Regulatory roundup

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

Congress sends bill to president keeping ACA small group health plan definition
On October 1, the U.S. Senate voted to approve the U.S. House bill “Protecting Coverage for Employees Act” (H.R.1624). The bill keeps the current definition of “small group health plans” under the Patient Protection and Affordable Care Act (ACA) at 50 or fewer employees unless states elect otherwise. Most states are expected to keep the small group definition at up to 50 employees. President Barack Obama is expected to sign the measure.

Financial considerations related to risk adjustment

Insurers on the healthcare exchanges should discuss the financial implications of risk adjustment throughout their operations and strategic planning. In his article “Winning with risk adjustment,” Milliman’s Scott Weltz highlights five areas that issuers should focus on to maximize their risk adjustment transfers.

1. Change internal reporting immediately to focus on medical loss ratio (MLR) net of risk adjustment by member
2. Optimize your product portfolio to maximize margins net of risk adjustment transfers
3. Work your risk adjustment member target list continuously
4. EDGE data accuracy is paramount
5. Grow with caution

For more perspective, read the entire article here.

Regulatory roundup

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

ACA Information Returns (AIR) composition and reference guide
The Patient Protection and Affordable Care Act (ACA) Information Returns (AIR) project is responsible for delivering applications, infrastructure, and supporting processes required to process information returns. In October 2015, AIR will begin processing tax-year (TY) 2014 Forms 1094/1095-B and Forms 1094/1095-C; TY 2014 is voluntary. In January 2016, TY 2015 Forms 1094/1095-B and Forms 1094/1095-C will be mandatory.

The Internal Revenue Service (IRS) has released the AIR Submission Composition and Reference Guide to provide guidance to all types of external transmitters about composing and successfully transmitting compliant submissions to the IRS.

To download the document, click here.

IRS posts information about Form 1094-C and Form 1095-C employer reporting
Employers subject to section 4980H of the Internal Revenue Code (Code), generally meaning employers with 50 or more full-time employees (including full-time equivalent employees) in the preceding calendar year, must use Form 1094-C and Form 1095-C to report information about their health coverage and their employee enrollment.

For more information from the IRS, click here.

IRS launches webpage with resources for ACA applicable large employers
The IRS has a new webpage featuring information and resources for employers of all sizes, including on how the ACA may affect an applicable large employer (ALE).

To visit the webpage, click here.

Federally facilitated marketplace FAQs
The Center for Medicare and Medicaid Services (CMS) has issued frequently asked questions (FAQs) regarding the federally facilitated marketplace’s 2016 employer notice program.

To read the entire FAQ, click here.

What’s on the menu for PEOs?

Professional employer organizations (PEOs) can enhance their business values by adding master health plans to their menu of benefits. In this article, Milliman’s Chase Pettus and Ryan Braden offer strategic considerations for PEOs selecting an insurance carrier.

Here an excerpt:

As you begin researching health benefits solutions, it truly is a matter of identifying potential partners that are compatible with your PEO and have the relevant experience. The funding of your master health plan policy largely depends on the insurance regulations in your state and your risk tolerance. While there are PEOs that self-fund a portion or all of their claims, the majority of PEOs, especially those creating master health plans, typically pursue a fully insured plan. This means you will likely be considering the major carriers in your market that have the necessary financial heft. It’s a good idea to focus on those that are familiar with PEOs, or better yet, already work with PEOs.

It’s also important to consider your long-term business strategy. Are you a local or regional player, or are you expecting to grow your business nationwide? If the latter is the case, you’ll probably want to talk to national players.

As mentioned above, a good consultant who operates in the PEO industry can help you navigate these initial steps. He or she would have existing relationships with carriers and know, for example, which ones have PEO vertical teams and which do not. When interviewing consultants, be sure to look carefully at the presentation materials they use when talking to carriers. Ask them if there are red flags that carriers look for and how they can help you avoid them. Also inquire about how they plan to collect your data. Some firms might leverage proprietary technology to make it more efficient.

Regulatory roundup

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

IRS issues final ACA 2015 employer health coverage reporting forms and instructions
The Internal Revenue Service (IRS) has issued final 1094-B, 1095-B, 1094-C, and 1095-C forms. The IRS also released instructions that employers, plan sponsors, and group health insurers will use to report health coverage as required by the Patient Protection and Affordable Care Act (ACA). Here are the final 2015 instructions and forms:

Instructions for Forms 1094-B and 1095-B
Instructions for Forms 1094-C and 1095-C
Form 1094-B – Transmittal of Health Coverage Information Returns
Form 1094-C – Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-B – Health Coverage 2015
Form 1095-C – Employer-Provided Health Insurance Offer and Coverage

IRS issues notice providing guidance on information reporting on minimum essential coverage
The IRS has issued Notice 2015-68 advising taxpayers that the agency and the Treasury Department intend to propose regulations under § 6055 of the Internal Revenue Code:

1. Providing that health insurance issuers must report coverage in catastrophic health insurance plans described in § 1302(e) of the ACA, enrolled in through an affordable insurance exchange (or exchange, also known as a health insurance marketplace).
2. Allowing electronic delivery of statements reporting coverage under expatriate health plans unless the recipient explicitly refuses consent or requests a paper statement.
3. Allowing filers reporting on insured group health plans to use a truncated taxpayer identification number (TTIN) to identify the employer on the statement furnished to a taxpayer.
4. Specifying when a provider of minimum essential coverage is not required to report coverage of an individual who has other minimum essential coverage.

Notice 2015-68 also invites comments on issues relating to solicitation of taxpayer identification numbers (TINs) of covered individuals; advises that the governments of United States possessions or territories, namely American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, are not required to report coverage under Medicaid and the Children’s Health Insurance Program (CHIP); and provides that the state government agency sponsoring coverage under the Basic Health Program is required to report Basic Health Program coverage.

Notice 2015-68 will be published in Internal Revenue Bulletin 2015-41 on October 13, 2015. To read the entire notice, click here.

IRS issues automated enrollment guide for ACA providers
The IRS has developed an automated enrollment guide for the ACA Information Returns (AIR) Application’s authorized contacts who want to use automatic enrollment to enroll Application to Application (A2A) client application systems into the IRS A2A channel.

To read the entire guide, click here.

Health insurance coverage in the United States
A new report from the U.S. Census presents statistics on health insurance coverage in the United States in 2014 and also focuses on changes between 2013 and 2014. According to the report, the percentage of people without health insurance coverage decreased sharply between 2013 and 2014 by just under 3.0 percentage points, specifically, by 2.9 percentage points.

To read the entire report, click here.

Alternate payment contracts introduce “insurance” risk for healthcare providers

Alternate payment contracts (APCs) are being employed to shift utilization risk from payers to providers in an effort to align financial compensation with provider performance. As a result, regulators may require that healthcare providers quantify their financial exposure and maintain adequate reserves to reduce their risks of insolvency. In this paper, Milliman consultants outline items that actuaries consider when reviewing a provider’s APCs and also provide perspective on modeling appropriate levels of financial reserves.

Here is an excerpt:

…The actuary will likely build a model to estimate the appropriate level of financial reserves required for the risk exposure borne by the provider through the APCs. Taking the above points into consideration, a deterministic model can be built to estimate the expected APC’s surplus or deficit based on projected claims and budget. The larger the projected surplus, the less likely random fluctuation from adverse events will cause financial strain on the provider, which will lower the level of required reserves.

A stochastic simulation can be built on top of this model to assign probabilities that the provider’s APC produces a deficit as a result of unforeseen events. A claims probability distribution can be created either from the provider’s actual APC historical claims data or another similar source.

Two main sources of claims variation that should be modeled in the simulation include:

• Mis-pricing. It is possible (probable) that the projected claims cost will not come in as expected because of inaccurate trend setting/assumptions.

• Random fluctuation. Even if the trend assumption is correct, there is always the possibility of chance events from year to year (i.e., larger-than-expected high-cost claimants).

Shared savings arrangements and ACOs provide cost savings opportunity

Sponsors of self-funded group health benefits may be able to reduce their healthcare expenditures by entering into a shared savings arrangement with an accountable care organization (ACO). In the latest issue of Milliman’s Benefits Perspectives, actuaries Anders Larson and Paul Houchens highlight some items that plan sponsors should consider regarding such an arrangement. The following is an excerpt from the article.

For plan sponsors determining whether a shared savings arrangement is appropriate, the following are some of the key factors to consider:

Number of plan participants: For plan sponsors with fewer than 2,000 plan employee participants, independently developing a shared savings arrangement with an ACO may be problematic as the plan may experience significant claims volatility from year to year. Additionally, the plan sponsor may not have the necessary leverage in terms of healthcare service volume to garner favorable terms with the ACO. For plan sponsors with limited size, exploring a shared savings arrangement as part of a purchasing coalition or through an insurer may be beneficial; however, the outcome of the shared savings calculation might not be shared directly with individual plan sponsors.

Geographic dispersion: ACOs generally have a localized geographic focus. Therefore, for employers with employees dispersed across the country, having an ACO manage the majority of the employee population may be an impossible task. For such employers, they should evaluate how their third-party administrators are building networks on a regional basis. A benchmarking exercise (discussed in the next section) will allow the plan sponsor to determine if its plan is well managed at a regional level. If the network is built with a focus on high-quality, cost-efficient care, the employer may capture the same financial benefits of a shared savings arrangement. Additionally, to the extent a private exchange could contract with ACOs on a regional or local level, the private exchange may offer purchasing power that could not be created independently by a plan sponsor.

Current healthcare utilization and cost: A plan sponsor that already enjoys partnering with a high-performing provider delivery system may have little financial incentive to deviate from its current arrangement. Employers with predominantly young adult employees also are unlikely to have the same financial savings opportunity from better utilization management as employers with a significant portion of employees with high-risk chronic conditions. Employees with high-risk chronic conditions create a larger variance in potential costs for a plan sponsor, as well as management opportunities for an ACO. As one of the first steps in evaluating whether a shared savings arrangement may be beneficial, plan sponsors should have their healthcare utilization and costs benchmarked relative to expected costs for their participants’ demographics (including population health), plan designs, geographic location, and provider discount level. Such an analysis will identify utilization management opportunities for a shared savings arrangement.

Regulatory roundup

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

IRS introduces ACA information center for ALEs
The Internal Revenue Service (IRS) has posted a webpage with links for applicable large employers (ALEs) to online resources related to the Patient Protection and Affordable Care Act (ACA).

To visit the webpage, click here.

IRS issues healthcare tax tip related to information health coverage providers must report
The IRS recently issued Health Care Tax Tip 2015-55, which is related to the ACA. The tip sheet provides information that health coverage providers, including employers that provide self-insured coverage, need to report to the IRS.

For more information, click here.

CCIIO grants additional time for insurers to post certificates of coverage online
The Center for Consumer Information and Insurance Oversight (CCIIO) of the Centers for Medicare and Medicaid Services (CMS) has issued a fact sheet entitled “Summary of benefits and coverage online posting of policy and certificate of coverage documents” granting two additional months for insurance issuers to post certificates of coverage online. The online accessibility of information must be provided in summaries of benefits and coverage (SBCs).

For more information, click here.

Midyear 2015 financial results for medical professional liability specialty writers

Aggregate direct written premium for the composite of medical professional liability (MPL) specialty writers continues its decline from a high in 2006 of $6.8 billion to $5.1 billion in 2014, a 26% decrease. Six months into this year, this trend is continuing, with direct-written premium down 4.7% from the same period in 2014. Despite the decline in net premium, robust competition, and historically low investment yields, MPL specialty writers continue to be profitable and continue to increase surplus levels. Net income for this composite is projected to approach $1 billion in 2015. But in the face of these positive overall results, pretax calendar-year underwriting and investment income are trending downward. Milliman consultants Brad Parker and Chuck Mitchell provide some perspective in this article.

This article was originally published in the September 2015 issue of the Medical Liability Monitor.

Regulatory roundup

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

ACA’s shared responsibility requirement: Understanding the potential employer penalty
The Congressional Research Service released the report “The Affordable Care Act’s (ACA) Employer Shared Responsibility Determination and the Potential ACA Employer Penalty.” To ensure that employers continue to provide some degree of health coverage, the Patient Protection and Affordable Care Act (ACA) includes a “shared responsibility” provision. This provision does not require that an employer offer employees health insurance; however, the ACA imposes penalties on a “large” employer if at least one of its full-time employees obtains a premium credit through the newly established exchange. The complex calculations and multiple definitions of full-time work have led to confusion among policymakers and employers. This report discusses these definitions and the application to the employer penalty in greater detail.

To read the entire report, click here.

IRS issues proposed rule on minimum value of eligible employer-sponsored health plans
The Internal Revenue Service (IRS) issued a proposed rule withdrawing, in part, a notice of proposed rule-making published on May 3, 2013, relating to the health insurance premium tax credit enacted by the ACA, including guidance on determining whether health coverage under an eligible employer-sponsored plan provides minimum value. It also replaces the withdrawn portion with new proposed regulations providing guidance on determining whether health coverage under an eligible employer-sponsored plan provides minimum value.

To read the entire proposed rule, click here.

CMS posts information on essential health benefits benchmark plans
The Center for Consumer Information and Insurance Oversight (CCIIO) of the Centers for Medicare and Medicaid Services (CMS) has published information on essential health benefits (EHB) benchmark plans related to the healthcare reform.

For more information, click here.

CRS report: The ACA’s essential health benefits
The Congressional Research Service has issued a report entitled “The Patient Protection and Affordable Care Act’s Essential Health Benefits (EHB).” It discusses the core package of healthcare services required by the ACA for non-group and small group health plans to offer.

The report provides an overview of the first component of the essential health benefits (EHB) package. The report examines how the EHB are defined, regulations related to the EHB, state variation in the EHB, applicability of the EHB to health plans, and how the EHB interact with other ACA provisions.

To read the entire report, click here.