under Law No 23 of 2005.

The standard compulsory health policy for expatriates and their families resident in Abu Dhabi covers the employee, spouse, and up to three dependent children under the age of 18. The onus to purchase compulsory insurance for expatriate employees and their families lies with the employer. No expatriate work permits are issued or renewed without proof of insurance and proof of premium payment. The scheme has been a success, with the insured population exceeding 1 million in 2009.

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Global, Underwriting global underwriting, GU series II, risk adjustment, Safder Jaffer, United Arab Emirates

By Safder Jaffer

Health insurance models vary from country to country. As highlighted in our first series of articles on international health markets, governments often dictate the role of private and public health insurance within any country. Milliman has produced a new series of blogs focused on the medical underwriting and risk adjustment practices of eight countries: Australia, Ghana, Ireland, New Zealand, Saudi Arabia, South Africa, Spain, and United Arab Emirates. This is the seventh article in our series.

Background to healthcare in the Middle East
The Middle East is going through rapid health reform with the transformation of a historical publicly funded health system into a hybrid public-private insurance model. The governments in these countries are facilitating the development of the provider community through the legislation of compulsory health insurance coverage, thus shifting the onus of the development of healthcare from the public sector to a public-private partnership, with the help of the private provider community and insurance industry.

Though no more than 10% of the population of any one Gulf Cooperation Council (GCC) country is currently covered by insurance, this is expected to change quickly. Workers covered under these plans can choose care at either public or private institutions, a system that has the benefit of ensuring that public providers must learn to generate claims in order to be reimbursed by the government. Once private health insurance takes hold, patient volumes for private providers will rapidly increase, as patients are allowed to pursue reimbursed care at private institutions.

Depending on the country, the health insurance opportunity could either be to enter as a stand-alone private player, or to form a joint venture with the government to establish and manage a national insurer.

Saudi Arabia
The healthcare network within the Kingdom of Saudi Arabia compares well with its counterparts in the West, and its health systems have been ranked in the top 30 in recent World Health Reports from the World Health Organization. Moreover, Saudi Arabia has been ranked as the largest among 17 healthcare markets across the Middle East and Africa, establishing it as one of the most valuable healthcare markets in the region.

Health services in the Kingdom are delivered through both the public (approximately 80%) and private (approximately 20%) sectors.

Public healthcare system
The provision of free healthcare is enshrined in the constitution of Saudi Arabia. Free healthcare is provided to all nationals and expatriates working in the public sector and to all pilgrim visitors (two million to three million pilgrims, or more, visit the Kingdom every year from all over the world). These services are delivered through the Ministry of Health (MOH) and other government agencies.

The healthcare system has two tiers. The first is a network of primary healthcare centers and clinics that provide preventive, prenatal, emergency, and basic services. These are supplemented by mobile clinics that visit remote rural areas dispensing vaccines and performing basic medical services. The second tier comprises the hospitals and specialized treatment facilities that are located in major urban areas throughout the country so as to be accessible to all.

Funding the free public healthcare services is an ever increasing challenge faced by the government, driven in particular by the rapid growth in population, the high price of new technology, and the growing awareness about health and disease among the community. Many large employers are already purchasing group medical expenses insurance for both their Saudi and expatriate staff, in order to avoid discontent among the Saudi staff members when only expatriate staff have access to private treatment.

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Global, Underwriting global underwriting, GU series II, risk adjustment, Safder Jaffer, Saudi Arabia

By Javier Sanabria

Genworth will roll out gender-based pricing for women who apply for long-term care (LTC) insurance individually starting in April. The company’s decision means that women, who live longer and file more claims than men, will begin paying more for LTC coverage.

Milliman’s Dawn Helwig discusses the new underwriting practice and the implications it’ll have on women in this Market Watch article. Here is an excerpt:

Historically, women have not been charged more for long-term care insurance than men, despite the fact that they live longer. (Girls at birth have a life expectancy of four years more than boys, though that gap narrows over time.) Women are generally thought to be the family decision makers when it comes to long-term care insurance purchases, and the industry didn’t want to risk alienating them by charging them more, said Dawn Helwig, consulting actuary and principal with Milliman, a global actuarial and consulting firm.

Yet, industrywide, women represent 60% of long-term care insurance policyholders, and account for 70% to 80% of claims, Helwig said. Not only do women live longer “on claim” than men, they also go on claim more. Married women often provide care for their husbands, delaying or even preventing the men’s need for care in a facility. And single women may be less likely to have family caregivers than their married counterparts, making them a potentially more expensive category of customer.

As the biggest player in the industry, Genworth has the clout to make the first move in raising prices to reflect women’s claims experience, Helwig said. The insurer’s move affects more than just single women, who in and of themselves are not a small constituency. Forty-seven % of all women 55 and over are widowed, divorced, separated or never married, according to the U.S. Census Bureau. A married woman who applies individually would also face the increase.

Long Term Care Dawn Helwig, Long Term Care, LTC

By Brian Studebaker

Employer group reporting is a requirement for most health plans and third-party administrators in today’s healthcare environment. Almost every large group employer seeking healthcare coverage has some requirement in its selection process related to reporting on membership and claim experience. These requirements can vary significantly, depending on the analytic sophistication of the employer and/or broker working with the group. The real questions are, what do employer groups really want from employer group reporting and what do employers really do with these reports?

Milliman MedInsight has recently added to its portfolio of standard reports a new “storybook” employer group report that focuses on meeting the needs of employers looking to understand their healthcare spending. Additionally, the report can serve as the foundation for data-driven discussions with brokers or sales agent about how to better tailor benefit design and healthcare investment to better serve employees’ needs and the employer’s investment.

The report development process was a collaborative effort between several Milliman clients and MedInsight data analytics consultants. At the start of the project the development team identified two primary objectives for the new storybook employer group report:

1. Enable the employer to understand and reconcile its historical healthcare spend.
2. Provide the employer data-driven insight into how it might wish to change its benefit offerings in the future—identify action items.

As the report specification evolved further, several secondary requirements emerged: the report had to be easy to read and understand, the report had to have meaningful comparative benchmarks to help an employer put its experience in context, and the report needed to be modifiable at run time by the sales group to add comments and adjust report output.

Some of the analytic tactics employed in the report to achieve the goals for the first objective above are:

1. Analysis of both paid and allowed amounts by Milliman’s Health Cost Guidelines™ categories.
2. Trend analysis between a definable current time period and prior time period.
3. Benchmark comparatives between a similar block of business for the health plan and/or a set of benchmarks derived from Milliman’s research database.
4. Reconciliation analysis of claims by paid date.
5. Membership analysis by demographic and benefit design dimensions.
6. Concurrent risk scores to measure the illness burden of the population between time periods.

Some of the analytic tactics employed in the report to achieve the goals for the second objective above are:

1. Use of Milliman’s Chronic Condition Hierarchical Groupings (CCHGs) to identify medical condition prevalence when considering wellness program initiatives.
2. Evidence-based measures to identify gaps in preventive care that influence the long-term health of the population.
3. Predictive risk scores for the employer group and the other similar groups within the health plan to forecast how future healthcare expenditures might compare.
4. Frequency of potentially avoidable emergency room use.
5. Provider network utilization analysis.
6. Pharmacy use analysis for mail order, generic use, and specialty drug use.

Milliman’s design of the employer group report will continue to evolve as we present the report to more clients and get additional feedback from our user base. If you’re interested in learning more about this new feature or would like to contribute your ideas to future versions of the report, please contact your Medinsight consultant.

This article first appeared at Milliman MedInsight.

Employers benchmarking, Brian Studebaker, employer group reporting, healthcare analytics, MedInsight

By Al Prysunka

For those states establishing insurance exchanges under the Patient Protection and Affordable Care Act (PPACA), all payor claims databases (APCDs) can provide much of the data needed for two of the key components of an exchange: a transitional reinsurance program and a permanent risk adjustment program. Both are critical to minimizing the effects of adverse selection that may occur in the initial years of operation of and during implementation of market-wide insurance reforms.

Transitional Reinsurance Program
The purpose of a transitional reinsurance program is to help stabilize premiums for coverage in the individual market during the years 2014 through 2016. The PPACA Transitional Reinsurance Program is an important element in helping states to level the playing field across the non-group health insurance market, to moderate premium changes from the implementation of insurance reforms both inside and outside of exchanges, and to set the foundation for the establishment of the exchanges. Under this program, reinsurance would be based on high-cost enrollees’ claims, and not on a list of medical conditions. The data contained in APCDs can be utilized to establish the attachment points of the high-cost enrollees and help to better define the upper limits of the coinsurance amounts.

In a bulletin of May 31, 2012, entitled, “Transitional Reinsurance Program: Proposed Payment Operations by the Department of Health and Human Services,” the U.S. Department of Health and Human Services (HHS) suggested that, in order to derive the reinsurance payment calculations, a minimum amount of data is necessary, which would contain the following:

All of the data elements suggested by HHS reside in a typical APCD and would be available for most commercial healthcare payors operating in a state. To minimize the data collection burden, HHS would like to leverage commonly used data elements from existing claims data standards. This could be accomplished in a comprehensive cost-effective manner with data provided by an APCD.

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Reform Al Prysunka, APCD, MedInsight, severity adjustment, state exchanges

By Javier Sanabria

How will the Patient Protection and Affordable Care Act (PPACA) affect employer-sponsored health insurance? Employers have to consider whether they want to preserve their existing coverage, self-insure, or pay fines for suspending coverage. That decision may hinge on an employer’s ability to maintain affordable costs while offering minimum coverage.

Paul Houchens recently discussed affordability and PPACA’s minimum benefits compliance with Healthcare Payer News. Here is an excerpt from the article:

Across industries, the main challenge will be having minimum coverage and keeping it as affordable as possible…

Wellness benefits across corporate and small firms vary from tobacco cessation programs to on-site fitness centers, free produce and commuting perks. For ACA minimum benefits compliance, though, it’s still not clear how exactly the affordability test will be measured against wellness incentives, said Paul Houchens, an Indianapolis-based consulting actuary with Milliman.

“Let’s say you have a plan that charges $2,000 for single coverage without wellness incentives, but $1,000 if you’re a non-smoker. Is that affordability going to be measured based on the $2,000 or that $1,000? Particularly for employers with large wellness incentives in their plans, it’s difficult to do a lot of planning without having that information.”

More broadly than wellness, Houchens sees employers probing the value of their current sponsored insurance and calculating the costs and benefits of different options, as federal agencies finalize rules for the individual and employer mandate, premium assistance and eligibility.

If all of an employer’s workers are above 400 percent of the federal poverty level (FPL), Houchens said, “None of them are going to qualify for premium subsidies and probably in a lot of cases are going to be paying a lot more for health insurance under exchanges than they would under (their) plan.” Or “if you have an employer with dominantly low-income employees, maybe some would actually be better off in the exchange versus your employer plan.”

While the level and relative affordability of coverage will probably vary by industry and income, Houchens and colleagues think that the cost of dropping coverage is likely to outweigh the savings.

“Even for some of the low-income employers, I think a key point to remember is that your health insurance is a tax-deductible expense, whereas the penalties are not,” Houchens said. “That’s a huge difference for the for-profit companies. And also, you’re being penalized on every full-time employee. You’re not just being penalized on the people that would participate on your plans.”

A company with 60 percent health plan participation is “really only paying for health insurance for 60 percent of employees,” he said. “But with the exception of the 30 employee exemption, you would be paying a penalty on 100 percent of the full-time employees; that’s non-tax deductible. We’ve run the calculations for a number of employers. The math of terminating coverage and trying to make them whole, it simply doesn’t add out. So employers are thinking prudently. They’re probably going to continue to offer coverage in 2014.”

Download Milliman’s Healthcare Reform Strategic Impact Study which helps answer important reform questions employers are dealing with.

Also, for more of Paul’s insights on healthcare reform, follow him on Twitter @PaulHouchens.

Affordability, Reform Affordability, Cost, employers, Healthcare Reform, Paul Houchens

By jeremy.engdahl-johnson

Today S&P Dow Jones Indices announced the results of S&P Economic Healthcare Indices for 2012. Data released by S&P Dow Jones Indices for the S&P Healthcare Economic Composite Index indicates that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 3.73% over the 12 months ending December 2012. This is a deceleration from the +4.46% annual growth rate recorded in November 2012 and the lowest rate in the eight-year history of the index.

All nine S&P Healthcare Economic Indices posted deceleration in their annual growth rates in December 2012. As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance plans increased by 5.39% over the year ending December 2012, down from +6.19% reported for November 2012. Annual growth rates in Medicare claim costs rose by 1.20%, according to the S&P Healthcare Economic Medicare Index, down from +1.81% recorded in November 2012. It is the lowest growth rate in the history of the Medicare Index.

The Professional Services Index annual growth rate was +4.78% in December 2012, down from the +5.68% November rate. The Professional Services Commercial Index decelerated to +7.34% in December, down from +8.17% reported in November. The Professional Services Medicare annual growth rate was -0.12% in December, down from +0.92% posted in November 2012. It is the first appearance of negative annual growth rate in the history of the index.

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Cost John Cookson, S&P

By Javier Sanabria

A.M. Best recently interviewed Bob Cosway about the challenges of defining essential health benefits (EHB) in each state. Under the Patient Protection and Affordable Care Act, insurers must provide plans that include these EHBs when marketing to the state health exchanges.

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Exchanges, Reform Bob Cosway, essential benefits, Healthcare Reform, state exchanges

By Employee Benefit Research Group

Employees’ family members who are eligible to enroll in the employees’ group health plan will be ineligible for federal subsidies under the exchanges if the employees are offered affordable self-only healthcare coverage, according to the final rule published on February 1 by the Internal Revenue Service (IRS). The final rule retains the provision in the IRS’s proposed rule basing the affordability test of the Patient Protection and Affordable Care Act (PPACA) on the cost of self-only coverage, rather than family coverage. Thus, an employee’s contribution toward the premium for family coverage is not taken into account when determining whether an employer is subject to penalties for not offering affordable coverage that satisfies PPACA’s minimum value standard. The IRS’s final rule may result in limiting federal healthcare premium subsidies for employees’ family members who purchase insurance from the exchanges beginning in 2014.

Under PPACA, employees eligible for an employer-sponsored health plan that is deemed “not affordable” can opt out of the coverage and receive a federal subsidy to help them purchase insurance in the exchanges. They are eligible for a federal health insurance premium tax credit, which is based on income as a percentage of the federal poverty level (FPL), if their employer-sponsored plan is deemed “not affordable,” i.e., if their share of the premium is more than 9.5% of household income. In addition, PPACA subjects employers to a $3,000 penalty for each full-time employee whose premium share exceeds the threshold of 9.5% of household income and who receives the subsidy to purchase exchange coverage.

In a related proposed rule also published February 1, the IRS said that family members of an employee who is offered affordable, self-only coverage will not be subject to the PPACA individual mandate penalty, which is applicable to individuals who do not obtain insurance if the employee’s premium share for family coverage exceeds 8% of household income and family members do not enroll in the coverage. This proposed rule cannot be relied upon at this time.

Employers should review their employee contribution and eligibility strategy for all employees to avoid unnecessarily limiting premium tax credit options under the exchanges for employees and their dependents.

For more information about the final rule or for assistance with implementing PPACA’s requirements, please contact your Milliman consultant.

Benefit news Affordability, Healthcare Reform, state exchanges, taxes

By Javier Sanabria

The pressure on Medicare Advantage (MA) plans to ensure that risk scores appropriately reflect the health status of their population under the Patient Protection and Affordable Care Act (PPACA) continues to increase. Payment rates from the fee-for-service (FFS) phase-in as well as changes in star ratings for MA plans have been impacted.

The Centers for Medicare & Medicaid Services (CMS) assigns a risk score to every MA member based on the member’s characteristics, including age, gender, disability status, Medicaid status, and “health” status. The majority of revenue received by MA plans is based on the risk scores of their members, and the health status is the primary variable in the calculation of the risk score.

CMS determines the diseases/hierarchical condition categories (HCCs) for each member based on ICD-9 diagnosis codes. Identifying and submitting all appropriate ICD-9 diagnosis codes to CMS results in a higher risk score for the member and an increased payment to the MA plan.

This article, first published in the October 2012 issue of the Society of Actuaries’ Health Watch newsletter, discusses accurate diagnostic coding as an important revenue tool.

Medicare, Reform Healthcare Reform, hierarchical condition categories, Medicare Advantage, SOA